Remuneration Committee Effectiveness and Narrative †Free Samples

Question: Discuss about the Remuneration Committee Effectiveness and Narrative. Answer: Introduction This report will state the remuneration paid to the executives of Primary Health Care Limited and the measures used for payment if remuneration. Further, the report will focus on the use of LTIs and STIs in the remuneration structure. Moreover, based on the findings from the remuneration structure, some recommendations will be provided to improve the payment structure and finally the conclusion will be provided. A fair and reasonable system for compensation for the employees and executives are crucial for the generation of long-term value for the business. However, during the past years, it has been identified that the growth in the top executives remuneration is significant and that leads to widening the gap between the compensation of employees and the executives. However, the compensation committee feels tremendous pressures from shareholders, government regulation and talents of the executives as compared to other organizations, while structuring the remuneration for the executives. It has been identified from the remuneration report of Primary Health Care Limited that the base packages are associated with the performance of the company that has a specific benchmark that takes into account the market capitalisation. The company also use the at risk remuneration to evaluate the employees with regard to those areas and the behaviours that will lead the company to perform better or outstandingly (Kanapathippillai, Johl and Wines, 2016). The revised policies for the remuneration also states that the incentives are also linked with the performance of the company. Further, an appropriate mix for long-term incentives (LTI) and short-term incentives (STI) are offered to the executives as are linked to their short-term and long-term performance that may have an impact on the performance of the company as a whole (Ferrarini and Ungureanu, 2014). The focus of the STIs is based on the indicators of the internal performance of the company that are associated with the achievement of business milestones, revenue results, growth and profit. On the contrary, the LTIs are associated with the performance of external perspective that are focussed on the return on the capital investment, return to the shareholders, share price and the market value (Primaryhealthcare.com.au, 2017). At-risk remuneration - 25% of STI is paid based on the performance rights, 50% is paid after 12 months and 50% after 24 months. 100% of LTI is awarded in performance rights and will be paid after three years. STI a substantial part (50% to 80% base on the role of executives) is based on the performance of group finance and 20% to 50% based on the efficiency of individual performance (Salvioni and Bosetti, 2015). LTI - 100% of LTI is paid based on the performance rights and are paid after three years and are subject to the testing at the end of those 3 years. Base package fixed annual compensation that includes the base salaries and are suitable benchmarked by the external independent consultant to create a balance between at-risk and fixed remuneration (Stathopoulos and Voulgaris, 2015). Recommendation It has been found the remuneration structure for the executives of Primary Health Care Limited are in order. However, they may include the incentive payment that will be based on the time taken for the given task. For instance, if an executive is given 5 days to complete a task and he completes it within 3 days then he must be provided with some incentives. Conclusion It is concluded from the above report that the payment structure of remuneration for Primary Health Care Limited is based on the company performance as well as the individual performance. Their remuneration structure involves payment for at-risk remuneration, STIs, LTIs and base package. Therefore, all the remuneration and incentives are taken into consideration and are seemed to be in order. Reference Ferrarini, G. and Ungureanu, M.C., 2014. Executive Remuneration. A Comparative Overview. Kanapathippillai, S., Johl, S.K. and Wines, G., 2016. Remuneration committee effectiveness and narrative remuneration disclosure.Pacific-Basin finance journal,40, pp.384-402. Primaryhealthcare.com.au. (2017). Cite a Website - Cite This For Me. [online] Available at: https://www.primaryhealthcare.com.au/irm/company/showpage.aspx/PDFs/2673-74202027/AnnualReport2016 [Accessed 7 May 2017]. Salvioni, D.M. and Bosetti, L., 2015. Corporate governance report and stakeholder view. Stathopoulos, K. and Voulgaris, G., 2015. The Importance of Shareholder Activism: The Case of Say?on?Pay.Corporate Governance: An International Review.