Executive Remuneration Principles and practice Coursework

Executive Remuneration Principles and practice - Coursework Example There was a big financial crisis in 2007. The remuneration practices for the executives in large financial institutions and industrial firms played a large role in that crisis.1 The main slogan of these debates was "there should be a fair compensation". The meaning of this line can be implied in the following ways 2 : For gaining a big profit, the managers or the agents interest does not necessarily match with that of the shareholders.3 They run the show according to their convenience and satisfaction, even if that hurts the shareholders sentiments. This can cost the firm to lose a strategically important acquisitions offers and even a takeover decision as well. This might increase the value of the shareholders but the position of the managers will be at stake. If we look into the matter in this aspect, then a fair remuneration is that which is given as per the market condition and value. This should be decided by a healthy negotiation. The second important factor in this regard is disclosure or precisely a better transparency.4 This is also important as far as the accounting is concerned. This acts as an important monitoring tool that deals with the fairness of remuneration. This is beneficial for the company as well as the market authority and the stakeholders that help them put forward a stren uous auditing activity. The people who are in charge of remuneration decision, decide on the remuneration that may not be a fair one and also it lacks transparency. Improvement of the corporate governance policies makes the task of decision-making easier. Promoting fair regulators, negotiations and also few best practices act as boosters to this step.5 There are chances that new and improved decision steps are being added. The purpose of this is not only limited to the creation of an independent board that has an internal remuneration committee, but also to allow the shareholders to be an important part of the remuneration process.6