Analyzing Regulatory and Governance Strategies for Executive Pay

This report examines the regulatory and governance strategies concerning executive remuneration in Australia, focusing on issues such as excessive CEO pay, remuneration setting processes, disclosures, and shareholder involvement. It discusses the roles of remuneration committees and external consultants in determining executive compensation, highlighting the importance of performance-based pay and post-employment benefits. The report explores regulatory strategies like agent constraints and affiliation terms, as well as governance strategies such as decision rights and agent incentives, to address disparities in executive remuneration. It also touches on the use of equity-based pay and derivatives to mitigate risks. The analysis concludes that while regulatory and governance mechanisms aim to ensure fair remuneration, the trend of increasing executive pay continues to raise concerns among investors and demoralize workers. Desklib provides access to this and many other solved assignments.

Running head: REGULATORY STRATEGIES RELATING TO EXECUTIVE
RENUMERTATION
Regulatory and Governance Strategies Relating to Executive Remuneration and are they
Appropriate
Name of the University:
Name of the Student:
Authors Note:

1REGULATORY STRATEGIES RELATING TO EXECUTIVE RENUMERTATION
Table of Contents
Issue.....................................................................................................................................2
Rule......................................................................................................................................2
Application..........................................................................................................................3
Conclusion...........................................................................................................................3
References............................................................................................................................4

2REGULATORY STRATEGIES RELATING TO EXECUTIVE RENUMERTATION
Issue
Several issues are observed in executive remuneration policies within Australia that
requires certain effective regulatory ad governance strategies. Such governance issues include
NED remuneration and CEO as well as executive remuneration (Jenter and Kanaan 2015).
Certain major issues that are faced by the executives of Australia also are concerning
remuneration setting process, disclosures and shareholder involvement. Focused on such issues
strategies are developed to maintain proper governance on remuneration. There has been a
controversial issue related to the excessive remuneration attained by the CEOs that has facilitated
them in leading luxurious lives. Executive compensation has increased by 150000 times the
wage of workers that has generated disparity causing an ethical remuneration issue (Pepper and
Gore 2015). Such trend of an increased hike in executive remuneration has generated a disparity
which is a clear cause to bother investors along with demoralizing the workers of the
organization.
Rule
The rule for deciding the CEO remuneration process is decided by the remuneration
committee and is the role of external consultants of remuneration. The rule of setting the
remuneration components are fixed, performance based and is also deemed to have post
employment advantages and termination payments. Certain factors that determine the optimal
remuneration amount for executives include labor market for the executives, organizations
circumstances and efficient arm length bargaining between organization and the executives.
There are also certain rules related to regulatory mechanisms which block the sub-optimal
remuneration (Shields et al. 2015). The rule of economic or agency theory argues that the

3REGULATORY STRATEGIES RELATING TO EXECUTIVE RENUMERTATION
performance based pay encourages the executives to enhance company performances. Another
rule for high executive remuneration is observed because directors might be paid high
compensation due to services provided by them in governing an organization.
Application
In analyzing the increased and issue of unfair executive remuneration, certain regulatory
and governance strategies are developed for safeguarding the rights of shareholders. The
regulatory strategies to resolve the identified issues include agent constraints and affiliation
terms. Certain governance strategies to resolve despaired executive remuneration includes
decision, appointment rights along with agent incentives (Van Essen, Otten and Carberry 2015).
Agent incentive strategies is also deemed to be applicable in addressing such remuneration issue
based on disparity. Application of such strategy is effective for the reason that it alters the
incentives of agents rather the increasing the power of principles. Moreover, in order to avoid the
issue of outrage, the CEOs involve in camflowedge concealing huge payments specifically in
relation to options. Equity based pay can also be applied in which use of derivatives will be
considered to decreased downside risks and this might also encourage “short-termism” or
manipulative practices.
Conclusion
It was gathered from analyzing the regulatory and governance regulations of
remuneration of executives that there is a trend of an increased hike in executive remuneration
has generated a disparity which is a clear cause to bother investors along with demoralizing the
workers of the organization. To resolve such issue rule of setting the remuneration components

4REGULATORY STRATEGIES RELATING TO EXECUTIVE RENUMERTATION
are kept fixed, performance based that are also deemed to have post employment advantages and
termination payments.
References
Jenter, D. and Kanaan, F., 2015. CEO turnover and relative performance evaluation. The Journal
of Finance, 70(5), pp.2155-2184.
Pepper, A. and Gore, J., 2015. Behavioral agency theory: New foundations for theorizing about
executive compensation. Journal of management, 41(4), pp.1045-1068.
Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., Johns,
R., O'Leary, P., Robinson, J. and Plimmer, G., 2015. Managing Employee Performance &
Reward: Concepts, Practices, Strategies. Cambridge University Press.
Van Essen, M., Otten, J. and Carberry, E.J., 2015. Assessing managerial power theory: A meta-
analytic approach to understanding the determinants of CEO compensation. Journal of
Management, 41(1), pp.164-202.