Reward Management: Executive Pay

Reward Management: Executive Pay

Do Not explain the Agency theory and Tournament Theory, what you need to do is
How will you apply what are the incidents that are happening or example are happening that relate to Agency theory and Tournament Theory. Also in this part of assignment, you cannot say always the top executive are paid this amount of millions of pounds but there is some top executive who actually deserve this. So you have to look at both side of the coin. There are executives who are taken the company off from being bankrupt to be a such full company (one example is enough) that justify top executive are not always expecting their reward.
Slide 5: In terms of determining their pay:
There are Market positions you cannot just pay top boss who has just moved into your company LESS than the previous top boss.
There are some Internal Issues: we do not have any job evaluation, the top bosses do not have any job evaluation that a reason why do they get a huge paid, and also no clarity in that job evaluation. E.g. the person from sky is getting 16.88 million what the reason he got 16.88 million no clear justifications.
Slide 6: That?s why these top executives get paid because of Historical legacies of Contractual obligations and Poorly designed Performance Management Systems. So those are the reasons.
? Slide 9: Bonuses
when you go back and do a bit of research how this 70 million or 30 million that I told you about come from? We will say the salary much less but the plucks they get which is rounds up to those millions that?s where your analyses come in. that 750 words will be more on your analyses and your critical thinking.
– Note: I do not mind somebody from you writing and saying all the salary they get is 100% right, there is no problem in that as long as you justify that, if you think giving up person up 70 million or 30 million to that particular industry is fine just write about it critically evaluate and give your logic.
– Note: In this task Pick up 2 or 3 companies and write surrounding this 2 options companies.
Useful link to use: https://www.cnbc.com/2015/05/18/why-corporate-ceo-pay-is-so-high-and-going-higher.html
Slide 8: one of the reasons that you will say top of executives get paid huge because of Comparisons and international pay gap. The current prime minister has promised us she will look for Political culture and Market forces; you might want write about that in one line if you find that relevantly, the prime minister has promised us she will look into these top executive paid wither they follow the market thing ? 7:26
When you start doing your research you will see these top executive?s pays are determined by a remuneration committee. A remuneration committee is supposed to be independent committee which actually sits part of the board of directors and fixes the salary of top boss. But who sites in the board of directors that selected the top boss, maybe the top boss is brother in law or a good friend or somebody they know, because the tops CEOs always in connection.
? Note: Slide 9 &10 from the power point attached file: Opaque criteria for payment ? ?The Dirty Dozen?: couple of them Must be use in writing your task 1.
Slide 9: Tidy desk bonuses: There was a BBC boss (attached file) who was in the office for 54 days, but was given 450,000 pound as a golden hand shake just to leave that office. 54 days and you are not preforming well and you will be given 450,000 pound just to leave the office, this is what we called Tidy desk bonuses. Because you are the top boss and you know lots of the company secrete and you do not want get out, so that?s why they do this golden hand shake, and by the law these tops executive contract should be 12 monthly contracts, but usually they are given 5 year contract, so they are breaking the law from the very beginning and that?s why is really hard to get rid of them. If you guys a shareholder if I call a meeting on the 23 of December how many will attend? Very few. And in that 23 of December you decide you will share the top executive salary decision. So, 23 of December a time where half or more than half of shareholders are their holidays, you call enough shareholders meeting to say that, this will be your top executive salary for the next year. So more shareholders turn up the things get vanishing and that?s what we call the vanishing AGM.

Slide 9 (Bonuses): What the company done, they said we are going to increase the salary of the top executives, they give up a breakdown and that?s by the law, they should give a breakdown and they said the breakdown in the footnote and the footnote is very law. In that footnote like your credit card statement where they has said there is 200% interest which we completely ignore and signed it, the top bosses spaces says they are going to get something bonuses which is 250% of their salary. I?ll give the paper it is your duty to read it, you did not read it that?s not my headache but that?s how to executive got this huge paid. They are legal in illegal way.
Share options: share options are top executives or people like ourselves if we are shareholders we got shares at based on those shares we get some dividends (we got some money) in the company has a profited, the government has put there are a certain month the top executives will get a share option but then, the top executives now have decided they will get the bonus for the different name share appreciation right
The big headline is BONUS but under that big headline they have different type of bonuses
Note: One example of that boss getting a huge million, but how are they manipulating the whole system.
? Slide 11: The person who mentioned The Dirty Dozen say we can have different executive pay, alternative for executive pay, we need ability to make a performance we also need to know efficiency and effectiveness
– Note: Write about this 7 requirement as a solution to that problem in your task 1 (Slide 11)
– You might want mention last one or two sentence what companies should do.
– What I am looking for in TASK 1 is your analyses, wither they getting huge if they are (How) and if they are not (why do you think they are getting not getting paid huge). If you think they are getting paid huge, what are that things the company needs to bring in, in order to stop that. These are the causes a factors lets summarize, this is the top CEO, there is a huge gap and also the CEO form performance, because when these CEOs stop CEOs coming, they always sign the contract that I do not care wither the company goes bankrupt or not, in the next 5 years this will be my salary and this what my bones will be, if I sign that contract and who made that contract,
Slide 13: the remuneration committee (my friends, my good mates or somebody who actually after me to come and clean the mess of that company so they fix up my contract, this how whole things work.
So, this what we call a Tournament Theory, large gap between CEO and the other executives a new torrent has come up in the some of organisations you will say it called the managing director and the CEO one person holding the same position (chairman and CEO) as a chairman you get a bit of salary bit of bonuses and as a CEO you get more bonuses, so your salary become huge, your benefits become huge, and when these state bits are usually given 2 shareholders like ourselves, they will have chairman bonuses and the CEO bonuses.
Who has the power, that what Agency theory is, to be have the power as Agency to talk in front of the shareholders and to say ?okay we don?t want that?, So what?s happen in the shareholders and the top executive, shareholders in the room say that ?I don?t agree to the top executive pay and the veto against that proposal, but it?s never heard?. Look at the British petroleum case, when the top boss salary was proposed that the salary should be this and there was a veto in the room against that, okay we will hear it but then nothing happen, because never heard. Just to continue in the Power Dependency (Slide 15), my top boss is very good and expert in that field and that?s why he deserves to get that reward, that?s absolutely fine. However, is it a prestige thing because you are the top boss of that company and compare to the market rate. E.g: if the Tesco boss get more than Azda Supermarket would it look good? That how the companies should is in the market.
– In conclusion, you should write, when you suggesting at these things: Should be actually taking into consideration, you could criticize those Tournament Theory in a line, not Tournament people should get something for expert
? Claw Back Polices: is being implementing now in HCBC and other big companies that, if the CEOs do not perform well or do not achieve the target, you ask the bonuses back, you cannot ask the salary back because it?s part of their package but you ask for the bonuses back. One of the criticism of Claw Back Polices is some organizations spend lots and lots of money in this Claw Back, spending money over 3 years on the lower fitting to get the money back

? The following resources MUST be used (included) in this essay: (All of them)
– POOR PERFORMERS STILL REAPING RICH REWARDS AT THE TOP
https://www.managers.org.uk/about-us/media-centre/cmi-press-releases/poor-performers-still-reaping-rich-rewards-at-the-top

– EMPLOYERS STILL REWARDING POORLY-PERFORMING BOSSES
https://www.managers.org.uk/about-us/media-centre/cmi-press-releases/employers-still-rewarding-poorly-performing-bosses

– UK’s top bosses received 10% pay rise in 2015 as average salary hit ?5.5m
https://www.theguardian.com/business/2016/aug/08/uks-top-bosses-earned-10-pay-rise-2015-average-salary-hit-55m
– CIPD-Podcast-Executive-Remuneration (attached file)
– Aligning Reward Strategy with Corporate Strategy — CIPD Report (attached file)

– Stop Paying Executives for Performance
https://hbr.org/2016/02/stop-paying-executives-for-performance

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