Performance and Reward Management

Topics: Executive compensation, Corporate governance, Non-executive director Pages: 6 (1815 words) Published: December 13, 2010
Performance Management is the strategic and integrated process that works towards the sustained success of organisations by improving the performance of the people who work in them and by developing the capabilities of individual contributors and teams. Reward Management entails the strategies, policies and processes required to ensure that the contribution of people to the organisation is recognised by both financial (bonuses) and non financial (recognition) means. Reward Management is about the design, implementation and maintenance of reward systems, which aim to meet the needs of both the organisation and its stakeholders. The overall objective is to reward people fairly, equitably and consistently. The main focus of this paper would be the high remunerations of directors. According to the Companies Acts 1985 and 2006, a director is defined as “any person occupying the position of director by whatever name called” - directors are often referred to as company’s officers. There are many different types of directors: •Managing Director/ Chief Executive Officer (C.E.O)

The managing director/ chief executive officer is responsible for the implementation of strategic plans and policies which have been established by the board of directors. The director takes part and makes decisions in the day to day running of business. •Non-Executive Directors

Non executive directors are not involved in the day to day running of an organisation but assists in the strategic decision making process that is important to the company’s development. •Shadow Directors

These are persons who provide instructions and directions and have the capacity to influence the whole board and therefore the appointed directors’ act upon their instructions. •De Facto Directors

A de facto director performs the functions of a director but has not been officially appointed. A de facto director is a part of the company’s governing structure and engages in the management of the company. The de facto director must submit to the companies act and the duties. In recent years, directors and senior executives have come under close scrutiny for their high salaries. The topic has become highly emotive and increasingly controversial with director’s salaries being branded as ‘fat cat’ salaries. Questions are frequently asked on the level of pay and the basis upon which pay decisions are made. Many see it as a reward of failure culture going against the objectives of reward management to reward all fairly, equitably and consistently; and are questioning if director’s salaries are linked to the level of performance given. This paper’s main focus will be the remuneration of directors, as stated above, and aims to show that there is in fact some justification for the high level of pay given to directors.

Role of Directors versus Average Employee

Directors of companies operate at the strategic level while average employees operate at the operational level. The roles of the director and the average employee are vastly different not to mention the level of risk a director’s job entails. The table below shows the responsibilities and duties of the director and that of the average employee.

General duties:-
A director of a company must
Act in accordance with the company’s constitution.
Only exercise powers for purposes of which they are conferred. •A director must exercise independent judgement, however in a way authorised by the company’s constitution. General duties:-
These are in accordance to the job title held by that person. Fiduciary duties:-
According to the law, a director of a company must act in the way he considers, in good faith would be most likely to promote the success of the company for the benefit of its members as a whole and in doing so have regard (amongst other matters) to: •The likely consequences of any decision on the long term; •The interests of the company’s employees;...
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