Q3. Discuss the types of managerial remuneration. Explain the elements of a managerial remuneration (Explaining the types of managerial remuneration, Explaining the elements of a managerial remuneration) Answer. Managerial remuneration is compensation for services provided to a company in a managerial capacity. This can include cash payments, along with benefits like stock options, health insurance, and bonuses. Managers are typically paid more than the people they supervise, although they tend to make less than the executives at the head of the company. Some pay structures are transparent, making it easy to determine how much money managers make, while others may be confidential. Types of managerial remuneration Managerial remuneration comprises of two important pays which are as follows: Managerial remuneration is compensation for services provided to a company in a managerial capacity. This can include cash payments, along with benefits like stock options, health insurance, and bonuses. Managers are typically paid more than the people they supervise, although they tend to make less than the executives at the head of the company. Some pay structures are transparent, making it easy to determine how much money managers make, while others may be confidential. People in management usually sign employment contracts with the terms of their employment clearly outlined, and these contracts can include a discussion of remuneration. A salary or hourly wage can be part of the compensation package along with any benefits. Performance-linked benefits are common for managers, to encourage them to up efficiency and production. People may get extra payments for meeting production targets, for example, or could receive a bonus based on overall company profits for the year. As managers rise in the ranks and acquire seniority, their pay can increase. Publicly traded companies and government agencies may be subject to caps on managerial remuneration, and these stipulations ensure that employees do not receive unreasonable compensation for working in management positions. They can be applied by legislation or through shareholder votes, in the case of a public company. Shareholders might, for example, decide to cut paid vacation benefits or payments to life insurance policies. Elements of a managerial remuneration For Group Management, total remuneration consists of fixed salary, short-term and long-term variable remuneration, pension and other benefits. If the size of any one of these elements is increased or decreased, at least one other element has to change where the competitive position should remain unchanged. • FIXED SALARY, • SHORT-TERM AND LONG-TERM VARIABLE • REMUNERATION AS PERCENT OF TOTAL TARGET REMUNERATION Fixed salary Fixed salaries are set to be competitive within an individual’s home market. When setting fixed salaries the Remuneration Committee considers the impact on total remuneration, including pension and associated costs. The absolute levels are determined by the size and complexity of the position and the year-to-year performance of the individual. Together with other elements of remuneration, Group Management salaries are subject to an annual review by the Remuneration Committee, which considers external pay data to ensure that levels of pay remain competitive and appropriate to the remuneration policy. Short-Term Variable remuneration The annual variable remuneration is delivered through cash-based programs. Specific business targets are derived from the annual business plan approved by the Board of Directors and, in turn, defined by the Company’s long-term strategy. Ericsson strives to grow faster than the market with best-in-class margins and strong cash conversion and therefore the starting point is to have these as three core targets: • Sales Growth • Operating Income • Cash Flow Long-Term Variable remuneration Share-based long-term variable remuneration plans are submitted each year for approval by shareholders at the Annual General Meeting. All long-term variable remuneration plans are designed to form part of a well-balanced total remuneration and span over a minimum of three years. As these are variable plans, outcomes are unknown and rewards depend on long-term personal investment, corporate performance and resulting share price performance. Total remuneration When we consider the remuneration of an individual, it is the total remuneration that matters. We first consider the total annual cash compensation, looking at target level of short-term variable compensation plus fixed salary. We then add target long-term variable remuneration to get total target remuneration and, finally, pension and other benefits to arrive at the total package.
Posted on: Sun, 05 Oct 2014 06:23:39 +0000
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