Management--corporate governance - Essay Example

It has been observed that there exists a high level of inequality in the society and the same could prove to be disastrous for the development of an economy. It is thus with, this objective that the recommendations are sought to improve the workings of the corporate world, encourage equality, transparency and accountability and make the Australian remuneration system internationally competitive - i.e. at par with international standards. According to the new recommendations, the key management personnel will now be prohibited from voting their shares on remuneration reports.

Such a step would bring about significant reforms in the corporate world, and encourage entrepreneurship and innovation, thus contributing to the nation's economy and prosperity. Furthermore by prohibiting the management from voting their shares on the remuneration report, it would help in increasing shareholder signal on non-binding vote thus leading to better informed shareholders. The recommendations 4 through 9 (with the exception of recommendation 5) essentially seeks to restrict the activities of the shareholders with regard to their voting rights on the basis of remuneration reports; simplify the language used in such reports to make it more accessible to the investors; and to encourage the disclosure of remuneration paid to all management personnel occupying key positions in organizations as opposed to the existing arrangement which stipulates the reporting of remuneration of the top five management personnel.

Concerns have been raised regarding the remuneration received by executives and particularly with regard to the level of average wages received by them. These concerns have existed since long, but have caught momentum in the wake of the global financial crisis resulting in a substantial reduction in the shareholder wealth, and the resultant consequences - those of rising unemployment in the nation. The key objective thus, of establishing a robust framework for deciding appropriate remuneration for executives is to ensure that the trust of the communities at large in corporate governance is suitably upheld, in the larger benefit of the wider economy.

The reforms in executive remuneration have been sought by various segments of the society since long, and such changes, are aimed at resolving the issues raised by the them, with regard to excessive payments made to the executives which depict their greed and mismanagement / misappropriation of funds; which is likely to culminate into a financial crisis, affecting a large section of the society as well as the economy. Furthermore, the recommendations would help in putting an end to constant public enquires and outcry with regard to their deteriorating standards of living on account of increase in taxes to bail out companies caught in deep financial crisis.

Furthermore, the Commission aims to ensure through these recommendations that it will help in reducing or eliminating the at least some of the doubts and concerns revolving the remunerations paid to the directors and key management personnel and reinforce faith in the investors, and in the wider community. One of the key objectives is to stabilize management remuneration and prevent it