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Measuring Performance and Management Control Systems

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Managerial Accounting (ACC 702)

   

Added on  2020-02-24

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MEASURING PERFORMANCE AND MANAGEMENT CONTROL SYSTEMS 2 MEASURING PERFORMANCE AND MANAGEMENT CONTROL SYSTEMS Measuring Performance and Management Control Systems Author’s Note: Course ID: Executive Summary: The current report aims to evaluate the performance and management control systems of the three leading insurance companies in Australia in order to assess the effectiveness of executive performance and remuneration policies. AMP Limited: Executive remuneration in 2016 Executive remuneration in 2015 Executive remuneration in 2013 Figure 1: Allocation of executive remuneration in AMP Limited from 2013-2016 (Source: Amp

Measuring Performance and Management Control Systems

   

Managerial Accounting (ACC 702)

   Added on 2020-02-24

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Running head: MEASURING PERFORMANCE AND MANAGEMENT CONTROL
SYSTEMS
Measuring Performance and Management Control Systems
Name of the Student:
Name of the University:
Author’s Note:
Course ID:
Measuring Performance and Management Control Systems_1
1MEASURING PERFORMANCE AND MANAGEMENT CONTROL SYSTEMS
Executive Summary:
The current report aims to evaluate the performance and management control systems
of the three leading insurance companies in Australia in order to assess the effectiveness of
executive performance and remuneration policies. The three organisations that have selected
to fit the purpose of this report include AMP Limited, IAG Limited and QBE Insurance
Group. The remuneration systems for the three organisations have been evaluated as well to
assess the efficacy of the overall organisational performance. Finally, the report sheds light
on providing recommendations for improving the reporting along with widening the
performance measures of the organisation. It has been found that it could be stated that the
remuneration methods of AMP Limited are superior in contrast to the other two organisations
due to better financial performance in the Australian insurance industry.
Measuring Performance and Management Control Systems_2
2MEASURING PERFORMANCE AND MANAGEMENT CONTROL SYSTEMS
Table of Contents
1. Introduction:...........................................................................................................................3
2. Company reviews:..................................................................................................................3
2.1 Allocation of executive remuneration:.............................................................................3
2.2 Change in executive remuneration reporting:..................................................................9
2.3 Company performance versus executive pay:................................................................10
2.4 Mix of performance measures used:..............................................................................12
3. Comparison of remuneration systems:.................................................................................15
4. Summary of findings:...........................................................................................................16
5. Analysis of remuneration methods used:.............................................................................16
6. Recommendations:...............................................................................................................17
7. Conclusion:..........................................................................................................................18
References and Bibliographies:................................................................................................19
Measuring Performance and Management Control Systems_3
3MEASURING PERFORMANCE AND MANAGEMENT CONTROL SYSTEMS
1. Introduction:
The current report aims to evaluate the performance and management control systems
of the three leading insurance companies in Australia in order to assess the effectiveness of
executive performance and remuneration policies. The three organisations that have selected
to fit the purpose of this report include AMP Limited, IAG Limited and QBE Insurance
Group. In this report, the company reviews have been evaluated in terms of executive
remuneration apportionment, changes in remuneration reporting, company performance in
contrast to executive payment and combination of performance measures used. The
remuneration systems for the three organisations have been evaluated as well to assess the
efficacy of the overall organisational performance. Finally, the report sheds light on
providing recommendations for improving the reporting along with widening the
performance measures of the organisation.
2. Company reviews:
2.1 Allocation of executive remuneration:
In order to determine the allocation of executive remuneration, it is necessary to
consider the fixed pay, short-term incentives and long-term incentives of the executive
directors (Arnaboldi, Lapsley and Steccolini, 2015).
AMP Limited:
Measuring Performance and Management Control Systems_4
4MEASURING PERFORMANCE AND MANAGEMENT CONTROL SYSTEMS
Executive remuneration in 2016
Executive remuneration in 2014
Executive remuneration in 2015
Executive remuneration in 2013
Figure 1: Allocation of executive remuneration in AMP Limited from 2013-2016
(Source: Amp.com.au, 2017)
According to the above figure, it could be found out that AMP Limited has disclosed
the value of long-term incentives (LTIs) at their face value from 2013-2016, as laid out its
annual report. However, in case of STIs, no such disclosure in relation to short-term
Measuring Performance and Management Control Systems_5
5MEASURING PERFORMANCE AND MANAGEMENT CONTROL SYSTEMS
incentives (STIs) has been made in 2013 and 2014. From 2015, the organisation has revealed
its method of allocating short-term incentives by segregating them into 60% cash component
and 40% deferred into share rights and the allocation process is identical in 2016 as well. It
has been observed that the fixed remuneration of AMP Limited was $8,896,000 in 2014,
which has increased to $9,098,000 in 2014 and the trend is inherent in case of 2015, as it has
increased to $10,240,000 in 2015. However, in 2016, it has fallen to $9,415,000 in 2016. The
organisation has failed to provide any short-term incentive in 2013; however, it has provided
$1,195,000 in 2014 as STIs in 2014 and it has increased further to $11,498 in 2015. In 2016,
it has again declined significantly to $2,219,000 in 2016. In case of LTIs, it has increased
considerably over the years and thus, there is an increase in overall remuneration until 2015,
which has declined in 2016 slightly due to fall in STIs.
IAG Limited:
Measuring Performance and Management Control Systems_6

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