Session 2 : Remuneration Committee and Nomination Committee

[Acid]

Q- Desribe the composition of Remuneration committee and Nomination Committee , Their Role and responsibilities within an organization.

[Acid]

Remuneration committee consists of ALL Non executive directors which is pretty much obvious as you can imagine what will happen If I tell you that you yourself are going to decide your own salary.... Duh!

That's why we need non executive directors , NED in short , who have no interest in operational managemenr of company and who decide the remuneration policy for board and for individual directors.

Remuneration policy should be good enough to hire good people , retain them and motivate them to work in best interest of the company.


Nomination committe would come in my next post..

[omerpk]

Acid my friend I haven't gotten as far ahead in the syllabus as u have. Consequently I read the relevant sections of the Board Committee chapter and based my answers to the question on what I understood and yes I had to read it a number of times to try to 'lock in' the concepts. Anyway here goes my answer:

REMUNERATION COMMITTEE

Composition: The Committee is comprised entirely of NEDs (non-executive directors)

Role and Main Responsibilities:

- To determine and regularly review the policy and specific terms and conditions of employment of the Chairman of the BoD (Board of Directors) and the EDs (executive directors)

- To determine and review the level and structure of senior management remuneration

- Ensure that statutory provisions regarding reporting and discosure of directors remuneration are complied with.

NOMINATION COMMITTEE

Composition: The majority of the members of the Committee are NEDs (non-executive directors).

Role and Main Responsibilities:

- Review on a continuous basis the size and composition of the BoD

- Nominate for approval by the BoD suitable candidates to fill board vacancies as and when they arise

-Prepare description of the capabilities required for any specific appointment to the BoD

[Acid]

Nomination committee:

Nomination committee consists of majority of NED who should be independent and the work of nomination committee involves monitoring the boards performance , if the composition of board is apt i.e. there is a balance between executive directors and non executive directors. ( making sure that there are equal cat and mice ).

- They also need to look for director succession i.e. If I resign as a director and someone inexperienced takes my position instead of you who is much qualified and experienced with the organizations work , would you feel bad ? yes you would! Thats why they make sure that such stuff doesnt happen whereever its professionally required.

Apart from this they also make sure that NEDS are independent and the current board composition is performing well in organizations interest and shareholders views are being taken into account ( Owners are owners afterall not just spectators of directors game ).


So we are done with Nomination and Remunerations committee and hence completed answer for session 1.

Cheers

[Acid]

hi omer,

What topics are you studying now? Let me know so that we get there in our session 2. Also i would advice you to get out of your suzuki mehran car and get into Toyota Corolla G.L.I ! ;)

We need to move fast for P1!

Cya in session 2.

[Vivienne]

Yes guys . am still putting my house in order.i have just been transfered and relocated to another town which is about 500kms from where i was.am joining you soonest.its just that i havent got the gtg books for P1 yet.it seems all my efforts to aquire are proving futile.i have written and consulted but stil to no avail.Am now just waiting upon the Lord to do his divine intervention.

[Acid]

Glad to hear from you vivie after a long time.

You're being missed at P1 BIT , Hope to see you soon.

Lets wait for the Divine Intervention and the GTG P1 Studytext will fall right from the sky on your desk ! :)

Stay in touch.

[Vivienne]

Acid buy me some books from there and send them.its seems you have a gtg bookstore nearby and dont have to order.tel me if it can work.i can send you a bank draft! i know you cant swindle me because you an ACCA proffesional and you follow the 5 professional ethics, so am very sure you have some integrity and wouldnt want to bring the ACCA profession into disrepute.

[Acid]

Hi Vivie,

First of all ,even if i am not an ACCA Student and I dont have ACCA Code of ethics then also I will not swindle you . ACCA Ethics is not the only standard of trust for me. The ACCA Ethics are not the only thing that bound me ethically . The first thing I am aware of is that I am accountable to The Almighty ! That is what bound me! :)

I wish I had a big GTG Store near me and i was able to help you but unfortunately no. I only order online . I know its expensive but since I have been passing all exams yet so I consider it as a good investment!

In Pakistan there are GTG books available but only for Fundamental level papers. So If you want them I can send it to you but you want a P paper !

Thank you anyway for placing your trust in me and remember we are bound by only one trust! ACCA Code of Ethics are only the reminder.. :)

Cheers

[Vivienne]

Thanks my bro Acid. you are very right that God is to be feared because they say ' The fear of God is the beginning of wisdom. i have tried to order online but i think i have failed on the procedures. anyway i will do with what i have at the moment hopefully i manage soon. lets keep those ideas flowing we shall definately getthrough.How is the internship going?

[Vivienne]

Good gorvenance entails that a company should have a remuneration committee in place.
This is a committes that should comprise of independent non executive directors.it sets up the remuneration of executive directors.its composition of non executive directors is so because the executive directors cannot set up their own salaries.

This remuneration should be dependant upon the company rules as well as the performance of individual directors.

The role of the remuneration committee is
1.To set remuneration packages for directors and that the package should be adequate in order to attract individuals of sufficient calibre.

2.it needs to determine the organisation 's general policy on remunaration of executive directors and specific packages for individual directors.

3.it has to analyse whether the package is adequate in order to attract sufficient calibre.



Could someone help me with the appointments committee as i dont seem to have information on it.

[Acid]

Hi Vivie,

Appointment committee is another name for Nomination Committee , Do you know what is a Nomination Committee ?

[Vivienne]

Yes Acid,

Let me get back to you on the nominations committee i seem not to have found information.
then the other thing how many are we who are participating on the P1 BIT. I say so because i want to know when it is time for me to ask a question.i have seen we have just ended on session 2.please go aheard and post session 3.

[Marvellous]

REMUNERATION COMMITTEE
The committee should be comprised of all NEDs

Role
1.It deternmines the appropriate package for Eds and the contents of the package
2.It determines and reviews the framework, remuneration policy and terms for the remuneration, terms and conditions of employment of the chair and EDs
3. Recommends and monitors level and structure of remuneration of senior management
4. Ensures Eds and management are fairly rewarded for contributions to overall performance

NOMINATION COMMITTEE
The committee should be composed of Eds and NEDs but the NEDs should be inthe majority. The chairperson or NEd should chair the committee.

Role
1. Regularly review the size, structure & composition of the board and make recommendations for new nominees
2. Evaluate balance of skills, knowledge & experience of the board.
3. Identify & nominate candidates for to fill vacancies
4. Recommend existing directors for re-appointment.
5. Full consideration for succession planning