Reference no: EM132585744 , Length: 2132 Words
AYN418 Advanced Financial Accounting Research Assignment - Queensland University of Technology, Australia
This assessment item assesses the following learning outcomes:
Knowledge and Technological Skills (KS)
1.1 Demonstrate and apply integrated discipline (including technical) knowledge across the broad field of business with depth in one or more core business disciplines.
Higher Order Thinking Skills (HO)
2.2 Exercise creativity and intellectual independence and make informed decisions and judgements in planning, designing, and executing strategic and research-based responses to address real world issues and problems.
Professional Communication (PC)
3.1 Use information literacy skills and communicate effectively and professionally in written forms and using media appropriate for diverse purposes, contexts and audiences.
Research Paper Background Information -
Executive compensation is a complex and controversial subject. Well-designed compensation packages are often served as a means of aligning managers' incentives with shareholders' wealth. For many years, academics, policymakers, and the media have drawn attention to the high levels of pay awarded to Australian chief executive officers (CEOs), questioning whether they are aligned with shareholder interests.
Australia introduced new legislation, Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2011, effective from 1 July 2011, with the aim to increase transparency and accountability in executive compensation matters. At the heart of the legislation is the 'two-strike rule'. Two-strike rule is applicable to Australian listed companies and it allows shareholders to vote on the compensation paid to the company's executives. If 25 per cent or more of shareholders vote, for the second time, against the executives' compensation packages the company's directors face re-election. Thus, directors now face greater reputational risk if their company receives a 'no' vote on its remuneration report of at least 25%.
Late last year, the National Australia Bank (NAB) has faced a revolt from angry shareholders over executive pay with a record protest vote at its annual general meeting. The bank announced it is scrapping its new executive pay scheme after more than 85% of shareholders voted against it. The first strike was the largest protest vote in Australian corporate history against management over pay at a blue-chip company. NAB will now be at risk of a second strike and a board spill next year (December 19 2018, Theguardian).
You have recently been appointed as a graduate accountant in National Australia Bank (NAB) listed on the Australian Stock Exchange (ASX). As a requirement of the Corporations Act (2001), an audited executive remuneration report must be provided by ASX listed companies. The CFO of NAB has asked you to research the compensation packages paid to the Chief Executive Officer (CEO): Andrew Thorburn for the financial year 2018. You are required to write a business report and it MUST follow this structure below:
You are required to write a business report and it MUST follow this structure below:
Title Page
Table of Contents
Business Report
1. Introduction: Purpose of the report and accounting issues to be discussed
2. Theory and Literature Review must include:
- Corporate governance in Australia
- The role of executive remuneration in reducing agency costs
- Does empirical evidence support a 'pay-performance' link?
- Does shareholders have used their votes on remuneration report judiciously to curb excessive pay?
3. Discussions and Analysis:
i. Undertake a comprehensive review of NAB's executive remuneration strategy, governance and framework disclosed in its 2018 annual report and identify the issues with the compensation packages paid to the CEO (Andrew Thorburn).
ii. Critically analyse whether these remuneration principles in 2018 help resolve agency conflicts between the executives (e.g. CEO) and shareholders. Support your position and discussion with reference to accounting theory and academic research you discussed in your Literature Review.
4. Recommendation to CFO: further recommendations to help NAB avoid the second strike in 2019.
Reference List