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Accounting Theory Assignment Information Sheet
Aligning the Incentives of Managers and Shareholders through Executive Remuneration
Deegan 4e Question 7.21 p. 328 (adapted)
“Within annual reports, companies frequently disclose information about how their managers are rewarded in terms of the components of their management compensation plans. For example, within IAS 24 (and AASB 124 within Australia) there is a requirement that information about the components of rewards paid to key management personnel be disclosed within a company’s annual report.”
a) Select two large companies listed on the Australian Securities Exchange (ASX) that issue share options as part of their remuneration for key managerial personnel. Use the financial year 2013 annual reports for listed companies to select two such companies, but generally companies within the S&P ASX All Ordinaries Index use stock options as a remuneration mechanism.
You are required to explain in a report for the Chief Accountant of the Australian Securities & Investments Commission how the respective components of the remuneration could be expected to align the interests of the managers with those of the owners and to minimize the contracting costs of the organization.
In your report you are expected to draw on (not necessarily in the numbered order):
1) the chosen annual reports
2) at least six quality*, scholarly articles from JOURNALS that appear in the Australian
Business Deans’ Council (2013) ranking of journals – Business Source Complete
(Ebscohost) is a Library database that hosts scholarly journal articles.
3) media reports of the workings in practice of the Corporations Amendment (Improving
Accountability on Director and Executive Remuneration) Act 2011.No. 42, which
provided shareholders with a ‘say on pay’ and which may result in ‘first strike’ or
‘second strike’ votes by shareholders. – Factiva is a Library database that hosts
The quality of journals can be assessed by reference to the Australian Council of Business Deans (ABDC) 2013 journal rankings (A, A, B, C in order of declining quality) available http://www.abdc.edu.au/journalreview.html
Learning outcomes addressed by the assignment:
The assignment is designed to provide you with the opportunity to develop the following
1. with regard to your accounting theory knowledge, the assignment provides you with the
opportunity to develop your understanding of positive accounting theory and, in particular, agency or costly contracting theory and its application to executive remuneration.
2. with respect to generic skills, the assignment provides you with the opportunity to develop your ability to research and analyse complex issues, to formulate well-reasoned and coherent arguments and to reach well considered conclusions, and to develop your written communication skills, including the conventions of referencing at university.
SUGGESTED REPORT STRUCTURE
1. Title Page
2. Contents Page
3. Executive Summary (which provides an overview of the whole report)
4. Introduction and Purpose
5. Responses to specific task using appropriate headings and sub-headings
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