Directors Remuneration

PREPARED BY:
ARDZLYN HAWATUL YUHANIS BINTI AYOB
2011269826
NUR ATIKA BINTI MOHD SANURI
2011632504
ROXANNE MARISSA J. JUATIN
2011815682

SUMMARY OF CASE STUDY

CEO and one director in BB Company resigned and work
with competitor company.
The remuneration committee agree that the reason for
them to left the company because the competitor
provide double pay.
Salary is the only element of remuneration in BB
Company.
Chairman disagree to increase directors salary and stop
the decision of CEO to reward the top managers at
almost same level of directors salary because company
not perform well in the fashion industry.
Remuneration and nomination committee consists of a
independent chairman and 5 NEDs (same IC & NEDs in
both).They also form majority in the Board.
Chairman decide NEDs salary above market increase in
order to retain their expertise.

QUESTIONS
a)Discuss the corporate governance
issues
raised in scenario and
recommendations for improvement.
b)Consider the key components of a
reward package and discuss how
they would apply in this organisation.

Introduction
Corporate governance

Directors remuneration

FIRST ISSUE
The remuneration package for the
CEO and executives directors of BB
Company is not attractive.

IMPACT
When experience directors move out
from the company, the effectiveness of
board will be fade.
The former CEO is the one who really
understand and have plan on the
ongoing objective of the company.
Competitors company take advantage
by offering better remuneration
package to the CEO and one other
director.

RECOMMENDATION
Offer attractive remuneration package
which includes a few key of components of
remuneration.
Remuneration committee should determine
amount and percentage of executive stock
ownership that will motivate them to align
their interests with the shareholders.
BB Company has to look and discuss on the
remuneration package so that they can
prevent such resignation of experience
directors.

SECOND ISSUE
Whether the CEO has the authority
on his decision to increase the
salary of its top managers in BB
Company.

Issue

THIRD ISSUE

Non-Executive
Directors
Raise Their
Remuneration
above Market
Salary

IMPACT
conflict of interest of non executive directors

RECOMMENDATIONS

Para companies
based
fees
nominating
7.24
on Competitive
BMLR
committee
that
:
being
practice
to review
listed
in in
the
the
stock
performance
Companys
exchange
remuneration
of board in decision
peer gro
m

COMPONENT
S OF
REMUNERATI
ON

BASE SALARY
EXECUTIVE DIRECTOR

Each option gives its holder the right to buy new shares in the
company at a fixed price, on or after a specified date in the
future (3years) price
Conditions :
1) meeting certain
performance targets
2) individual still works
for the company at
that time exerciseble
Performance Metrics
(compare among
competitive in the same
industry) :
TSR
EPS
GEP
Operating cash flow

Example :
Awards vest on RBs 3-year
average earnings per share
growth: 40% vests at 6% p.a.
60% vests at 7% p.a. 80% vests
at 8% p.a. 100% vests at 9% p.a.

CEO remuneration for the year

2012 : Share options granted in
2009,(31.65), 100% exercise at
value (37.99)

CONCLUSION