Directors’ Remuneration's Connection with Profit and Share Price

Running head: DIRECTORS’ REMUNERATION'S AND PROFIT AND SHARE PRICE
OF FIRMS
Directors’ Remuneration's Connection with Profit and Share Price
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DIRECTORS’ REMUNERATION'S AND PROFIT AND SHARE PRICE OF FIRMS
Executive Summary
The current study evaluates probable relationship between financial performances of the
corporation and level of remuneration of key management. The study at hand assesses overall
performance of business concerns with regard to profitability and its relation to management
remuneration for three different Australian firms that are listed on Australian stock exchange
(ASX). Essentially, the current purpose of the study is to scrutinize contribution of
remuneration towards financial performance of firms. The level of profitability of firms is
reflected as share price and net profit of the firms and financial profitability is enumerated for
utilization of resource and wealth of shareholders are regarded in the study for examining the
theme.

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DIRECTORS’ REMUNERATION'S AND PROFIT AND SHARE PRICE OF FIRMS
Table of Contents
Chapter 1: INTRODUCTION....................................................................................................5
1.1 Introduction......................................................................................................................5
1.2 Research Background.......................................................................................................6
1.3 Research Questions..........................................................................................................7
Chapter 2: LITERATURE REVIEW.........................................................................................8
2.1 The concepts and relations...............................................................................................8
2.1.1 Directors of companies: Roles and Responsibilities.....................................................8
2.1.2 Motivations for the directors of business organizations.............................................10
2.2 Finding the Issue............................................................................................................11
Chapter 3: RESEARCH METHODOLOGY...........................................................................11
3.1 Data Collection...............................................................................................................11
3.2 Sample Selection and Data Sources...............................................................................12
3.3 Variables........................................................................................................................12
3.3.1 Independent Variables.................................................................................................13
3.3.2 Dependent Variables...................................................................................................13
3.4 Structure of the research.................................................................................................13
Chapter 4: FINDINGS and ANALYSIS..................................................................................14
4.1 Analysis of descriptive...................................................................................................14
4.2 ANNOVA......................................................................................................................15
4.3 Correlation Analysis:.....................................................................................................18

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DIRECTORS’ REMUNERATION'S AND PROFIT AND SHARE PRICE OF FIRMS
Chapter 5: DISCUSSION.......................................................................................................20
5.1 Directors remuneration with the profit..........................................................................20
5.2 Limitations.....................................................................................................................20
5.3 Conclusion and Recommendations................................................................................21
References................................................................................................................................22
Appendix:.................................................................................................................................26
1) Raw Data..........................................................................................................................26
2) Descriptive.......................................................................................................................26
3) ANNOVA........................................................................................................................27
3) Enumeration of Correlation.............................................................................................29

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DIRECTORS’ REMUNERATION'S AND PROFIT AND SHARE PRICE OF FIRMS
Chapter 1: INTRODUCTION
1.1 Introduction
In the contemporary period, with the development of the global commercial and
business scenario, attributed mostly to phenomena like Globalisation, trade liberalisation and
technological as well as infrastructural development, more and more businesses have been
going global and exploring new markets as well as geographical regions. This in turn, has
increased the level of competition among the businesses in all types of industries, thereby
increasing the dynamics and complexities of the organizations (Tjan et al., 2012).
With time, thus, the organizational frameworks have also become more dynamic,
complex and multilateral. Most of these organizations, especially the private organizations
are mostly profit driven and are founded and run by entrepreneurs, with intention of personal
monetary and non-monetary benefits maximisation. The top tiers of the business
organizations, in a generalised framework, consisting of Directors and Executives, their
remunerations and monetary benefits are crucial aspects in the commercial framework across
the globe (Sigler & Carolina, 2011). However, the remunerations of the directors and the
dynamics in the same, depend considerably on different factors, both internal and external to
the concerned organizations with which these people are associated, and the level of
remuneration of the directors, not only have implications on their level of motivation and
intention to stay in the same, but also impacts different organizational aspects and operational
frameworks (Kaplan & Minton, 2012).
Keeping this into consideration, the concerned research tries to analyse and interpret
the relationship between the remuneration of the directors of commercial and business
organizations and the profits as well as the share price dynamics of these organizations,

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DIRECTORS’ REMUNERATION'S AND PROFIT AND SHARE PRICE OF FIRMS
especially emphasizing on the commercial and industrial sector of one of the dominant
economies in the contemporary period, that is, the Australian economy (Huczynski et al.,
2013).
1.2 Research Background
As discussed in the above section, in the era of increasing commercial dynamics and
competition as well as increased market activities of businesses, it is of immense importance
to manage the operations of a company effectively and efficiently, in a comprehensive and
inclusive manner. Much of these managing and decision-making aspects and responsibilities
are bestowed to the managing bodies and directors of the companies, which in turn indicates
towards the immensely crucial roles which these people play in the operational frameworks
of the companies and also towards the power and level of influence of their decisions and
activities on the profitability, prosperity and long-term sustainability of the organizations, in
almost all types of industries, across the globe (Hahn &Lasfer, 2011).
The directors of the companies are either the entrepreneurs themselves or are those
who are hired by the entrepreneurs to take decisions and manage the companies on their
behalf (Foster, 2012). These people are usually highly skilled ones with considerable
experience and efficiencies in their fields, due to remaining in the industries for long periods
and a lot of the company’s profits, prospects, image and sustainability in the market depends
on their insights, decisions and problem-solving as well as managing abilities, which make
them immensely crucial assets and resources for the companies. Thus, to retain these
resources and the benefits of this human capital, the companies design lucrative remuneration
and financial benefits structures for these people (Frederick, 2011).
The remuneration structures of the executives and the directors of the business
organizations, however, are dynamic and multilateral frameworks, which keep on changing