ExpertMedium2 marksMultiple Choice
Syllabus B: Organisational structure, culture, governance and sustainabilitySection ASyllabus BCorporate Governance
ACCA · Question 10 · Syllabus B: Organisational structure, culture, governance and sustainability
According to best practice corporate governance codes, who should primarily comprise the remuneration committee of a publicly listed company?
According to best practice corporate governance codes, who should primarily comprise the remuneration committee of a publicly listed company?
Answer options:
A.
A mix of Executive and Non-Executive Directors
B.
The Chief Executive Officer and the Chief Financial Officer
C.
Independent Non-Executive Directors only
D.
Major institutional shareholders
How to approach this question
Consider the conflict of interest if executives set their own pay. Who is left on the board to do it objectively?
Full Answer
C.Independent Non-Executive Directors only✓ Correct
The remuneration committee is responsible for setting the pay and bonuses of executive directors. To ensure objectivity and prevent executives from inflating their own pay, corporate governance codes mandate that this committee be composed entirely of independent Non-Executive Directors.
Common mistakes
Thinking the CEO should be on the committee to advise on staff pay. The CEO may be invited to advise on *lower-level* staff, but cannot be a member of the committee.
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