The Compensation Package in Alacer Gold Corp - Example

Business Report Course Institution Table of Contents Executive Summary 3 Background of the compensation package of the Chief Executive Officer 4 Introduction 5 Types of Compensation Packages 6 Advantage of compensation 7 Recommendations 9 Appendix: Media Release 10 References 11 Executive Summary This is a business report to update the Chief Financial Officer and the board of directors on the compensation package paid to the Chief Executive Officers (CEO) in Alacer Gold Corp. This report is compliant to the requirement of the Corporations Legislation that all Australian listed companies must provide an audited executive remuneration report as a component of the annual remuneration. The remuneration package will be examined on whether it is designed to encourage the CEO to carry out activities in favor of the shareholders. Recommendations will be provided on how the compensation package could be restructured to improve future firm performance. Details of the type of compensation paid and which type of compensation paid and which type of compensation is tied to short-term versus long-term incentives will be discussed. A critical analysis whether the compensation package of the CEO helps resolve agency conflicts between the CEO and shareholders and, if so, how this is achieved. Changes will be recommended to help the CFO and the firm as a whole devise a compensation package of the CEO to better align the CEO’s and shareholders’ interests of Alacer Gold Corp. finally, a media release will be written keeping in mind the influence media release has on the perceptions of key stakeholders and investors. Background of the compensation package of the Chief Executive Officer. The main objective of the compensation package of the CEO is to reward the performance and results delivered by the CEOs. The compensation package is aligned with the strategic objectives, value creation for the shareholders of Alacer Gold Corp. There are certain considerations that the board uses to ensure that the compensation package satisfies the practices of reward governance. These are: reasonableness and competitiveness, being accepted by shareholders, compensating executives according to performance, being transparent and managing capital. Alacer Gold Corp seeks help from outside remuneration consultants when structuring a framework of executive remuneration which market competitive and complimentary as per the reward strategy. The compensation package justifies the interests of shareholder’s, makes sure there’s constant growth of the wealth of shareholders, makes sure the price of shares constantly grows, return on assets(ROI) is kept constant and consideration of vital non-financial value drivers, hiring and keeping competent executives, and overall profits as the main component of the package. The compensation package is also aligned to program participants (CEOs, stakeholders and shareholders) interests. That is rewarding experience together with capability of CEOs. (Sun S.kwon, 2006) Introduction Fixed and also variable pay mixture is provided in the framework, with long and short-term incentives included. When executives are promoted, this mixture changes its balance to “at risk” prize which is greater. A remuneration committee is established by the board whose work is to give remuneration, incentive policies advice, and advice on packages of remuneration and executive’s employment terms. It is also the work of the committee to supervise the employees’ packages of remuneration. Further information is provided in the statement of corporate governance on the remuneration committee’s role. (Heymann & Barrera, 2010) Types of Compensation Packages. Executive Pay Includes the benefits and base pay, and short and long-term incentives and superannuation with the participation of Alacer Gold Corp Limited officers, directors, employees together with other people permitted. All these combined form the total remuneration of the executive. The executives are given a handsome base pay which consists of a fixed pay and extra rewards. Analysis and recommendations are conducted by external remuneration consultants so that a suitable base pay that complies with the market trend is set. This is further emphasized by reviewing the base pay annually to make sure it is competitive marketwise. During promotion, the particular executive’s pay must be reviewed. The executive’s contract has no guarantee of a base pay increase. Base Pay It is designed to be the full employment package cost and it is given as cash together with non-financial benefits without the executive knowing. A handsome base pay is given to the executives which consist of the main pay and extra benefits. Analysis together with recommendations are provide by external remuneration consultants so that there’s an assurance that the base pay reflects the market trends. Annual review of the base pay is conducted to make sure there’s a competitive advantage of the base pay in accordance to the market. During promotion, an executive’s pay should be reviewed. The executive’s contract doesn’t stipulate a guarantee of base pay increase. Benefits CEOs enjoy some benefits together with allowances such as housing allowances and motor vehicle. Superannuation Pension funds plan must be compliant to superannuation finances that the executives nominate. Short-term incentives Remuneration committee sets indicators of performance and targets according to the organization’s short-term incentive plan (STI). Alacer Gold Corp agrees with the Managing Director on a component based on performance. When they meet some crucial performance levels that the board and the chairman sets, a 50% of a Managing Director’s base salary can be earned, this is a cash incentive in short-term. An employee can secretly be issued a short-term cash incentive by the board of directors upon meeting certain performance targets of the company. It is the responsibility of the remuneration committee to assess whether the KPI’s are met. The management and external remuneration consultants provide detailed reports on performance to the committee for assessment. Short-term incentives vary either higher or lower in terms of compensation according to the performance levels of the employees in relation to the target. This is decretory to the remuneration committee. The remuneration committee develops plans and policies during the next financial year about incentives on short-term that are in accordance to Alacer Gold Corp operations which are gold production and activities of exploration. Incentives on long-term The Alacer Gold Corp Directors, Officers, Employees and other permitted persons provide long-term incentives. The managing director and junior managers terms of employment and remuneration is formalized in agreement of the service. All agreements deal with the provision of participation and cash bonuses that are performance-based, if qualified, Alacer Gold Corp officers, directors, employees and other people who are permitted Option Plan. Compensation based on shares Share options in Alacer Gold Corp are given to Alacer Gold Corp officers, directors, employees and other people who are permitted Option Plan that a special resolution was used to approve during the shareholders general meeting. Incentives on long-term are provided by this option plan aiming at the deliverance of long-term shareholder returns by the executives. options are given to the participants under the plan that become functional only when set standards of performance are realized by the employees employed continuously and still are currently employed by Alacer Gold Corp to the end of the period of vesting. The company is allowed in this plan to give free options to people eligible. According to the plan, the options can be exercised at a fixed price. Options exercise price is premium set in accordance to the average price that is volume weighted whereby the shares of the company are traded in Australian Securities Exchange on that week and on the grant date together with the employment offer acceptance. Advantage of compensation The advantage of payment includes various pay systems that reward employees because of their performance and achievement. The general idea is to offer compensation to make them rise beyond. [Num10] 1. Job satisfaction: Employees are always happy when there is a reward and due to this, they work harder because and they feel secure. 2. High motivation: We all have different needs, and for one to keep working in an individual firm there must be a motivation to keep on working harder. 3. Minimal Absenteeism: Many employees would prefer being in their workplaces than being at home because of the package they get at the end. 4. Low Turnover: when an employee gets a good package he/she will not aspire to work for that other organization. 5. Retention When a company retains some its productive workers, it's always an achievement. Remaining with the same employees save firms the company a lot of money, time and efficiency. The use motivation and excellence payment Retaining quality employees need a very organized method that will be used to compensate workers depending on their effort in the firm. Compensation motivates staff to make a promise to abide in the organization and prevent the loyal employees from leaving the company to other entities. The governance ideas that has are in place includes the pay performance of the directorate, age and the number of the shareholders. There are ways whereby compensation policy on compensation can significantly improve the overall performance of the C.E.O’s. (Marcia Millon Cornett(2003) In most big firms’ agency misunderstanding are likely to occur in the control and ownership where owners together with shareholders may have different opinions. The company is owned by the shareholders, but board of directors is responsible decision-making on owners behalf, they also have the mandate for the routine decision of the company. In most cases managers are in a good position to enrich them, and they always take advantage of their strategic location to quench their need leaving the business in jeopardy. (Christina, 2013) Recommendations Compensation is not just a problem in a single organization but it’s a global issue. The executives of Alacer Gold Corp do serve for a much longer period before they retire due to an excellent package they get. Companies should come up with their various independent ways of awarding employee, and of compensating, appreciation, and other benefits. Recognition is an essential in places of work where each one needs to be respected.[Kim13] Media release Employee remuneration is a key issue, and most people are passionate when trying to determine the appropriate method for compensation. Motivations plan need to have super rules to reduce misunderstanding that may arise. (WSCC, 2016) There is a lot of debate that is all over on which basis employee should get compensated and what should determine their compensation. How will payment affect the growth of the business? In recent times, Alacer Gold Corp are after the best worker who has the best skills in the job market as the keep on perusing various opportunities so as to expand its’ territories. Therefore, after the companies lure such a person into their organization, they have to offer an excellent compensation package that creates an interest to those skilled personnel. Some factors determine remuneration payable to an employee. External factors are the ability to pay, where the capacity to pay is the most important factor that influences employee compensation. In a successful firm, it can pay more than the competitive rate, and this is what attract worker of high caliber, and this is also encouraged by the labor law. The other internal factor is a performance which gets always rewarded with a pay increase and as a result, it motivates the worker to do better. Experience is the other factor that which has a great significance. Most companies’ nowadays they hire on basis of the experience of a number of years for the executive position. Most companies presume that experienced candidate performs the job without being trained which is time-consuming. Seniority, senior employee demand more than the junior employee and trade union always advocate for pay rise depending on the criterion. External factor includes, the cost of living is an annual adjustment in wages to account for a change in the power of purchasing as consumer price index measures it. C.P.I is an indicator that is calculated by the department of labor. Law and regulation have an impact on remuneration depending working period, minimum wage, overtime, compulsory bonuses among others. Compensating tend to be a complex issue in meeting the employee’s expectation and those of the company goals. As employer must know that our employee is the utmost valued asserts Reference Num10: , (Nazir, 2010), Kim13: , (Harrison, 2013), Read More