Overview of Remuneration Committee in Corporate Governance
The role of the remuneration committee in corporate governance is to help the company to have an appropriate reward policy that attracts and motivates the board of directors and management to achieve the strategic goals. The remuneration committee ensures a sound remuneration system for the directors and other senior executive officers of the Company.
Overview of Remuneration Committee in Corporate Governance
The remuneration committee ensures how directors and management are paid. The remuneration committee usually determines the general remuneration policy of key management and specific remuneration packages for each director. They will look at the proportionate of fixed pay and also the performance-related pay. This needs to be sufficient to motivate directors but not cause them to take a high level of risks that compromise the long-term objectives of the company.
The remuneration committee consists of at least three non-executive directors. The majority of the committee members should be independent non-executive directors. The Chairman of the Committee shall be an independent non-executive director.
Components in the Remuneration Package of Executive Directors / Senior Management
- Fixed Remuneration – Basic salary and fringe benefits according to the terms of the contract. This is a fixed component not related to the performance of the company.
- Bonus / Performance Incentive – Cash bonus/incentive component for excellent performance. In some aspects, deferred shares are also given as a bonus.
- Share Options – Right to purchase shares at a specific exercise price at a specified date in the future. This usually helps to overcome the agency problems since the directors become owners.
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