Accounting Theory: Executive Compensation, Remuneration Report, Agency Problems, and Risk Mitigation

Running head: ACCOUNTING THEORY
Accounting Theory
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1ACCOUNTING THEORY
Table of Contents
Answer to Question 1......................................................................................................................2
Answer to Question 2..................................................................................................................3
Part A...........................................................................................................................................3
Part B...........................................................................................................................................5
Part C...........................................................................................................................................5
Part D...........................................................................................................................................6
Part E...........................................................................................................................................6
Answer to Question 3......................................................................................................................6
Answer to Question 4......................................................................................................................8
References......................................................................................................................................10

2ACCOUNTING THEORY
Answer to Question 1
The outcry for the executive compensation is depicted with companies which are seen to
be having movement towards performance-based compensation. It has been identified that in
general the corporate boards of directors increasingly provide the compensation under the greater
portion of the executive pay in form of the contingent compensation arrangements instead of
guaranteed salary base. The contingent compensation in many situations are responsible
introducing the element of risk to the executives. In situations where the executive receives the
amount of the salary in form of the fixed salary then it is regardless of the performance of the
company. It needs to be further identified that the various types of the information gathered for
the different types of the sources associated to the various types of the consideration for the
aspects are fixed base of salary is identified with regardless of how a company performs in
general (Ferlay et al. 2015).
The term “contingent compensation” or "performance-based compensation" refers to the
various types of the methods of the compensation focused on the merit spay of the long-term
incentive compensation. In general, the executive compensation is seen to include various types
of the contingent compensation mostly in short-term bonus plan payments and lon-term
compensations like stock options and stock bonuses (Schaeck and Cihák 2014).
The short-term incentive is seen to be based on the different types of the consideration
which are seen to be considered as per the typical compensation given to the executives which
seen to be considered as per the association of the data related to the certain measures of the
performance of the company. Typically the board compensation for the compensation committee
in considered outside in terms of the plan established with the various types of the benchmarks

3ACCOUNTING THEORY
which are needed to be considered with the various types of the factors which are directly
associated to the firms for measuring the categories of information like EPS, ROA and ROE. In
case the company intends to achieve the various types of the consideration of the information
which are not meeting the goal then only a small amount of bonus is paid. The most evident form
of the long-term compensation is associated to the stock options which are seen to be given as
per the right of the holder. It needs to be also discerned that in general the stock price of a
company is fixed at the grant date (Financial Times 2015).
The equity theory is identified as variation of the balance theory which considers that the
behaviour is initiated, sustained and directed by the important outcomes and objectives of the
work performance. It needs to be further discerned that the equity theory holds the internal
balance of the of the psychological tensions. This theory is applicable in the workplace and
concentrating on Festinger’s theory of the cognitive dissonance. A more likely result of the
perception of this consideration has been seen to be focused toward the various types of the
depictions which are considered with reducing the productivity (OECD 2015).
Answer to Question 2
The following excerpts of the information have been extracted from the remuneration
report of Tabcorp, which is a publicly listed company in Australia.
Part A
The target mix of the CEO and MD is seen to be stated with 67% of at risk performance
and 50% equity based. The short term executive KMP is seen to be delivered as per the mix of
cash and restricted shares.