Correlation between Directors’ remuneration and the firm's activities based on Return on Asset and Share Price

Name: BUSN20019 Assignment 1.1
Correlation between Directors’ remuneration and the firm's activities based on Return on
Asset and Share Price
Field of research: The decisions taken by directors have a direct impact on companies’
performance in the industry. Many organisations apply the pay-for-performance theory which
focus on compensating the directors based on the organizational performance. The executive
tend to put extra effort to improve a company’s performance when their remuneration is
depend of it. Studies have established a direct relationship between directors’ remuneration
and company’s performance. Clearly directors’ remuneration and a company’s performance
are dependent of each other. This study seeks to investigate the correlation between
Directors’ remuneration and the firm's performance based on Return on Asset and Share
Price.
Secondary Data: The secondary data will be obtained from two ASX listed companies, that
is, the ANZ Banking Group Limited Company and the Alumina Limited. A two-year 2017
financial and review report of the two companies will be obtained from their official
websites, that is, http://www.rns-pdf.londonstockexchange.com/rns/5969V_-2017-11-6.pdf
for the ANZ Banking Group’s 2017 financial report and
https://www.aluminalimited.com/latest-annual-report/ for Alumina Limited’s 2017 financial
and review reports.
RQ (Research Question): The study will investigate the relationship between Directors’
remuneration and companies’ performance based on Return on Asset and Share Price.
Specific RQ: How does Directors’ remuneration affect a company’s performance based on
Return on Asset and Share Price?
Variables: Firm’s activities and Directors’ remuneration
Search terms: Directors’ benefits and remuneration; Organizational performance; ANZ
Group Limited; Alumina Limited; Financial reports; Return on Assets; and Share price.
Merged articles Reference List: The studies by Borlea, Achim, & Mare (2017);
Barenbaum, O’Rourke, & Schubert (2017); and Rashid (2018) investigated the relationship
between executives’ remuneration and company performance. The four studies established a
correlation between the two variables. In a performance-based pay system, the executives are
likely to focus on increasing a company’s financial earning to increase their income. The
studies were conducted outside Australia and cannot be used as a true representation of the
relationship between firms’ performance and directors’ remuneration. However, the studies
provide vital literature for the research.
Barenbaum, L., O’Rourke, B., & Schubert , W. (2017). The Impact of Share-Based
Compensation. New York: Strategic Finance.
Borlea, S. N., Achim, M. V., & Mare, C. (2017). Board characteristics and firm performances
in emerging economies. Lessons from Romania. Journal of Economic Research,
Volume 30, Issue 1.
Rashid, A. (2018). Board independence and firm performance: Evidence from Bangladesh.
Future Business Journal, Volume 4, Issue 1, June 2018, Pages 34-49.