What role might accounting numbers play

Reference no: EM132213292

Question: Behavioural Accounting Research-managerial performance & control

Objections to Crackdown

By Steven Scott & Marsha Jacobs

The Rudd government's proposed crackdown on employee share schemes could drive up executive cash bonuses and lead further tax volatility, human resources have warned. And caps' [upper limits] On executive payouts by Prime Minister Kevin Rudd would only force companies to beef upper other parts of remuneration packages.

The waring from the Australian Human resources Institute is a submission in the Productivity Commission's inquiry into executive remuneration.

Submission, based on a survey of members and focus groups interviews of HR directors from 20 leading ASX companies, argued any regulation of executives' golden handshake payments would merely drive up senior salaries.

Mr.Rudd has criticised executive's termination payments and ordered the commission to inquire into possible regulation to limit excessive risk-taking. Companies surveyed by the Institute said that, if there was a termination pay cap', they would be forced œto find some other way of spreading the present value of the foregone benefits into other remuneration elements, either pre or post termination.

The Institute also called the government to scrap its proposal to tax employee share schemes up front ,taxing instead at called the government to scrap its proposal to tax employee share schemes up front, taxing instead at the point at which shares or rights could be sold, or rights could be sold ,or risk a œpolicy push back to cash and cash bonus' only structure [which] lead to potentially higher GDP and tax volatility in the long term.

In a separate submission, Australasian Compliance Institute called for tighter controls for executive bonus payments via the introduction of key performance indicators directly linked to industry-benchmarked frameworks. (Source: Excerpts from The Australian Financial Reviews, 29 May 2009, p.13)

Required: Read the above case and answer the questions that follow:

a) What are the likely componentsof a chief executive officer's (CEO) , managementcompensation package that might be affected by the proposed changes?

b) How is the introduction of cap' (upper limit) on termination payments likely to affect CEO's remuneration if firms make no adjustments to the compensation packages?

c) How could researchers evaluate the general impact of a termination pay cap' on the structure of management compensation packages?

d) What sort of key performance indicators are likely to be included in CEOs' compensation packages?

e) What role might accounting numbers play in motivating' CEOs' compensation packages?

Reference no: EM132213292

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