This article consists of 5 pages and 1309 words.
In order to have full access to this article, mail us at thedocumentco@hotmail.co.uk
Director Remuneration in UK (Ref No: 1539)
Director Remuneration in the UK
Director Remuneration in UK, As evident from the corporate governance code of UK by the Financial Reporting Council, the setup of the remuneration committee and decision on the director’s remuneration is an important aspect of the corporate governance code. The corporate governance code of UK states that the compensation of directors and executives must be designed in a manner so that it promotes the long-term growth for the company.
It is further stated that the remuneration of such directors and executives must be decided by the remuneration committee by making a comparison with the related companies and considering the performance of those individuals (Council, 2010; Council, 2012). It can be analysed that the corporate governance code aims to compensate top executives in such a manner that it complements the growth and performance of the company. However, the actual case has been quite different as the executive pay has been higher for most of the companies in comparison to their capacity.
As stated by High Pay Centre (2016), the pay for executives is quite higher than the normal employees. As stated, the ratio of the salary of CEO to the average of normal employees for FTSE-100 companies is 148:1 in 2014; the ratio has further increased since the year 2010. However, the same ratio for all UK firms is 183:1 suggesting that FTSE-100 practices are better in terms of executive compensation.
The average salary of a CEO in case of FTSE-100 companies is £4.965 million in 2014 as compared to £4.129 million in 2010 suggesting that the compensation has increased significantly during the 4 year period. Though the companies justify the higher remuneration for director and CEO based on different rationale; one of those includes the market rates as it is considered that the companies must pay the market average salary for each position (West, 2016).
It is noted that the basic salaries of chief executive and other directors in the UK companies are not that high, but other benefits ultimately make the compensation/remuneration higher. As stated by the corporate governance code of UK, these benefits must be offered on the basis of performance. As per my own observation, the compensation of key executives in the UK has been higher regardless of the performance, and there is a weak relationship between the performance of the executives and their compensation.
Even if the company is incurring losses, there is a significant amount paid to key directors and executives as remuneration. The benefits of these executives vary very slightly in the case of poor performance, so I find a low relationship between the pay and performance of the directors…
Recent Comments