Shareholder Emowerment, Pros and Cons

Topics: Corporate governance, Board of directors, Executive compensation Pages: 20 (6809 words) Published: August 27, 2013
Abstract
The purpose of this assignment is to examine the recent regulatory changes that have taken place in directors’ remuneration requirements in Singapore, the United Kingdom and the United States. The first part of this assignment will address the regulated remuneration cycle in these three counties; which would be consisting of four activities: remuneration practice; disclosure of remuneration; engagement on remuneration; and voting on remuneration. It has been witnessed that remuneration practice is largely regulated by statements of good practice, while legislative intervention is most prevalent for remuneration disclosure and voting on remuneration. Shareholder engagement is subject to the least amount of regulation, with most regulation being self-regulation by institutional investors. The second part of this assignment will compare these regulatory changes in the aforementioned countries with the proposed changes in Europe and Australia. The implications of this analysis will determine whether these changes have gone too far in empowering shareholders or do they fall short of reigning in excessive remuneration of directors. It has been a recent attention in front of the eyes of the public, as the focus  grew on problems associated with the then remuneration of the executives  (senior managements and directors) in companies, and since then, there have been changes in the executive remuneration in various countries to counter the problems. The remuneration refers to the payment (includes elements such as flat rate salaries, as well as bonuses, share options, restricted share plans, pensions and benefit like healthcare and cars) offered to attract the top quality executives, and at times the level and range of payment increases depending on how an individual executive is on demand. The elements mentioned are important to be considered as the remunerations should be able to reflect the efforts of the driving engines of the companies which are the senior managements and directors. For the purpose of this essay, changes in executive remuneration of 5 countries, such as Australia, U.K., U.S.A., Singapore and a country from European Union, will be presented and discussed after which the best changes will be mentioned and recommendations will be provided.

Introduction
Executive pay lies at the heart of current discussions on corporate governance reform and conflicts-of interest management. Increased disclosure on executive pay, monitoring by the media, and institutional investor activism, all suggest that the current high levels and structures of executive pay are often divorced from management performance, and represent a particularly sharp conflict of interest between management and shareholder interests. The purpose of this assignment is to consider current research on the burgeoning executive-pay problem and evaluate in the context of regulatory framework of directors’ remuneration requirements in Singapore, the United Kingdom and the United States and conclude which country has better regulatory structure. The regulation of executive remuneration can be conceived around a cycle of four activities: • Remuneration practice: the actual practices of firms and individual executives in relation to remuneration. Remuneration practice includes setting remuneration policy, writing the remuneration contract, execution of the contract (namely the executive performs and the company makes payments according to the contract), and termination of the contract; • Remuneration disclosure: the disclosure of remuneration annually via the remuneration report together with ad nondisclosures related to remuneration, such as share transactions, margin loans, company loans; • Engagement on remuneration: the engagement between the company and shareholders on remuneration. There are two types of engagement: proactive engagement of shareholders by the company and reactive engagement of the company by shareholders. • Voting on...
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