Azt Pricing Decision Essay

In 1986, Burroughs-Wellcome Company introduced the first major breakthrough against acquired immune deficiency syndrome (AIDS). It was the life-prolonging drug AZT. The product has turned out to be very successful for the company and, largely because of AZT’s success, Burroughs-Wellcome’s profits have doubled in the three years ending in 1988. The Food and Drug Administration (FDA) plans to expand the authorization for the drug’s usage to those who are infected with the AIDS virus, but not yet showing signs of serious illness. The estimate of the size of this market is hundreds of thousands rather than the tens of thousand who are currently sick with AIDS (1988). The controversy over the drug centers on its price. AZT costs about $8,600 for a year’s supply for each patient (lowered from $10,000 in 1987). Critics in the gay, medical, and legal communities contend that Burroughs-Wellcome executives are â€Å"corporate extortionists.† Some believe that the company has already made too much money at the expense of the sick. The price is so far out of reach of indigent and moderate-income people that the federal government had to step in with subsidies of millions of dollars. Burroughs-Wellcome defends it pricing practices by stating that its profit margins (in the 50-70 percent range) are in line with those companies introducing new drugs. They contend these high returns are necessary to finance research and recoup the millions of dollars invested in developing the drug. They initially gave the drug free-of-charge to as many as 5,000 AIDS patients and spent $80 million on a new plant. Additional criticism revolves around the actual development of the drug. The Wall Street Journal stated, â€Å"But Wellcome’s moral position is undercut by its relatively minor role in the creation of AZT.† Researchers at the Michigan Cancer Foundation, from West Germany, and at the National Cancer Institute are credited with the major discoveries that led to AZT. Nevertheless, Wellcome performed toxicology, pharmacology, and animal studies before AZT was given to the first human volunteer. It also financed the big clinical trial and bankrolled the give-away to the patients in the initial experiment. Wellcome is under pressure to cut its price. The government is attempting to institute a â€Å"reasonable price† clause where an unduly high price could trigger a government order for a company to open its books. Any company found in violation could be sued for breach of contract. Congress is also studying AZT and one Congressman wrote the company contending that the original price rationale (achieving a decent return on investment during a short product life) no longer exists as the drug has been on the market for three years and the market is growing for the product.

Effectiveness Audit Accessibilities for Senior Citizen Comfortability

EFFECTIVENESS AUDIT ACCESSIBILITIES FOR SENIOR CITIZEN COMFORTABILITY: ( A CASE STUDY OF THE HERITAGE RESIDENCES AND HEALTH CARE CENTRE IN MALAYSIA ) Abstraction Missing in accessible environment will curtail aged and handicapped individual to bask their life ( Tan, 2008 ) . Person with disablements ( PWDs ) will restrict by the physical barriers in a edifice. Therefore, it is necessary to analyze ways to better the degree of handiness in edifices for the aged and handicapped people in the built environment, particularly in infirmary and retirement Centre. This paper tends to place the degree of handiness in infirmary and abodes edifices in Selangor, Malaysia. This survey comprises literature reappraisal, informations aggregation, observations and table research to research on how to accomplish friendly and comfy entree for all particularly aged and handicapped. This survey tends to make full the spread of the old survey on the handiness of senior citizen and disables. The findings will let the edifice supplier to upgrade bing installations in order to suit accessible built environment for the aged and handicapped people. Findingss revealed t hat failings found are caused by hapless design, deficiency of policies and ordinance every bit good as limited guidelines. Final portion of this paper provides some recommendation in proposed guidelines in regard to the individual with disablements ( PWDs ) needs. Keywords: Accessibility, Person with disablements ( PWDs ) , Built environment 1. Introduction Malaysia is a underdeveloped state with a population of 29.62 million in twelvemonth 2013. Out of this 29.62 million, 1.56 million – 2.75 million are those aged and people with disablements ( PWDs ) . Although the population of Malaysia is considered younger than others developed states, nevertheless the ageing population is increasing twelvemonth to twelvemonth resulted from birthrate diminution. It is proven from the Statisticss of Malaysia that ageing population is increasing about 5 % each twelvemonth. Harmonizing to a old survey, it is estimated that the population of ageing and aged will increase to 15 % of the state population in the twelvemonth 2030. Health attention and residences edifices take on particular significance as the rapid increasing of ageing and disabled in our society is widely recognized today. As the aged and handicapped population grows, it is progressively of import to happen a more efficient service for this group. This survey can be a guideline for architecture, developer every bit good as authorities bureau in fixing the act and ordinance in reinforced environment. This survey highlighted that accessible design must do edifices more approaching and easier for come ining and utilizing. In concurrence to this, an accessible design must incorporate with the inside and outside of edifice elements. In other words, an accessible design should able supply a high degree of safety life and should let people to execute their day-to-day life and activity more freely. Last, accessible design must incorporate with a edifice ‘s map, layout every bit good as signifier. This seminar paper will discourse about the effectivity and process to carry on entree audit for handicapped comfy. The concluding aim of this authorship is to measure and happen another attack to supply a pleasant entree audit. In order to supply accessible environment for ageing and aged, it is of import to understand assorted group of individual with disablements. B asically individual with disablements can be divided into four major classs which are orthopedic, centripetal, cognitive and multiple. Orthopaedic This class is the people who are enduring orthopedic disablements such as locomotor disablements. Sensory This group of individual with disablements refers to people with centripetal disablements in footings of either hearing or ocular. However, this group of people normally come in both which mean they will endure both. Cognitive Peoples in this group refer to them who are enduring mental illness such as development or acquisition disablements. Multiple Multiple refer to those who are enduring with the combination of orthopedic, centripetal and/or cognitive disablements. 2. ELDERLYttriumAND PERSON WITH DISABILITY ( PWDs ) Elderly or senior citizens refer to those who are at age of higher than mean life span of homo. However, there is no formal boundary age for aged and senior citizens. It is vary from each state on how the state defined the boundary for aged and senior citizens. In Malaysia, elderly or senior citizens are those who are in age of 60 old ages old and above while individual with disablements are those who are enduring job in term of orthopedic, centripetal, cognitive every bit good as combination of these three. In order to protect the individual with disablements, Malaysia authorities has introduced Persons with Disabilities Act ( PWDA ) in 2008. In the twelvemonth 2006, around two hundred 1000s of handicapped people have been registered under the Department of Social Welfare Malaysia ( DSW ) . Graph 1 Population of Elderly and Disabled Person in Malaysia and Australia in 2009 Beginning: Wellness National Data 2009 – Institute of Gerontology, UPM Graph 2 Aging Populations in Malaysia from 1970 to 2020 Beginning: Department of Statistics, Malaysia 3. CodeOFPRACTICEON ACCESSFOR DISABLED Peoples: DESIGN AND ARCHITECTURAL ELEMENTS In order to protect individual with disablements, Malaysia authorities has introduced Malaysia Standards on Disabled Person ( MS ) in 2002 and a more recent and powerful one which is Persons with Disabilities Act ( PWDA ) in 2008. Malaysia Standards on Disabled Person ( MS ) in 2002 is concentrating on supplying comfort environment and installations for handicapped individual in Malaysia. However, this is merely a criterion but non Acts of the Apostless, hence some garbage to follow the guidelines or the Standards. Therefore in 2008, Malaysia authorities introduced the Persons with Disabilities Act ( PWDA ) . Part of this act has written that those who did non obey or follow the act will be all right and gaol. There are fundamentally five elements to be considered in planing infirmary and abode edifices which are:Obstructions Figure 1: Obstructions Beginning: Sciverse ScienceDirectStreet furniture Figure 2: Idea dimension of tabular array that fits wheelchair users Beginning: Sciverse ScienceDirectCurb inclines Figure 3: Design of Curb inclines Beginning: Sciverse ScienceDirectParking Figure 5: Dedicated parking tonss design for the individual with disablements Beginning: Sciverse ScienceDirect 4. REVIEW OF EFFECTIVENESS AUDIT ACCESSIBILITIESHospital Sungai Long ( HSL ) Figure 6: Hospital Sungai Long Beginning: HSL web page at hypertext transfer protocol: //hospitalsungailong.com/web/contact-us/location-map.html Hospital Sungai Long is located at Pt 21147, Persiaran SL1, Bandar Sungai Long, 43000 Kajang, Selangor, Malaysia. This edifice consists of 6 floors with 60 beds available. This infirmary began its operation in 2012. An entree audit was performed in April 2014 for bing edifice and installations. Based on the observation and findings, this infirmary is non so accessible for aged and PWDs. Figure 7: Parking tonss of HSL Beginning: Case survey of HSL, Kajang ( 2014 ) This is the lone parking batch next to the chief entryway provided by Hospital Sungai Long which consists of non more than 10 tonss. In concurrence to this, there are 4 parking tonss provided for physicians and specializers staffs of Hospital Sungai Long. In fact they didn’t provide any parking tonss for aged and handicapped individual that should approach the chief entryway. It will take a long distance for aged to travel through the chief entryway. Besides that, there are no pronounced parking infinites across the site for those who are registered under individual with disablements ( a valid spine ) . In order to work outing this job, Hospital Sungai Long should supply parking tonss for aged and disabled that near chief entryway and painted in different colour from other tonss. Figure 8: Main entryway of HSL Beginning: Case survey of HSL, Kajang ( 2014 ) The figure shows the chief entryway of Hospital Sungai Long. Hospital Sungai Long is utilizing manual operation door and it is hard undertaking for aged and disabled to open the door particularly those utilizing wheelchairs. Other than that, it may make some uncertainness for aged and individual with disablement such as autumn down to floor and others. Therefore, it is recommended that Hospital Sungai Long should utilize automatic door for easy usage of aged and handicapped individual although it incurred a higher cost. Figure 9: Nerve pathway of HSL Beginning: Case survey of HSL, Kajang ( 2014 ) The tract provided from Hospital Sungai Long is excessively slanted. The tract has exceeded the Malayan Standard MS 1184: 2002 which is non more than 1:12. It is hard for aged and individual with disablements to acquire usage of it. Therefore, Hospital Sungai Long should supply a tract of gradient non more than 1:12. Figure 10: Toilet in HSL Beginning: Case survey of HSL, Kajang ( 2014 ) This is the figure of lavatory provided in Hospital Sungai Long. The lavatory is good equipped with inveighing that easy accessible for the aged and handicapped individual. However, the country is excessively little. The country is a spot narrow for wheelchairs users. Besides that, there is no haptic surface installed. The installing of haptic surface is to avoid those uncertainnesss such as autumn on floor and others. As a decision, Hospital Sungai Long should better installations provided for aged and individual with disablements by enlarge the size of lavatory and put in haptic surface. Figure 11: Lift installed in HSL Beginning: Case survey of HSL, Kajang ( 2014 ) The figure shows the lift installed in Hospital Sungai Long. Overall, the lift is user friendly. For illustration, the button is 1200mm from the floor degree and it is easy accessible for wheelchairs users. However, there is no haptic warning surface installed in forepart of the lift. Therefore, it is recommended that Hospital Sungai Long should supply tactile warning surface for vision impaired and a bigger lift that able to suit more wheelchair users.

Audit - Assurance - and Compliance Trimester

The company, Bio Sustainable Feeds Ltd of Australia Is mainly engaged in the research and development process related to different eco-friendly products including fish feed. So far the case study says, the engagement of Bio Sustainable Fish Feeds Ltd in the research of fish feed had faced early setback when their effort towards research of exploring new range of fish feed with the ingredients of earthly items like canola, corn, soya-bean, sunflower, etc. could not be able to produce desired result. To hour their effort with constant endeavor to excel in the field of environmental friendly fish feed had been recognized by Commonwealth Scientific and Industrial Research Organization or CSIRO by extending a grant of AUD 500 million with specific terms and conditions of spending the money in the activity of research on the eco-friendly fish feed  (Morgan, 2015). The company had engaged themselves with further research in this filed of fish feed by exploring the scope of deploying ingredients like wood chips, cane residue or captured methane gas from different sources, which had seen some success in the respective field in the context of feed products increasing the weight of the valuable fishes like salmon, tuna, trout with reasonable satisfactory standard. The respective company will undergo a audit program by a professional audit agency who will undertake the assignment after verifying certain issues like the detection of audit risk, the financial accounting documents and with the context of certification of the claim of the company related to their exclusive patent right and TBL as per GPFS of BSF ltd. As per the standard procedure, the audit firm has to set steps of audit before the assignment is to be started. There are different opinions of fixation of steps of audit for any assignment which is depending upon the volume of documents to be checked and assessing the gravity of the situation which is needed for concluding part through generation of audit report. Steps are basically framed in macro level with planning of audit, conducting audit and conclusion of the audit activity. These steps are divided micro level of activities to be compliant of audit purpose  (Asic, 2016). These steps will be discussed as follows to understand the utility of these steps and the respective outcome these steps can produce to make the final audit report for the stakeholders of the company. The basic requirements of an audit program is to be entertained with the steps of audit program and these preliminary steps are more essential to ensure the accuracy of the audit process and ultimately to provide with the best possible audit report to the process owner and other stakeholders of the company  (Penn, 2016). Planning of audit is divided into different micro aspects which are being appended below: To plan any audit assignment, first to derive by the auditor is to ascertain of the assignment is suitable for the auditors. The identity of an auditor for any assignment is unique and in any case auditor should not get involved with any such assignment which is of material interest. The auditor has to ensure that he is not at all attached to the company by any means with some material interest and except for the purpose of audit, the auditor should not get involved in any sort of such activity which is directing towards any sort of interest of the auditor with the company or any such activity which is related to company other than of audit process. It is also advised to introduce fresh personnel in the audit process to have fresh outlook on the process  (Penn, 2016). To ensure the above point, the auditor and his team should involve themselves in the derivation of the size of the audit process along with the scope of the audit work. To ensure this, there should be an homework to ascertain how the members of the audit team will get involve in the process with the specific time limit to be fixed related to this assignment.   Also it is to be noted if any special investigation is to be done any specific issues which is related to work-intensive. These elements can make the leader of the audit team about fixing the number of team members for successful completion of audit assignment  (Acca, 2016).  Ã‚   Prior to staring the audit process, the team leader should assess the probable areas which may produce potential mistakes which will be caused due to misstatement in the reports of financial accounting system of the company. The right spade of ding this is the highly professional and experienced background of the team leader. This identification process can be done though the knowledge of the company with the past financial statements and as because this is of subjective nature; the team leader should depend upon his self-judgment.   Post the introductory assessment, the auditor has to fix the strategy of undertaken audit assessment by segregating different activities to be done which should include identifying the critical area of interests depending upon which the task assignment is to be made with the factor of time limit by which the job is to be done  (Asic, 2016). It is the execution part of the audit assignment which includes different micro activities like advance intimation, verification of concerned documents, like financial accounting statement and relevant documents, compliance of statutory obligation, reviewing of the audit process and making of draft audit report. It is the first step of conducting audit to place the intimation to the company in which the audit process is to be taken care. The intimation should be in black and white and will contain the start date of the audit process with proposed completion date,   checklist of documents and records pertaining to the financial accounting to be made available for the purpose of audit, well in advance for the period specified for which the audit process will take place  (Mediacongo, 2015). The basic criterion of any audit process is to ensure proper verification of financial accounting documents and records in the form of receipts, payments and the respective entries in journal and ledger. The main job of auditing is to verify the documents provided by the company with proper checking. The documents such ought to be verified are statements, registers and records. While checking the application of mind with the professional knowledge is required for checking and subsequent derivation of judgment. The documents and records are to be substantiated with the respective journal and ledger entries which are instrumental for the process of finalization of accounts; hence this is the most discrete part of the entire audit operation  (Mediacongo, 2015). The statutory obligations for any company arise from the implication of several taxes payable by the company through the generation of business. It is the obligatory part of the company to ensure the payment of taxes and other statutory compliance within specified period; otherwise the company will face liability by penalty and interest, being a defaulter. Hence it is one of the important areas to find out by auditor that the compliance in the said field is properly ensured by the company.   After the audit is over, the generation of financial review report is compulsory with the view of the auditor. The same report is to be forwarded to the management of the company for required clarification in different issues which are found not abiding by the system and the process of the company. Post all these activities, the auditor has to furnish the recommendation which will guide the company to make their strategies to be reviewed or fixed as per the constitution of the company. Violation on any issues must be highlighted with the preferred recommendation of the auditor to get rid of such instances. After all activities related to audit process is over, the auditor ahs to handover the necessary copies to the respective stakeholders with signature. The report is to be signed by the director of the company simultaneously as a token of acceptance of the facts revealed in the audit. With all the above steps to be completed, the audit process comes to an end for any specific financial period of the company concerned. The audit report will be elementary for the company to find out the lacuna of the system adopted by the company with clear and transparent recommendation to avoid those in future so far accounting standard is concerned. When the auditor will take the assignment of BSF Ltd. Preferably these steps will be adopted for a professional audit of the company. Audit risk is a regular feature for determining if the assignment is to be taken or not. There are three types of risks prevalent in this segment- inherent risk, control risk and detection risk. It is that type of risk which is inherent in nature within the culture of the company due to misstatement of subject appearing in the financial statement of the company. Inherent risk is featured in the high range where it s found that high level of judgment is involved to encounter complex transactions observed in the process  (Accounting-simplified, 2010). This risk is generated from the activities which are arising out of the lesser –practice of internal control which subsequently leaves the scope of high level of material misstatement. To mitigate control risk, high level of multi-layer internal control check is to be implemented with the professional knowledge in the respective field of accounting and finance. This risk arises when the auditor can not detect the focus area and put highlight on the areas which are not so important, and at the same time ignoring the areas which are of more importance is status. This situation arises when the auditor is getting confused with the issues arising during the process of audit  (Unifr, 2016). The acceptable model of risk assessment determination is practiced with the below formula:- Audit risk= Inherent risk x control risk x detection risk   In this case the assumed audit risk is derived with the coefficient provided in case of BSF Ltd.:- Inherent risk = 90%, control risk =5% and detection risk = 80% Thus audit risk derived is = 90% x5% x 80% or 0.036 This audit is risk is reasonable, if the audit firm is accepting. Otherwise the audit firm has to follow the specified benchmark they follow for derivation of audit risk  (Unifr, 2016). Following is the audit program for BSF Ltd.: The Assigned audit firm has to assess the audit risk and then serve a notice to the management of BSF Ltd with the time limit and the requirement of the financial documents of BSF Ltd. along with acceptance of the assignment. To start with the process, schedule of audit is to be made containing the detailed program and the time limit with assigned members of the audit team. The plan of audit is the next step which should emphasize on the objective, scope and detection of critical area of the audit to be made on BSF Ltd. Management of audit process is the most vital step of audit program which is the responsibility of the team leader who will concentrate on the schedule and ensure compliance of audit plan. Submission of the draft audit report to the management for further discussion on the gray areas of observation is the next step with highlighting the discrepancies found during the course of audit(Cag, 2011).    Spent on research 1 st installment   Expense on procurement of fixed assets for research   Spent on research 2 nd    installment   Spent on research 3 rd and final   installment Observations of the journal entries related to CSIRO grant and R & D expenses: CSIRO grant had been booked properly in the books of financial accounting. R & D expenses are booked as per expenses made with the conditions applied as per CSIRO TBL or Triple Bottom Line concept endorses the concept of compliance of any organization by exposing their concern about social environmental and economical bottom line. As per BSF Ltd. they are claiming their compliance of TBL through GPFS and they need the certification of the same from the auditor. So far their activities of research with the eco friendly ingredients are proved, and with their endeavor to serve the society through their efforts they are substantially comply the same along with the economic bottom line of profit generation. Hence the claim may be certified with true and fair observations from the auditor. It is found that BSFR had acquired the patent of the product which is the result of their effort exploiting the environment friendly bacterial based resource. Their patent is being allowed on the subject with the product they have explored. But the entire field of bacterial based feeds technology can’t be their claim area as patent. Hence the claim such placed may not be allowed by the auditor keeping in mind the said factor of covering entire range of that technology  (Acca, 2016). Acca. (2016, May 31). Planning an Audit of Financial Statements. Retrieved September 22, 2016, from accaglobal: https://www.accaglobal.com/in/en/student/exam-support-resources/professional-exams-study-resources/p7/technical-articles/audit-financial-statements.html Accounting-simplified. (2010). Audit Risk Model Inherent Risk, Control Risk & Detection Risk. Retrieved September 20, 2016, from https://accounting-simplified.com/audit/risk-assessment/audit-risk.html Aicpa. (2006). Audit Risk and Materiality in Conducting an Audit. Effective for audits of financial statements for periods beginning on or after December 15, 2006. Earlier application is permitted; https://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-00312.pdf , 47 (107), 1647-1662. Asic. (2016). Are you a large or small proprietary company. Retrieved September 17, 2016, from https://asic.gov.au/regulatory-resources/financial-reporting-and-audit/preparers-of-financial-reports/are-you-a-large-or-small-proprietary-company/ Cag. (2011, March 31). Audit Plan. Retrieved September 22, 2016, from Cag: https://dgace.cag.gov.in/pdf/AMG-III-Audit-Plan.pdf Mediacongo. (2015, April 15). ToR Audit BSF-IA Final. Retrieved September 17, 2016, from mediacongo: www.mediacongo.net/docs/jobaof/2015/wv_tdr_anglais_20150418.docx Morgan, H. (2015, December 07). CSIRO fund to support Australian start-ups. Retrieved September 22, 2016, from Csiro: https://www.csiro.au/en/News/News-releases/2015/CSIRO-fund-to-support-Australian-start-ups Penn, S. (2016). Six-Step Audit Process. Retrieved 09 17, 2016, from https://smallbusiness.chron.com/: https://smallbusiness.chron.com/sixstep-audit-process-17816.html Unifr. (2016). Risks (Audit Risk Formula). Retrieved September 20, 2016, from https://www.unifr.ch/controlling/assets/files/Noesberger2016/3-audit-risk-formula.pdf With a decade's experience in providing essay help,

How resilience works Essay Example | Topics and Well Written Essays - 500 words

How resilience works - Essay Example From depicting a quality of stability in physics, to psychology where resilience has come to be defined as the capacity of people to cope with and stress and catastrophe, this term is now a major trend in the corporate world. Or so says Diane L Coutu in her article titled, How Resilience Works, where she etches the nuances of the use of the term. This paper is essentially a critique of the article. Where the issue of family strength and crises are concerned, the author has demonstrated that resilience does not necessarily come from the genes and it is more commonly found among children from troubled homes - they seem strong from inside. Resilience itself comes up in diverse ways like humour, an ability to laugh at oneself, etc. The author has been fascinated by the issue of resilience in one's daily life - and it shows in her case studies and examples she has cited. Even the references of people she has used for professional takes on the subject, demonstrates people who are from various backgrounds, yet by and large, a resilient lot who have gotten where they have through a strong dose of determination. But is that all there is to resilience Apparently not, if the author is to be believed - she talks of resilience from the psychological point of view, where to start identifying the basic features of this trait, she finds that a sense of humor, sometimes bordering on the black, is not a surprising quality

Collective and Distributive Power of the United States Assignment

Collective and Distributive Power of the United States - Assignment Example America enjoys a power in the international system that is indispensable as the state wishes to take their leadership responsibilities as well as share the burdens of others. Thus the country of America enjoys both collective as well as distributive powers. (Simone, 2000, p 39) The United States of America play an important leadership role in the policies regarding the international trade. Thus the paper aims at evaluating the role of the country in international trade. Trade relations existed among economies from the period of Mercantilism in the world economy. The large economies of the world have always been dominating the small economies in their economic interaction in terms of trade. One main instance that reflects the dominance of the United States in the dealings of international Trade was the signing of the conditional MFN clause in the year 1778 between the United States and France. The equality of the privileges enjoyed in the market was to be ensured by the treaty. However, the clause held by the US was the main factor responsible for destroying the equality in the market. (Trebilcock & Howse, 2005, p 50) In the period following the Second World War and the establishment of universal balance in the economies of the country, that is, after such a huge disturbance, there had been a significant increase in international trades. In order to conduct the liberalization of the world economies in a systematic way, a certain agreement was planned to be signed between the nations participating in international trade. This gave rise to the General Agreement on Tariffs and Trades, which was followed by the establishment of a general governing body for monitoring the international trade, namely the World Trade Organization. The main aim motive behind the formation of GATT was to avoid the difficulties of the policies of imports and exports of individual countries prevalent before the Second World War. An overall policy for all member countries participating in international  trade was the main aim.  

International Business (Embraer Corporation) Essay

International Business (Embraer Corporation) - Essay Example The internationalization strategies that the companies resort to, often involve numerous factors. In the light of this fact, it should be stated that most governments are interested in attracting the financial resources of the Multinational Corporations. Therefore, while some companies develop their product, extend markets, increase the amount of workers, the others win governmental tenders, invest, and look for partners. Another aspect of the trade globalization strategy is closely linked with the opportunity to create employments all over the world. While the governments get an opportunity to reduce unemployment rates, the MNCs enjoy lower labour costs. The aim of the research is to analyze the globalization and expansion strategy of the EMBRAER (EMBRAER - Empresa Brasileira de Aeronautica S.A.). Since it is one of the largest aeronautical and aerospace conglomerates, it should be highlighted that the Brazilian globalization experience may be regarded as a universal path to success for other corporations with headquarters located in the developing countries. Company Overview. The company was founded in 1969 as a government owned corporation. It was engaged in developing and building aircrafts, including commercial and military machines. The globalization process of the EMBRAER Corporation started in 1994 when the company was privatized. The manufacturing capacities are concentrated in Brazil, and by 2010 the company had occupied the third place among the largest commercial aircraft suppliers (jointly with the Canadian Bombardier), while the first two places righteously belong to Boeing and Airbus. The total number of employees exceeds 17 000, and the expected net income in 2012 approaches to $ 350 million. Business units of the corporation are located in Brazil, USA, China, France, Portugal, and Singapore. In general, the internationalization of the aircraft business became the key driver of the expansion processes in EMBRAER. (King, 2006) In accordance with the official data, given on the website (Embraer Profile, 2012), the growth in 2000s was mainly stipulated by the increased demand for the ERJ aircrafts family. Considering the fact that the world demanded high flight safety after September 11, 2001, the company succeeded to adapt to the changed requirements of the aircraft building industry. The expansion strategy of the EMBRAER Corporation is mainly associated with the opportunity to invest into the aircraft and air transportation industries. Therefore, as it is stated in Kronemer (2006), American Airlines operates up to 200 ERJ jets. Regardless of the fact that AMR owns these aircrafts through the American Eagle Company, the EMBRAER had an opportunity to provision up to R$583.2 million. In the light of this fact, it should be stated that the described decision could influence the secondary market for medium sized jets, and the company performed essential restructuring the financial management oriented at international markets. Jo hnson and Turner (2003) emphasize that such a restructuring was needed for covering potential expenses, and getting financial guarantees linked with the ERJ 145 jets supplies. The next step was linked with the investments into the customer support network. Executive aviation is regarded as the sphere with the highest priority. On the other hand, the commercial aviation investments were

Green Revolution and Energy Use Assignment Example | Topics and Well Written Essays - 750 words - 1

Green Revolution and Energy Use - Assignment Example Most of the energy I use is by using heating and cooling equipment, lighting and electronics devices. In order to decrease energy use I will ensure to use programmable thermostat in daily heating and cooling management at home. This will reduce the kilos of energy used by nearly  ¼. Moreover, I will also ensure to turn off electronics such as fan, television and lights whenever am leaving the house. This will gradually reduce the hours from 3-4 hours to roughly 2-3hours, when these appliances are in use. Moreover, I will ensure to unplug electronic devices such as; cell phones charges, power tools, digital cameras and computers when they are not in use so as to reduce the recharging period. I will also reduce hot water usage by taking short showers and washing clothes with cold water (Doty et al, 2007). Lastly, I would try using other energy sources that are more efficient like natural gases. I rely on electricity in three quarter of my energy use; therefore, diversifying to other sources for example gas water heaters and dryers might reduce my energy use. Since energy is significant in my day to day activities increasing its efficiency will help me save a lot. Modern technology advancement has brought about many useful changes that assist in increasing energy efficiency. For instance; modern appliances e.g. freezers, ovens, dishwashers and refrigerators, use significantly less energy and are more efficient than older appliances. Refrigerators today use less energy compared to conventional models of 2001 by approximately 40%. Therefore, I would buy modern appliances that use energy efficiently. Furthermore, since use of energy for lighting is averaging 5.5k per day, I will ensure to incorporate architectural features that reflect light into the building(Diesendorf, 2007). This will result to a reduced artificial energy use. I will also use compact fluorescent lights

Operations Management Essay Example | Topics and Well Written Essays - 750 words - 3

Operations Management - Essay Example Business operations are geared towards achievement of profit targets and commanding wider market segment. However, relationship with competitors is healthy to avoid misunderstanding, which leads to disputes. Nonetheless, successful entities allow employees contribute to decision making and planning of future activities. It is the prerogative of the management and stakeholders to ensure there is a clear channel of communication and distribution of resources among all departments to avoid blame shifting thus to enhance quick supervision. Societies expect Carphone company to adhere to forces of mindset in order to build confidence within employees’ fraternity thus make work efficient and effective. Therefore, business prosperity largely relies on operations management (Abrams 2013). Employees and owners of Carphone Warehouse need to be educated on how to run operations, and manage activities of the business. Employees nonetheless, are required to posses’ technical knowledge of serving customers with etiquette, kindness, and without discrimination. Employers however need management, accounting, planning, and organization training. Therefore, training strategies for instance, customers’ markets, Workforce development, Employee’s behavior, Leadership training, peer training, benchmarking, pricing, mentoring, networking and budgeting uplift economic growth in the society(Butler 2012). The expansion of Carphone company was contributed by participating in community activities that increased the number of customer turn-over notably, The x factor, Big brother, Get connected, and Appys awards. Decision making is always fast-tracked from parent country but always protects the interests of customers in competitive markets. Company data protection mechanism has enabled the company flourish because this sealed loop-holes that competitors and employees could leak critical

The Spinnaker Tower and St Pancras Station Essay

The Spinnaker Tower and St Pancras Station - Essay Example The notable difference between these two projects is that the development of the St. Pancras project was an example of a lean construction while the development of the Spinnaker Tower went through several obstacles before the project reached completion. The Spinnaker Tower stands at a height of 170 metres, towering over Portsmouth harbour. The notable aspect of the construction is its representation as a sail blowing in the wind, and this objective was achieved by using two steel arcs. The construction material used was a composite mixture of steel and concrete, and there are three different viewing levels. It is built upon a 3m thick pile cap and 84 piles, with two steel cross bows rising from the ground and connecting with the central structure, comprising two inclined, hexagonal concrete shafts. Two cross bows rise elegantly from the ground, cross between the shafts and connect at the top of the tower, with aerofoil shaped ribs spanning between the bows to give it the distinctive look of the spinnaker sail. The Spinnaker Tower is situated on the Gunwharf Quays and offers 350 degree views of Portsmouth harbour, the South Coast and the Isle of Wight. The Tower was opened up to the public on 18th October 2005 and has received over 600,000 visitors within the first year of its opening. The concrete that has been used to build the tower is of an amount sufficient to fill five and a half Olympic sized swimming pools. Project management has been defined as the process by which projects are defined, planned, monitored, controlled and delivered in order to achieve the desired benefits (www.apm.org.uk). The Spinnaker Tower project was initiated in September 1995, when the proposal to erect a millennium tower was mooted for the renaissance of Portsmouth harbour and approved by the Millennium Commission. There were several problems associated with the development of this project that cost 23 million pounds. At the outset, there were

Assignment is to read both articles and summarize the main points of Essay

Assignment is to read both articles and summarize the main points of each - Essay Example This group of free market think tanks and contrarian scientists has ceaselessly worked towards creating a paralyzing thick fog of doubt around the issue of climate change. The group was seen to first claim that the earth was not warming and the current warming being experienced was natural and its effects would be harmless and minuscule. Newsweek polls showed that only 46 percent of Americans believe that the greenhouse effect is currently being felt today (Begley 22). Several states such as California, New Jersey and Minnesota has recently signed laws targeted at reducing their carbon emissions levels by up to 80% by the year 2050. In January 2007, nine different corporations including, Caterpillar and General Electric were seen to actively call on Congress to enact various strong national legislation that reduce the level of emissions attributed to greenhouse gases (Begley 22). On June 23rd, 1988, James Hansen who was a NASA climatologist presented a testimony before congress on how the greenhouse effect had been detected and was currently in the process of changing the planet’s climate. This testimony caused the world’s science community to work together in an attempt to resolve and better explain the issue of climate change. This move caused several industry associations and individual companies to form various lobby groups like the Information Council on the Environment (ICE) and the Global Climate Coalition (GCC) to try and cast doubt on the effects of climate change in a similar manner to how doubt had been cast on the effects of smoking (Begley 23). The United Nations organized a summit dubbed â€Å"Earth Summit† in 1992, in Rio de Janeiro, Brazil. Both the ICE and the GCC lobbied against the recommendations made during the Earth Summit successfully managed to convince the American President Bush not to mandatory cut back into law. The Rio treaty had been seen to call on all countries to try and stabilize their greenhouse emissions by

Bloom taxonomy Essay Example for Free

Bloom taxonomy Essay Bloom’s taxonomy or also known as the revised bloom taxonomy is a great teaching tool to use when teaching patients about their illness. It consists of three categories and then multiple sub-categories. Blooms taxonomy addresses not only the patient’s readiness to learn but it address the appropriate approach to each individual situation. It gives a systematic way of approaching a topic and the audience that will be learning. When this method is applied to nursing it is a great tool. This is due to the fact that each patient has different cognitive factors, different psychomotor factors as well as an affective domain. Bloom’s Cognitive categories have to do with how the mind can process or regenerate the information provided during a teaching session. There are six sub-categories to the cognitive category. The six are remember, understand, apply, analyze, evaluate and create. A teacher should be able to determine where in this pyramid is the patient. What teaching strategies must be changed and modified to fit the patient lifestyle. The second category is the Affective domain. This is how patients address their emotions to specific problems. This will show what a patient or student values and what motivates them to be who they are. This category has five sub-categories receiving, respecting, valuing, organizing and internalizing. This is the category that will determine if the patient is willing to accept this disease or new lifestyle change into their life. This will tell a teacher where on the scale the patient is willing to rate their disease and how it will affect their life. The Third and final category is psychomotor. This tells the teacher if the patient is physically able to complete the task asked of them. This will allow the teacher to gage if the patient is able to successfully complete what is needed of them to live with their disease process. There are five sub-categories imitation, manipulation, precision, articulation, and naturalization. There is a great example of this category, teaching a patient to use a new nebulizer treatment. The patient will go through reach step of the process till they  can finally reach the goal of naturalization. Conclusion Blooms taxonomy learning tool can break down the heart of teaching and give it meaning to apply to most any professions. Nursing is just one of those professions that teaching is a large part of the job, on a daily basis. Blooms taxonomy should be used each day on a nursing unit from the admission date to the discharge date.

What the Writer Thought of the Event Essay Example for Free

What the Writer Thought of the Event Essay What the event symbolized for America was explicitly stated in the editorial — Woodstock was the kind of success that could be achieved when there is benevolence among people. Everyone saw a disaster out of Woodstock in the beginning. People predicted it would end out a havoc. Even hip radio stations warned people against it. It was easy for the Americans to think that such a large gathering of people in such a place would end up to no good, especially when it’s the youth that is involved. However, as the event turned out to be a success, America realized that it is not impossible for people to come together and be in a state of harmony at the same time. More importantly, Woodstock became a realization for America that the power of benevolence could do such amazing things, and could rise above such adversities as shortage in water, toilets, bad trips, and even thunderstorms. Aside from these, Woodstock symbolized for the rest of America that their youth is not going down the drain. Instead, their youth is worthy of respect and emulation, because amidst the prejudice against their capabilities and their culture, is their power to rise above the adversity and to display such a culture of good will among perfect strangers. For the parents of America at that time, Woodstock was a â€Å"wakeup call’ that their children did something worthy of their approval , and that this is what is important amidst the drugs and the display of nudity. The bottomline is that Woodstock, for America, had become as symbol of both the power of the youth and the power of benevolence, and the beauty that comes when these two powers work together. For the writer, not only was Woodstock Music and Art Fair an â€Å"Aquarian Exposition of music and peace . It was much more. It ranked among one of the most important sociological and political events of the decade. Not only was it the largest happening that ever was in history at the time, it was also a public announcement of the culture of America’s youth in the sixties. It was a manifestation of their â€Å"strength, appeal, and power† (TIME, 1969). Along the article, the writer pointed out how massive the gathering was, even estimating that had the roads not been blocked, there would have been a million people between the age of 16-30 at Woodstock. And though the writer acknowledged the presence of the largest gathering of rock idols as a bait for the crowd to come, he pointed out a more analytical reason for the gathering. According to him, Woodstock was a kind of â€Å"pilgrimage† where the youths sought to discover that there were hundreds of thousand of people who shared their culture, in other words, that they are not isolated, as they have previously thought they were (TIME, 1969). The writer was also quick to acknowledge the fact that the old generation of Americans initially saw the event as a â€Å"squalid freakout,† but had experienced a change of tune, which included even the New York Times . Along with this, however, the writer ran a paragraph that told about both the â€Å"deplorable† and commendable things about the event that could be the reason for such a two-sided perception of the event. The bad side of Woodstock that the writer perceived included deaths and illnesses from drugs, as well as the deplorable case of sanitation, accommodation, garbage, and rains throughout the event. However, the writer exalted in the fact that â€Å"there were no rapes, no assaults, no robberies and, as far as anyone can recall, not one single fight† (TIME, 1969). In the length of the rest of the article, the writer presented several analysis of the meaning of Woodstock. Among these was that Woodstock was a manifestation of the youth’s valuation of self over society, and aside from the youth’s total separation from the norms of the past generation, was also a manifestation that the adults could not control them anymore. However, along with these was the youth’s perception that they are changing the society for the good and that they did not need someone to lead them since they already have each other . In the end, the writer was able to send a message of questioning to his readers. A question of â€Å"to what purpose† could the outpouring and extremely powerful emotions of the youth could be harnessed politically. His advice was made implicitly by quoting what a sociologist had to say about the event . Towards the end, the writer’s advice turned out into a warning about the possible negative impacts of the event, instead of a dawning of enlightenment .

Executive Compensation and Stock Option in the UK

Executive Compensation and Stock Option in the UK 1 Introduction Todays highly competitive world consists of numerous corporations and these corporations are so huge and so large that it cannot be controlled by the people who own them. The control of these corporations is separated from shareholders who are the owners and vested into the hands of professional executives who are specifically hired for its management. This separation of ownership and control gave rise to agency problem or the principal-agent problem. Principal is referred to the stockholders and the agents are the executives who work for the stockholders. Although stockholders are the owners of the company to whom the executives are accountable, their actual powers are restricted except in the case of those corporations where stockholders are also the directors of that corporation. Stockholders have no right to inspect the books of accounts nor are they aware of the exact functioning and position of the firm. As a result, executives tend to work inefficiently without even bothering to look for profitable new investment opportunities, as well as they may use the firms assets for private purposes and also work to achieve their personal goals all at the expense of the shareholders. Some managers do not take any action whatever state or condition the corporation may be as they are risk averse and fear the threat of losing their job if a decision taken by them goes wrong. Therefore in order to avoid the various problems that arise due to the agency problem, executives must be properly and promptly compensated along with proper monitoring. In the beginning of 1990s, debates on corporate governance mainly focused on directors remuneration and fat cats. Fat cats are referred to those executives who provided themselves with huge compensation packages without any performance criteria. In UK, the most famous Fat Cat episode which saddened the shareholders of many large public companies and dragged the attention of the media was the notorious British Gas incident of the mid 1990s. Various issues arising out of executive compensation and the trouble of framing the deserved level of compensation, that has to be provided to an executive, made executive remuneration a main area of concern under corporate governance. According to Jensen (1993), providing the right level of remuneration to the executives and creating positive incentives in order to achieve the interest of the shareholders has been an important study conducted in many academic literatures. An improvement in corporate governance is brought about by filtering certain aspects of executive remuneration. There exists a wide gap between the remuneration paid to the executives and the remuneration paid to the other employees on the company. This gap keeps on increasing year after year as executives demand more and more for their services and decision making process to boosts the productivity and reputation of the firm which thereby increases the market price of the companys share. In a research mentioned in the Higgs Report (2003), chairmen of FTSE 100 companies in 2003 earned an average of  £ 426,000 as remuneration. Moreover, executives are being rewarded with stock options which would enrich them with abnormal profits in the future when the options granted to them are exercised. Critics argue that, executives are not worth for the remuneration paid because of their poor and unsatisfactory performance. According to Blitz (2003), MORI a leading market research company in the UK, through a survey, found 78% of the people unsatisfied by the remuneration paid to the executives. The pu blic in UK believe that executives are being overpaid for the amount of work they actually do. 2 Methodology This paper is a critical review on the various aspects of executive compensation in the UK and how the executive compensation especially the executive stock option encourage the managers and top executives, for their personal benefit, to take short term high risks and boost up the current value of shares rather than looking into the future and acting in favour of the stakeholders of the company. The tools used for the research mainly consist of various literature reviews of past articles and current working papers with some analysis of some statistical data regarding executive compensation. On the basis of the above mentioned area of research certain questions have been framed which will be critically looked into: a) Brief description of the executive compensation and corporate governance in the UK. b) Basic structure of executive remuneration in the UK and their disclosure requirements in United Kingdom. c) Are stock options considered the best means of remuneration in an executive compensation package? d) A brief historical overview of the introduction of executive stock option in the UK. e) What are the various manipulations done with executive stock option and what are the risk incentives created by executive stock option? f) Brief comparison of the UK executive compensation with the US executive compensation. g) The role of executive compensation in the UK banking towards the current financial crises. 3 Executive Compensation and Corporate Governance in the United Kingdom: During the past decade, various issues on corporate governance established the emergence of many reports and codes of best practice in the United Kingdom. These include the Inland Revenue (1988), Cadbury Report (1992), Greenbury Report (1995), Hampel Report (1998), The Combined Code (1998), Hermes Statement on Corporate Governance and Voting Policy (1998), Internal Control: Guidance for Directors on the Combined Code (Turnbull Report)(1999), Company Law Reform (1999) and Financial Services Market Act (2001) (Konstantinos Stathopoulos, Susanne Espenlaub, Martin Walker, 2003). Among these reports the Cadbury Report, Greenbury Report and the Combined Code, which emerged from the Hampel Report, focused on issues regarding executive compensation. 3.1 Cadbury Report (1992): The first guidelines of good practice on various issues of corporate governance were provided in the year 1992 by the Cadbury Committee which was established in May 1991 and was chaired by Adrian Cadbury. The Cadbury Committee discussed issues that were broader in nature than the executive remuneration but certain suggestions the committee made on altering the executive pay was accepted as permanent. The Cadbury report was titled as the Financial Aspects of Corporate Governance and came out with the Code of Best Practice, which insisted that decisions based on executive remunerations should not be made by the executive directors nor they have to get involved in making such a decision (1992, paragraph 4.42 p. 31). The report therefore recommended the appointment of a remuneration committee which will act in the interest of the shareholders of the firm and express a good opinion on various matters regarding executive compensation to the board. Companies in the UK responded spontaneousl y to this recommendation made in the Cadbury Report and established a remuneration committee within the firm (Bostock, 1995). The remuneration committee consists of a non-executive director as the chairperson and non-executive directors as its members who are all independent and free from the influence of the management. According to Williamson (I985), there always arises a question of doubt whether the directors make remuneration contracts for their own huge benefits and sanction it, if an independent pay committee does not exist. The role of remuneration committee is to ensure that executive compensation levels are set up in a formal, transparent way along with the goals required to be achieved by the executives for any schemes that are performance related. The remuneration committee can take advice from outside sources whenever necessary. The Cadbury report also suggested the establishment of an audit committee within each company which comprises of three non-executive directors (Martin Conyon, Paul Gregg and Stephen Machin, 1995). According to a questionnaire survey conducted by Conyon and Mallin (1997), by 1995, 98% of the companies followed the suggestions made by the Cadbury report and has reported the involvement of the remuneration committee in their annual reports. 3.2 The Greenbury Report (1995): Cadbury report failed to provide detailed guidance on how compensation packages have to be structured. However, it pointed out executive compensation to be the main area of study for the next committee known as the Greenbury Committee. The Greenbury Committee chaired by Sir Richard Greenbury, was formed by the United Kingdom Confederation of Business and Industry, and in 1995 it submitted the Greenbury report which dealt with matters regarding the determination and accounting of top executive pay. The main issues discussed in the Greenbury Report includes the role of the remuneration committee in an organisation, the disclosure requirement required by the shareholders of the organisation, the remuneration policies for compensating the executives and the service contracts provided to the executives. The remuneration policies recommended in the Greenbury Report are: a) Compensation packages must be provided by the remuneration committee to quality executives in order to influence, sec ure and encourage them and any payments extra to this intention must be avoided (Greenbury Report Paragraphs 6.5 – 6.7). b) The payments made and the subsequent resulting performance by other companies in the same industry must be evaluated by the remuneration committee. On the basis of this evaluation, the remuneration committee should relatively place their company (Paragraphs 6.11 – 6.12). c) While making changes to the annual salary of the executives, the remuneration committee should look into the payment and employment situations in other areas of the company rather than only concentrating on the executive pay and increasing them so as to satisfy the executives (Paragraph 6.13). d) The part of remuneration that is related to performance should be designed in such a way that the executives incentives go hand in hand with the interest of the shareholders and the executives are motivated to perform their duties with high standards (Paragraph 6.16). e) The performan ce conditions for executives to avail their annual bonuses, if any, should be designed to support and widen the operations of the business. The maximum possible amount of annual bonus an executive can avail should be taken into consideration by the remuneration committee and in some cases a part of these bonus payments can also be made by shares (Paragraphs 6.19 – 6.22). f) Under the long term incentive scheme, the Greenbury Report suggested that the shares and options granted to the executives should neither vest nor be exercisable, at least for a period of 3 years after such grant. The remuneration committee should encourage its executives to keep possession of their shares, after its vesting or exercise, for a long period of time (Paragraphs 6.23 – 6.34). g) The present existing long term incentive scheme should either be replaced by the new incentive scheme proposed or, the new incentive scheme proposed when combined with the old existing scheme should formulate a well structured incentive plan. The remuneration committee should make sure that the new long term incentive plan does not pay in excess than what is actually required for the executives and this new plan is accepted by the shareholders (Paragraph 6.35). h) The criteria for any long term incentive grant should be challenging and the performance of the executives should help achieve the goals set by the company in order to stand out from rest of its competitors. Key variables like the total shareholders return are used to judge the performance of the company with respect to its competitors (Paragraphs 6.38 – 6.40). i) Executive stock option grant or any other long term incentive grant must not be presented in lump-sum but should be awarded in series of stages. Moreover, no discount should be provided to the executives on the issue of executive stock option (Paragraph 6.29). j) While increasing the annual basic salary of the executives, the remuneration committee should look in to the effect of such increase on the executives pension entitlement and on the future expenses of the company particularly in case of those executives who are nearing retirement. The annual bonuses paid or any benefits paid in kind are not entitled for any pension payment (Paragraph 6.42 – 6.45). The aim of the Greenbury Report was not to cut down the executives remuneration but was to establish a balance between the compensation paid to the executives and their respective performance. On publishing the report in 1995 by the Greenbury Committee, certain tax advantages that was permitted on newly issued share options which comes under the approved executive share option scheme was withdrawn by the UK government. A new type of option scheme was introduced in November 1995 which had an upper limit of only  £20,000 on individual option holdings. Further, executive share options whose exercise price was earlier accepted at a discounted price of 15% on the existing share price at the time of grant was prevented (Konstantinos Stathopoulos, Susanne Espenlaub Martin Walker, 2003). According to Conyon (1994) in UK, the top executive director of a company was also made member of its remuneration committee before the launch of the Greenbury Report. However, the old fashioned executive share options schemes was not benefitted from the recommendations made by the Greenbury Committee as it not only seized the tax benefits but also encouraged to substitute options with long term incentive plans which in the UK is just awarding shares and not cash. The recommendations made by the Greenbury Report were not widely accepted as many of the critics believed that the report failed to link the executive pay with the performance of the company. 3.3 The Combined Code (1998): The Combined Code of the London Stock Exchange controls the various remuneration practices adopted by the companies listed in the London Stock Exchange. It has combined the recommendations given by the Cadbury Report and the Greenbury Report in order to form a regulation for efficient remuneration practice. The annual report of the companies listed should contain in a separate section the remuneration policy adopted by the company. The Combined Code requires a statement, in the annual report, showing that the remuneration standards mentioned in the code are being followed by the company and if any set standard is not complied with, the statement should point out the reason for the non compliance. A high level of executive remuneration disclosure is also required under the combined code and clear explanations about the various compensation packages provided to each executive director and non executive director should be stated (Konstantinos Stathopoulos, Susanne Espenlaub Martin Walk er, 2003). 4 Structure of Executive Remuneration in the UK: The typical structure of executive compensation in UK comprise of base salary, annual bonus, share options and long term incentive plans along with certain additional components like restricted stock and retirement plans. In 1997, an average executive compensation package consisted of 54% of base salary, 24% of annual bonus and 22% of non cash items which include share options and long term incentive plans (Martin J. Conyon, Simon I. Peck, Laura E. Read and Graham V. Sadler, 2000). Base Salary Determination of the base salary of an executive is done by taking into consideration the base salaries paid to executives of other companies in the same industry through surveys and analysis. This system of setting up and providing base salary is known as competitive benchmarking. Certain modifications are carried out on the base salary depending on the size of the firm, thereby linking executive compensation and firm size. In UK, base salary form the major part of the total executive remuneration paid. Base salary is that component of executive remuneration which is fixed and do not vary according to the performance, experience, age, etc of the executives. A  £1 increase in the base salary is preferred by executives who are risk averse than a  £1 increase in other components of executive compensation that are variable. Annual Bonus Bonus is provided to the executives on the basis of their performance during the relevant financial year. It is provided on an annual basis and the amounts paid as bonus to each executive vary from year to year. The performance of the executives is generally measured by taking into consideration accounting numbers which can be cross checked and audited. Executives have a clear idea of their daily performance by looking at the accounting numbers and they can forecast how overall profit of the company is going to look like at the end of the year. The drawback of relying on accounting numbers for measuring performance is that it is fully under the control of the executives and if wanted executives can manipulate the accounts in order to increase their annual bonus entitlement. Share Options Share options are contracts provided to the executives that cannot be traded which gives the executives the right to buy the shares of the firm at a price that is pre-determined known as the exercisable price for a specified time period. These contracts become void and have to be surrendered if the exercisable period mentioned has elapsed or if the executive resigns from the company before the exercisable period. This component of executive compensation is looked more into detail in the later section. Long-Term Incentive Plans – Long-Term Incentive Plans are provided to the executives in order to motivate and compensate them for achieving long term performance for the company. Grant of shares is the most typical form of LTIPs provided in the UK. These shares are vested to the executives only on achieving the objectives set by the company that is related to future performance. Earnings per Share and Total Shareholders Return are the two main elements by which the performance of the company is measured in the UK. Retirement Plans – Apart from the basic pension plans provided by the company, in UK, executives are encouraged to participate in an additional retirement benefit plan. These plans are a major source of concern because it symbolises invisible compensation. The actual value of executive retirement plan cannot be calculated by the available information provided in the books of accounts and the annual report. 4.1 Disclosure Requirement of Executives Remuneration in the UK: The Greenbury Report in 1995 identified three fundamental principles, which are accountability, transparency and performance linkage, in respect to executives remuneration. In UK, the current best practice disclosure pattern failed to compile with these fundamental principles therefore the government introduced certain necessary additions to the existing disclosure pattern. These latest requirements regarding disclosure of UK executives remuneration unifies the existing law, regulation and best practices that are mentioned in the UK Companies Act of 1985, the UK Listing Rules and the UK Combined Code of Principles of Good Governance and Code of Best Practice. The new requirement requires every company in the UK to adopt and prepare the directors remuneration report along with other necessary requirements. 4.1.1 Directors Remuneration Report (DRR): Companies listed in the London Stock Exchange should prepare the directors remuneration report for every financial year (Section 234B Companies Act) and should publish this report along with the accounts and annual report of the company (Section 244 Companies Act). The preparation of the remuneration report is done by the board of directors and not by the remuneration committee being, a committee accountable and responsible to the board and consisting only the non executive directors of the company. The remuneration of both the executive and non executive directors is clearly mentioned in the remuneration report. The fully prepared remuneration report should be filed with the registrar of companies (Section 242 Companies Act) and made available and provided to all the parties interested in the company such as the shareholders, debenture holders, and other persons who are required to attend the general meetings (Section 238 Companies Act). The remuneration report should contain all the information regarding the remuneration of the directors for the financial year completed i.e. the relevant financial year which includes disclosure of the amount receivable by the directors, whether paid or not, during the financial year as well as the disclosure of any amount paid as directors remuneration for any other period during the financial year (Companies Act, Schedule 7A, paragraph 19). The remuneration report should include the payments made to a third party for any services provided to the directors (Companies Act, Schedule 7A, paragraph 18(3)) and a statement showing the future remuneration policy of the directors. In UK, only the disclosure of directors remuneration is needed in the remuneration report. The name and information of every person who is the director, during the relevant financial year, has to be mentioned in the remuneration report. The remuneration report contains information that has to be audited by an external auditor (Companies Act, Schedule 7A, Part 3) and information need not be audited (Companies Act, Schedule 7A, Part 3). a) Information in DRR subject to audit: With regards to information subject to audit, the external auditor in his own consent should mention whether the information provided are prepared according to the necessary requirement and if any information is not complied as needed, the auditor should provide a statement showing them (Sections 235 and 237 Companies Act). The auditor will also look into disclosure information that are not subjected to audit and verify them with the company accounts as well as with the disclosure information that are audited. The various information included in the DRR that are subject to audit are: Emoluments and compensation For the services provided to the company as an executive or for any other services relating to the companys management, the salary, bonus, fees or compensation as termination of qualifying services received or receivable by the executives should be disclosed in the DRR. The overall value of non monetary benefits provided to the executives should be mentioned and the total aggregate of each kind of executive compensation provided in the relevant financial year should be compared with the previous financial year (Companies Act, Schedule 7A, paragraph 6). Share Options – The different types of shares options a company have should be mentioned along with their terms and conditions and besides each share option the total option each executive hold in the beginning of the relevant financial year as well as in the end should be disclosed. Detailed information of the various options provided during the year, its date of grant, its exercise price, date of expiry, number that have become void and number exercised and unexercised by the executives should be mentioned. If the share options are subject to any performance condition then the criteria has to be clearly described. For those shares that have been exercised, the market price during the time of exercise and for those shares unexercised ,the highest, lowest and the year end market prices have to be also mentioned. Since the disclosure of share options is a lengthy process, the aggregate of options each director hold is stated and the disclosure can be made on the basis of weighted average exercise pri ces (Companies Act, Schedule 7A, paragraphs 7-9). Long-term incentive schemes – Disclosure of scheme interests at the beginning and end of the current financial year which each executive hold must be made. Details of the type of scheme interest provided to the executives, its value and when it is vested in the year should be mentioned. If there are any conditions on the basis of which scheme interests will be granted then the relevant conditions should be specified (Companies Act, Schedule 7A, paragraphs 10 and 11). Other Information Details of executives pension scheme transfer value, any benefits that are accumulated over time and amount paid or payable by the company towards the money purchase pension scheme and retirement benefit scheme should be mentioned (Companies Act, Schedule 7A, paragraph 12). Amount received or receivable by the executives as benefits over and above the retirement benefit which he is entitled after 31st March 1997 should be included in the DRR (Companies Act, Schedule 7A, paragraph 13). If any person, who was once the executive of the company, has been given a special reward or if any third party is paid for their services provided to the executives during the relevant financial year it should be stated and disclosed (Companies Act, Schedule 7A, paragraph 14 15). b) Information in DRR not subject to audit: The information in the DRR that are not subject to audit is: Remuneration Committee – If any decision regarding the remuneration of the executives is taken by a committee during the financial year then the DRR must contain the name of all the non executive directors who were the members of such a committee and also should mention the name of any other person who is not the member of the committee but has been appointed by the members to assist them with certain services and advice. The details of the services rendered by the outside party should be clearly mentioned and this is done to ensure that the executive director play no role and influence the decision making of the committee (Companies Act, Schedule 7A, paragraph 2). Statement of policy on executives remuneration – A statement of future policy on executives remuneration for the coming financial years has to be included in the directors remuneration report (Companies Act, Schedule 7A, paragraph 3). The statement of policy should therefore disclose the conditions of performance, by an executive, for the entitlement of share option and long term incentive scheme along with the reasons for setting up such performance condition and the method used to assess the performance condition. If any executive fails meet the performance condition and does not benefit from the stock option grant or long term incentive scheme, the report should clearly state the conditions that are unsatisfactory. Details of the company on the basis of which the performance is measured should be provided in the report. Changes or amendments proposed to the existing terms and conditions for executives entitlement should be highlighted. Explanation should also provide for non-performance related remuneration and company policies on executives service contracts. This statement covers all directors from the end of the current financial year till the time when the report is put for voting by the shareholders of the company Performance graph – Publication of preceding 5 years performance graph should be included in the DRR showing the total shareholder return for holding shares whose listing transformed the company into a quoted company and for holding shares on the basis of which calculations are made for a broad equity market index. A fair method is used for the calculation of the total shareholder return along with various assumptions like the interest received on shares being reinvested (Companies Act, Schedule 7A, paragraph 4). Service Contract – During the relevant financial year if any executive is provided with a service contract, the date at which the service contract has been provided, its duration and its terms and conditions should be mentioned in the remuneration report. A detail of the termination compensation the executive is entitled to receive along with the companys liability on early termination is to be included (Companies Act, Schedule 7A, paragraph 5). On the complete preparation of the remuneration report, in the annual general body meeting it is introduced and called for a vote by the shareholders of the company (Section 241A Companies Act). This concept of voting the remuneration report was a controversial topic as many commentators suggested the voting to be limited to only the remuneration policy rather than the whole remuneration report. The reason they point out is that the executives remuneration policies are futuristic in nature so the shareholders can express their opinion on the policies adopted ra ther than making aware of the actual remuneration paid to each individual director. 4.1.2 Other Requirements: a) Along with the preparation of the DRR, disclosure of the aggregate compensation of the executive, loan given to the executives and other company transactions with the executive should be done in the notes of the annual accounts as mentioned in Schedule 6 of the Companies Act. b) As per Section 251 of the Companies Act and Companies Regulations (1995), listed companies in their summary financial statements should as a statement, state its policies regarding the remuneration of executives and the companys performance graph. 5 Stock/Share Options – Are they the Best in an Executive Compensation package? The most prominent and important component of executive compensation, in order to merge the interests of the executives with that of the interests of the shareholders, is providing the executives with stock options in the firms they serve (Jensen and Meckling, 1976). According to Jeffrey A. Williamson and Brian H. Kleiner, A stock option is a security that represents the right, but not the obligation, to buy or sell a specified amount of stocks at a specified price within a specified period of time. Stock options granted to executives of many large multinational firms are much higher in value than the annual cash pay they are entitled to be paid which in-turn boosts up the overall total compensation provided to the executives. This makes stock options the single largest ingredient in the current scenario of executive compensation. In the United States itself, stock options are held by more than 10 million employees (Simon R. and Dugan J., 2001) out of which around 160,000 of them tur ned out to be millionaires (Tate E.A. and Wilson T.E., 2001). Initially stock options were provided as a bonus to all the key executives of a company, but during the recent years its use is restricted only to the top level management. Providing stock options have resulted in increased productivity of the organisations. Executives are aware that their gain is linked with the stock performance of the organisation therefore they strive harder and work more efficiently to achieve progress. The main objective behind granting stock options is to make sure that executive make a profit on the success of the companys operations and in case of failures they suffer. Hence executive stock options link pay to performance. Critics argue to provide shares of stock rather than providing stock options in order to link pay and performance. The value of a stock option is only one third the value of a share, in case of companies having an average volatile stock price and yielding an average dividend the reason being stockholders receiving the whole value along with the dividend payment and the option holders benefitting only from the additional returns that is over and above the exercise price. This implies that options have a greater leverage and at the same cost, a company can provide its executives with options that are three times as much as that of shares. Stock options are incentive plans that are future Executive Compensation and Stock Option in the UK Executive Compensation and Stock Option in the UK 1 Introduction Todays highly competitive world consists of numerous corporations and these corporations are so huge and so large that it cannot be controlled by the people who own them. The control of these corporations is separated from shareholders who are the owners and vested into the hands of professional executives who are specifically hired for its management. This separation of ownership and control gave rise to agency problem or the principal-agent problem. Principal is referred to the stockholders and the agents are the executives who work for the stockholders. Although stockholders are the owners of the company to whom the executives are accountable, their actual powers are restricted except in the case of those corporations where stockholders are also the directors of that corporation. Stockholders have no right to inspect the books of accounts nor are they aware of the exact functioning and position of the firm. As a result, executives tend to work inefficiently without even bothering to look for profitable new investment opportunities, as well as they may use the firms assets for private purposes and also work to achieve their personal goals all at the expense of the shareholders. Some managers do not take any action whatever state or condition the corporation may be as they are risk averse and fear the threat of losing their job if a decision taken by them goes wrong. Therefore in order to avoid the various problems that arise due to the agency problem, executives must be properly and promptly compensated along with proper monitoring. In the beginning of 1990s, debates on corporate governance mainly focused on directors remuneration and fat cats. Fat cats are referred to those executives who provided themselves with huge compensation packages without any performance criteria. In UK, the most famous Fat Cat episode which saddened the shareholders of many large public companies and dragged the attention of the media was the notorious British Gas incident of the mid 1990s. Various issues arising out of executive compensation and the trouble of framing the deserved level of compensation, that has to be provided to an executive, made executive remuneration a main area of concern under corporate governance. According to Jensen (1993), providing the right level of remuneration to the executives and creating positive incentives in order to achieve the interest of the shareholders has been an important study conducted in many academic literatures. An improvement in corporate governance is brought about by filtering certain aspects of executive remuneration. There exists a wide gap between the remuneration paid to the executives and the remuneration paid to the other employees on the company. This gap keeps on increasing year after year as executives demand more and more for their services and decision making process to boosts the productivity and reputation of the firm which thereby increases the market price of the companys share. In a research mentioned in the Higgs Report (2003), chairmen of FTSE 100 companies in 2003 earned an average of  £ 426,000 as remuneration. Moreover, executives are being rewarded with stock options which would enrich them with abnormal profits in the future when the options granted to them are exercised. Critics argue that, executives are not worth for the remuneration paid because of their poor and unsatisfactory performance. According to Blitz (2003), MORI a leading market research company in the UK, through a survey, found 78% of the people unsatisfied by the remuneration paid to the executives. The pu blic in UK believe that executives are being overpaid for the amount of work they actually do. 2 Methodology This paper is a critical review on the various aspects of executive compensation in the UK and how the executive compensation especially the executive stock option encourage the managers and top executives, for their personal benefit, to take short term high risks and boost up the current value of shares rather than looking into the future and acting in favour of the stakeholders of the company. The tools used for the research mainly consist of various literature reviews of past articles and current working papers with some analysis of some statistical data regarding executive compensation. On the basis of the above mentioned area of research certain questions have been framed which will be critically looked into: a) Brief description of the executive compensation and corporate governance in the UK. b) Basic structure of executive remuneration in the UK and their disclosure requirements in United Kingdom. c) Are stock options considered the best means of remuneration in an executive compensation package? d) A brief historical overview of the introduction of executive stock option in the UK. e) What are the various manipulations done with executive stock option and what are the risk incentives created by executive stock option? f) Brief comparison of the UK executive compensation with the US executive compensation. g) The role of executive compensation in the UK banking towards the current financial crises. 3 Executive Compensation and Corporate Governance in the United Kingdom: During the past decade, various issues on corporate governance established the emergence of many reports and codes of best practice in the United Kingdom. These include the Inland Revenue (1988), Cadbury Report (1992), Greenbury Report (1995), Hampel Report (1998), The Combined Code (1998), Hermes Statement on Corporate Governance and Voting Policy (1998), Internal Control: Guidance for Directors on the Combined Code (Turnbull Report)(1999), Company Law Reform (1999) and Financial Services Market Act (2001) (Konstantinos Stathopoulos, Susanne Espenlaub, Martin Walker, 2003). Among these reports the Cadbury Report, Greenbury Report and the Combined Code, which emerged from the Hampel Report, focused on issues regarding executive compensation. 3.1 Cadbury Report (1992): The first guidelines of good practice on various issues of corporate governance were provided in the year 1992 by the Cadbury Committee which was established in May 1991 and was chaired by Adrian Cadbury. The Cadbury Committee discussed issues that were broader in nature than the executive remuneration but certain suggestions the committee made on altering the executive pay was accepted as permanent. The Cadbury report was titled as the Financial Aspects of Corporate Governance and came out with the Code of Best Practice, which insisted that decisions based on executive remunerations should not be made by the executive directors nor they have to get involved in making such a decision (1992, paragraph 4.42 p. 31). The report therefore recommended the appointment of a remuneration committee which will act in the interest of the shareholders of the firm and express a good opinion on various matters regarding executive compensation to the board. Companies in the UK responded spontaneousl y to this recommendation made in the Cadbury Report and established a remuneration committee within the firm (Bostock, 1995). The remuneration committee consists of a non-executive director as the chairperson and non-executive directors as its members who are all independent and free from the influence of the management. According to Williamson (I985), there always arises a question of doubt whether the directors make remuneration contracts for their own huge benefits and sanction it, if an independent pay committee does not exist. The role of remuneration committee is to ensure that executive compensation levels are set up in a formal, transparent way along with the goals required to be achieved by the executives for any schemes that are performance related. The remuneration committee can take advice from outside sources whenever necessary. The Cadbury report also suggested the establishment of an audit committee within each company which comprises of three non-executive directors (Martin Conyon, Paul Gregg and Stephen Machin, 1995). According to a questionnaire survey conducted by Conyon and Mallin (1997), by 1995, 98% of the companies followed the suggestions made by the Cadbury report and has reported the involvement of the remuneration committee in their annual reports. 3.2 The Greenbury Report (1995): Cadbury report failed to provide detailed guidance on how compensation packages have to be structured. However, it pointed out executive compensation to be the main area of study for the next committee known as the Greenbury Committee. The Greenbury Committee chaired by Sir Richard Greenbury, was formed by the United Kingdom Confederation of Business and Industry, and in 1995 it submitted the Greenbury report which dealt with matters regarding the determination and accounting of top executive pay. The main issues discussed in the Greenbury Report includes the role of the remuneration committee in an organisation, the disclosure requirement required by the shareholders of the organisation, the remuneration policies for compensating the executives and the service contracts provided to the executives. The remuneration policies recommended in the Greenbury Report are: a) Compensation packages must be provided by the remuneration committee to quality executives in order to influence, sec ure and encourage them and any payments extra to this intention must be avoided (Greenbury Report Paragraphs 6.5 – 6.7). b) The payments made and the subsequent resulting performance by other companies in the same industry must be evaluated by the remuneration committee. On the basis of this evaluation, the remuneration committee should relatively place their company (Paragraphs 6.11 – 6.12). c) While making changes to the annual salary of the executives, the remuneration committee should look into the payment and employment situations in other areas of the company rather than only concentrating on the executive pay and increasing them so as to satisfy the executives (Paragraph 6.13). d) The part of remuneration that is related to performance should be designed in such a way that the executives incentives go hand in hand with the interest of the shareholders and the executives are motivated to perform their duties with high standards (Paragraph 6.16). e) The performan ce conditions for executives to avail their annual bonuses, if any, should be designed to support and widen the operations of the business. The maximum possible amount of annual bonus an executive can avail should be taken into consideration by the remuneration committee and in some cases a part of these bonus payments can also be made by shares (Paragraphs 6.19 – 6.22). f) Under the long term incentive scheme, the Greenbury Report suggested that the shares and options granted to the executives should neither vest nor be exercisable, at least for a period of 3 years after such grant. The remuneration committee should encourage its executives to keep possession of their shares, after its vesting or exercise, for a long period of time (Paragraphs 6.23 – 6.34). g) The present existing long term incentive scheme should either be replaced by the new incentive scheme proposed or, the new incentive scheme proposed when combined with the old existing scheme should formulate a well structured incentive plan. The remuneration committee should make sure that the new long term incentive plan does not pay in excess than what is actually required for the executives and this new plan is accepted by the shareholders (Paragraph 6.35). h) The criteria for any long term incentive grant should be challenging and the performance of the executives should help achieve the goals set by the company in order to stand out from rest of its competitors. Key variables like the total shareholders return are used to judge the performance of the company with respect to its competitors (Paragraphs 6.38 – 6.40). i) Executive stock option grant or any other long term incentive grant must not be presented in lump-sum but should be awarded in series of stages. Moreover, no discount should be provided to the executives on the issue of executive stock option (Paragraph 6.29). j) While increasing the annual basic salary of the executives, the remuneration committee should look in to the effect of such increase on the executives pension entitlement and on the future expenses of the company particularly in case of those executives who are nearing retirement. The annual bonuses paid or any benefits paid in kind are not entitled for any pension payment (Paragraph 6.42 – 6.45). The aim of the Greenbury Report was not to cut down the executives remuneration but was to establish a balance between the compensation paid to the executives and their respective performance. On publishing the report in 1995 by the Greenbury Committee, certain tax advantages that was permitted on newly issued share options which comes under the approved executive share option scheme was withdrawn by the UK government. A new type of option scheme was introduced in November 1995 which had an upper limit of only  £20,000 on individual option holdings. Further, executive share options whose exercise price was earlier accepted at a discounted price of 15% on the existing share price at the time of grant was prevented (Konstantinos Stathopoulos, Susanne Espenlaub Martin Walker, 2003). According to Conyon (1994) in UK, the top executive director of a company was also made member of its remuneration committee before the launch of the Greenbury Report. However, the old fashioned executive share options schemes was not benefitted from the recommendations made by the Greenbury Committee as it not only seized the tax benefits but also encouraged to substitute options with long term incentive plans which in the UK is just awarding shares and not cash. The recommendations made by the Greenbury Report were not widely accepted as many of the critics believed that the report failed to link the executive pay with the performance of the company. 3.3 The Combined Code (1998): The Combined Code of the London Stock Exchange controls the various remuneration practices adopted by the companies listed in the London Stock Exchange. It has combined the recommendations given by the Cadbury Report and the Greenbury Report in order to form a regulation for efficient remuneration practice. The annual report of the companies listed should contain in a separate section the remuneration policy adopted by the company. The Combined Code requires a statement, in the annual report, showing that the remuneration standards mentioned in the code are being followed by the company and if any set standard is not complied with, the statement should point out the reason for the non compliance. A high level of executive remuneration disclosure is also required under the combined code and clear explanations about the various compensation packages provided to each executive director and non executive director should be stated (Konstantinos Stathopoulos, Susanne Espenlaub Martin Walk er, 2003). 4 Structure of Executive Remuneration in the UK: The typical structure of executive compensation in UK comprise of base salary, annual bonus, share options and long term incentive plans along with certain additional components like restricted stock and retirement plans. In 1997, an average executive compensation package consisted of 54% of base salary, 24% of annual bonus and 22% of non cash items which include share options and long term incentive plans (Martin J. Conyon, Simon I. Peck, Laura E. Read and Graham V. Sadler, 2000). Base Salary Determination of the base salary of an executive is done by taking into consideration the base salaries paid to executives of other companies in the same industry through surveys and analysis. This system of setting up and providing base salary is known as competitive benchmarking. Certain modifications are carried out on the base salary depending on the size of the firm, thereby linking executive compensation and firm size. In UK, base salary form the major part of the total executive remuneration paid. Base salary is that component of executive remuneration which is fixed and do not vary according to the performance, experience, age, etc of the executives. A  £1 increase in the base salary is preferred by executives who are risk averse than a  £1 increase in other components of executive compensation that are variable. Annual Bonus Bonus is provided to the executives on the basis of their performance during the relevant financial year. It is provided on an annual basis and the amounts paid as bonus to each executive vary from year to year. The performance of the executives is generally measured by taking into consideration accounting numbers which can be cross checked and audited. Executives have a clear idea of their daily performance by looking at the accounting numbers and they can forecast how overall profit of the company is going to look like at the end of the year. The drawback of relying on accounting numbers for measuring performance is that it is fully under the control of the executives and if wanted executives can manipulate the accounts in order to increase their annual bonus entitlement. Share Options Share options are contracts provided to the executives that cannot be traded which gives the executives the right to buy the shares of the firm at a price that is pre-determined known as the exercisable price for a specified time period. These contracts become void and have to be surrendered if the exercisable period mentioned has elapsed or if the executive resigns from the company before the exercisable period. This component of executive compensation is looked more into detail in the later section. Long-Term Incentive Plans – Long-Term Incentive Plans are provided to the executives in order to motivate and compensate them for achieving long term performance for the company. Grant of shares is the most typical form of LTIPs provided in the UK. These shares are vested to the executives only on achieving the objectives set by the company that is related to future performance. Earnings per Share and Total Shareholders Return are the two main elements by which the performance of the company is measured in the UK. Retirement Plans – Apart from the basic pension plans provided by the company, in UK, executives are encouraged to participate in an additional retirement benefit plan. These plans are a major source of concern because it symbolises invisible compensation. The actual value of executive retirement plan cannot be calculated by the available information provided in the books of accounts and the annual report. 4.1 Disclosure Requirement of Executives Remuneration in the UK: The Greenbury Report in 1995 identified three fundamental principles, which are accountability, transparency and performance linkage, in respect to executives remuneration. In UK, the current best practice disclosure pattern failed to compile with these fundamental principles therefore the government introduced certain necessary additions to the existing disclosure pattern. These latest requirements regarding disclosure of UK executives remuneration unifies the existing law, regulation and best practices that are mentioned in the UK Companies Act of 1985, the UK Listing Rules and the UK Combined Code of Principles of Good Governance and Code of Best Practice. The new requirement requires every company in the UK to adopt and prepare the directors remuneration report along with other necessary requirements. 4.1.1 Directors Remuneration Report (DRR): Companies listed in the London Stock Exchange should prepare the directors remuneration report for every financial year (Section 234B Companies Act) and should publish this report along with the accounts and annual report of the company (Section 244 Companies Act). The preparation of the remuneration report is done by the board of directors and not by the remuneration committee being, a committee accountable and responsible to the board and consisting only the non executive directors of the company. The remuneration of both the executive and non executive directors is clearly mentioned in the remuneration report. The fully prepared remuneration report should be filed with the registrar of companies (Section 242 Companies Act) and made available and provided to all the parties interested in the company such as the shareholders, debenture holders, and other persons who are required to attend the general meetings (Section 238 Companies Act). The remuneration report should contain all the information regarding the remuneration of the directors for the financial year completed i.e. the relevant financial year which includes disclosure of the amount receivable by the directors, whether paid or not, during the financial year as well as the disclosure of any amount paid as directors remuneration for any other period during the financial year (Companies Act, Schedule 7A, paragraph 19). The remuneration report should include the payments made to a third party for any services provided to the directors (Companies Act, Schedule 7A, paragraph 18(3)) and a statement showing the future remuneration policy of the directors. In UK, only the disclosure of directors remuneration is needed in the remuneration report. The name and information of every person who is the director, during the relevant financial year, has to be mentioned in the remuneration report. The remuneration report contains information that has to be audited by an external auditor (Companies Act, Schedule 7A, Part 3) and information need not be audited (Companies Act, Schedule 7A, Part 3). a) Information in DRR subject to audit: With regards to information subject to audit, the external auditor in his own consent should mention whether the information provided are prepared according to the necessary requirement and if any information is not complied as needed, the auditor should provide a statement showing them (Sections 235 and 237 Companies Act). The auditor will also look into disclosure information that are not subjected to audit and verify them with the company accounts as well as with the disclosure information that are audited. The various information included in the DRR that are subject to audit are: Emoluments and compensation For the services provided to the company as an executive or for any other services relating to the companys management, the salary, bonus, fees or compensation as termination of qualifying services received or receivable by the executives should be disclosed in the DRR. The overall value of non monetary benefits provided to the executives should be mentioned and the total aggregate of each kind of executive compensation provided in the relevant financial year should be compared with the previous financial year (Companies Act, Schedule 7A, paragraph 6). Share Options – The different types of shares options a company have should be mentioned along with their terms and conditions and besides each share option the total option each executive hold in the beginning of the relevant financial year as well as in the end should be disclosed. Detailed information of the various options provided during the year, its date of grant, its exercise price, date of expiry, number that have become void and number exercised and unexercised by the executives should be mentioned. If the share options are subject to any performance condition then the criteria has to be clearly described. For those shares that have been exercised, the market price during the time of exercise and for those shares unexercised ,the highest, lowest and the year end market prices have to be also mentioned. Since the disclosure of share options is a lengthy process, the aggregate of options each director hold is stated and the disclosure can be made on the basis of weighted average exercise pri ces (Companies Act, Schedule 7A, paragraphs 7-9). Long-term incentive schemes – Disclosure of scheme interests at the beginning and end of the current financial year which each executive hold must be made. Details of the type of scheme interest provided to the executives, its value and when it is vested in the year should be mentioned. If there are any conditions on the basis of which scheme interests will be granted then the relevant conditions should be specified (Companies Act, Schedule 7A, paragraphs 10 and 11). Other Information Details of executives pension scheme transfer value, any benefits that are accumulated over time and amount paid or payable by the company towards the money purchase pension scheme and retirement benefit scheme should be mentioned (Companies Act, Schedule 7A, paragraph 12). Amount received or receivable by the executives as benefits over and above the retirement benefit which he is entitled after 31st March 1997 should be included in the DRR (Companies Act, Schedule 7A, paragraph 13). If any person, who was once the executive of the company, has been given a special reward or if any third party is paid for their services provided to the executives during the relevant financial year it should be stated and disclosed (Companies Act, Schedule 7A, paragraph 14 15). b) Information in DRR not subject to audit: The information in the DRR that are not subject to audit is: Remuneration Committee – If any decision regarding the remuneration of the executives is taken by a committee during the financial year then the DRR must contain the name of all the non executive directors who were the members of such a committee and also should mention the name of any other person who is not the member of the committee but has been appointed by the members to assist them with certain services and advice. The details of the services rendered by the outside party should be clearly mentioned and this is done to ensure that the executive director play no role and influence the decision making of the committee (Companies Act, Schedule 7A, paragraph 2). Statement of policy on executives remuneration – A statement of future policy on executives remuneration for the coming financial years has to be included in the directors remuneration report (Companies Act, Schedule 7A, paragraph 3). The statement of policy should therefore disclose the conditions of performance, by an executive, for the entitlement of share option and long term incentive scheme along with the reasons for setting up such performance condition and the method used to assess the performance condition. If any executive fails meet the performance condition and does not benefit from the stock option grant or long term incentive scheme, the report should clearly state the conditions that are unsatisfactory. Details of the company on the basis of which the performance is measured should be provided in the report. Changes or amendments proposed to the existing terms and conditions for executives entitlement should be highlighted. Explanation should also provide for non-performance related remuneration and company policies on executives service contracts. This statement covers all directors from the end of the current financial year till the time when the report is put for voting by the shareholders of the company Performance graph – Publication of preceding 5 years performance graph should be included in the DRR showing the total shareholder return for holding shares whose listing transformed the company into a quoted company and for holding shares on the basis of which calculations are made for a broad equity market index. A fair method is used for the calculation of the total shareholder return along with various assumptions like the interest received on shares being reinvested (Companies Act, Schedule 7A, paragraph 4). Service Contract – During the relevant financial year if any executive is provided with a service contract, the date at which the service contract has been provided, its duration and its terms and conditions should be mentioned in the remuneration report. A detail of the termination compensation the executive is entitled to receive along with the companys liability on early termination is to be included (Companies Act, Schedule 7A, paragraph 5). On the complete preparation of the remuneration report, in the annual general body meeting it is introduced and called for a vote by the shareholders of the company (Section 241A Companies Act). This concept of voting the remuneration report was a controversial topic as many commentators suggested the voting to be limited to only the remuneration policy rather than the whole remuneration report. The reason they point out is that the executives remuneration policies are futuristic in nature so the shareholders can express their opinion on the policies adopted ra ther than making aware of the actual remuneration paid to each individual director. 4.1.2 Other Requirements: a) Along with the preparation of the DRR, disclosure of the aggregate compensation of the executive, loan given to the executives and other company transactions with the executive should be done in the notes of the annual accounts as mentioned in Schedule 6 of the Companies Act. b) As per Section 251 of the Companies Act and Companies Regulations (1995), listed companies in their summary financial statements should as a statement, state its policies regarding the remuneration of executives and the companys performance graph. 5 Stock/Share Options – Are they the Best in an Executive Compensation package? The most prominent and important component of executive compensation, in order to merge the interests of the executives with that of the interests of the shareholders, is providing the executives with stock options in the firms they serve (Jensen and Meckling, 1976). According to Jeffrey A. Williamson and Brian H. Kleiner, A stock option is a security that represents the right, but not the obligation, to buy or sell a specified amount of stocks at a specified price within a specified period of time. Stock options granted to executives of many large multinational firms are much higher in value than the annual cash pay they are entitled to be paid which in-turn boosts up the overall total compensation provided to the executives. This makes stock options the single largest ingredient in the current scenario of executive compensation. In the United States itself, stock options are held by more than 10 million employees (Simon R. and Dugan J., 2001) out of which around 160,000 of them tur ned out to be millionaires (Tate E.A. and Wilson T.E., 2001). Initially stock options were provided as a bonus to all the key executives of a company, but during the recent years its use is restricted only to the top level management. Providing stock options have resulted in increased productivity of the organisations. Executives are aware that their gain is linked with the stock performance of the organisation therefore they strive harder and work more efficiently to achieve progress. The main objective behind granting stock options is to make sure that executive make a profit on the success of the companys operations and in case of failures they suffer. Hence executive stock options link pay to performance. Critics argue to provide shares of stock rather than providing stock options in order to link pay and performance. The value of a stock option is only one third the value of a share, in case of companies having an average volatile stock price and yielding an average dividend the reason being stockholders receiving the whole value along with the dividend payment and the option holders benefitting only from the additional returns that is over and above the exercise price. This implies that options have a greater leverage and at the same cost, a company can provide its executives with options that are three times as much as that of shares. Stock options are incentive plans that are future