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Hi everyone!
In part a of the chapter3 video, the lecturer said the remuneration committee (in which mostly are NEDs) decide the executives’ remuneration. What confuses me is that, as mentioned in the video, the NEDs’ remuneration is in turn decided by the executives. It seems to me that it has the same drawbacks as ‘cross directorship’? evaluating each other’s performance? I hope i am making my question clear. 😛Cheers!
Lukeas far as i can remember board as a whole decides, but am not sure cuz my memories of it are blurry.
You’re right of course, Luke. However, in the interests of transparency, I understand that most companies are likely to take advice from independent sources – (recruitment agencies?)
Sameed, you’re wrong!
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What I understand is that, the remuneration of NEDs is being decided by the board.
Some text (Emile Woolf) suggests that to avoid that problem and keep NEDs independent, the remuneration should not be indexed to the performance of the co. i.e no share options and incentives like that. The fees should be aimed at attracting and retaining dirrectors of the calibre required by the company. This implies that fees should be competitive though set by the EDs, of course taking advice of headhunting specialists
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