Question 1:
Explain the pros (advantages) and cons (disadvantages) in the use of remuneration consultants when negotiating a remuneration package for an incoming senior executive are discussed and/or are in difficulty for concluding it.
Answer:
- The advantage of hiring a remuneration consultant is that the board can have a broader and industry-wide viewpoint of how the remuneration package of the CEO should be designed.
- It can also help in suggesting useful alternatives that are both in favor of the company and the CEO.
- The remuneration consultants may tell what the other organizations are charging to their top executives and how the company can remain competitive by giving an appropriate remuneration package.
- The disadvantages include that it questions the existence of the remuneration committee. The call for consultants shows that the company is not much clear about its remuneration policy
Question 2:
natives responses open to the remuneration committee in order to deal with the demands of the lawyer for the new CEO and simultaneously to maintain best standards in corporate governance practice within the company
Answer:
- The company can provide alternatives like medical allowance, home allowance and transportation allowance despite increasing the basic salary.
- The company can make the provision of two-year payments subject to a specific level of target achievement.
- The company can make a deal with Mr. Tucker to purchase a specific amount o share each year and as a reward of that, the company will grant in future shares to him.
- The company should design a long-term incentive scheme like gratuity, old age benefits, and life insurances in order to attract new employees and retain the new executives for the long run.
Conclusion:
As the remuneration of the CEO is the internal matter of the company it is better than company forecasts its future demands from top executives, evaluate their capabilities, evaluate alternatives available to the candidate and his probability of going to another firm. Hiring the consultants may divert the attention of the board committee by making comparisons with outer forces and taking up a decision that is not in line with management objectives.
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