Tuesday, May 5, 2020

Remuneration Report of Qantas Airlines Free-Samples for Students

Question: Write a Report on the Remuneration report of Qantas airlines. Answer: Introduction: The remuneration report of Qantas airlines exhibit the information about remuneration for the Chief executive officer, non-executive directors and executive management. It also contains the detailed remuneration framework that was applicable for the financial year 2015 and 2016. Outcomes of remuneration is aligned with the performance and creation of value to shareholders. The directors of group in agreement with the Section 300 A of the Corporation Act, 2001, prepare remuneration report of Qantas. Information concerning remuneration of executive management is disclosed by applying the process of evaluating performance (Chan 2013). Discussion: Executive management of organization receives annual incentive based on their contribution toward their achievement for a particular financial year. It is the responsibility of board to review the executive management performance and conclusions about their performance being instrumental in achieving their target is given by board. Under the long-term incentive outcome for the financial year 2016-2016, executive management were awarded with fixed number of rights (Datar and Rajan 2014). Remuneration framework of Qantas: The framework of remuneration is aligned with the strategy of Group. Executive remuneration report intends to motivate, retain, attract and rewarding a capable executive team appropriately. There are three elements involved in executive remuneration framework and this comprise of base pay, annual incentive and long-term incentive. Base pay is the certain salary level and this involves superannuation. Annual incentive is regarded as short-term incentive plan (STIP) and long-term incentive is long-term incentive plan. Base pay involves superannuation, cash and other salary-sacrificed benefits. Under long-term incentive, executives have right over share of Qantas. Under short-term incentive, delivery comprise of two third of cash and one-third shares within a restricted period of three years. Comparison of remuneration system of Qantas for financial year 2015 and 2016: The remuneration system of Qantas for financial year 2016 is based on fair vale methodology that will ensure absolute transparency around the value of rights awarded under long-term incentive. Remuneration report for year 2016 provide with additional face value information (Crosson and Needles 2013). Awards are calculated using the following methodology: Rights awarded to executive team= [Base pay * at target opportunity/ Each right fair value] = Base pay * at target opportunity/ Share price as on 30th June When looking at annual report of Qantas for year 2015, it is evident that number of rights approved to executives under LTIP was calculated on fair value basis and formula is depicted below. Number of rights awarded= Base pay * at target opportunity/ Fair value of each right Growth of LTP share price is equivalent to rights bestowed multiplied by increase in share price of Qantas for three-year performance period. Therefore, comparing remuneration methodology for two financial year has same. Financial year 2016 relied on using fair value methodology. Scorecard measures of STIP and Benchmarking: Scorecard category for measuring the performance of executive involves profitability of group, customer, people and operational safety, cost agenda and transformation cost, strategic and growth initiatives. Measures include underlying profit before tax, transformation benefit delivery, assessment of board and operational safety, net promoter score and EBIT growth (Kravet 2014). The long-term incentive and short-term incentive opportunities for Base pay and At target are set with reference to external benchmark and this also involves comparable roles in international airlines and other listed Australian companies (Gerdin et al. 2014). STIP, LTIP and at target rewards are usually expressed as Base pay percentage. However, there is no match between strategy remuneration mix and target remuneration mix. The reason is attributable to the difference between actual LTIP and STIP outcome and that differ every year at target level. Reward mix is computed on accumulation basis according to Australian standard. Statutory remuneration of every year involves a portion of share based payment value (Ferrarini and Ungureanu 2015). Long-term incentive plan: The fair value of right is determined by determines the number of rights granted. Under LTIP 2014-2016, 100 percent of rights were granted and it was vested following the performance hurdles at 30th June, 2016. Under LTIP 2013-2015, 85% of rights were granted (Qantas.com.au 2017). Short-term incentive plan: One third of STIP awards for year 2014-2015, were delivered to deferred shared participants that are subjected restriction period of two years. Restriction period is applicable throughout 2015-2016 Recommendation: As a part of strategic management and organizational behavior, a radical and different approach should be taken by organization for broadening the performance measures of remunerations payable to executive management. There needs to be an alternative means of aligning the remuneration package of executives with the incentive of managers with the owners. Measurement should rather be drawn on increasing the skills of employees, improving their motivation and empowering them. Conclusion: After going through the compensation report depicted in the Qantas annual report and analyzing the various remuneration components, it is concluded that the group has adopted a fair methodology for valuing the incentive plan payable to executive team. When comparing the remuneration methodology for the financial year 2016 and 2015, it is evident from the analysis of annual report that both the years have adopted fair allocation methodology in determining the number of rights payable on STIP and LTIP to executive team. Reference: Ahmed, A.S. and Duellman, S., 2013. Managerial overconfidence and accounting conservatism.Journal of Accounting Research,51(1), pp.1-30. Braun, K.W., Tietz, W.M. and Harrison, W.T., 2013.Managerial accounting. Pearson. Chan, L., 2013. ACCTG 421 Managerial Accounting Module, Sections 1 and 2. Crosson, S.V. and Needles, B.E., 2013.Managerial accounting. Cengage Learning. Cumby, J.A., 2013. Business 2101: managerial accounting. Program 03-02. Job Costing. Datar, S.M. and Rajan, M.V., 2014.Managerial Accounting: Making decisions and motivating performance. Pearson Education. Ferrarini, G. and Ungureanu, M.C., 2015. Executive remuneration. InThe Oxford Handbook of Corporate Law and Governance. Filler, G., Burkoski, V. and Tithecott, G., 2014. Measuring physicians productivity: a three-year study to evaluate a new remuneration system.Academic Medicine,89(1), pp.144-152. Gerdin, J., Messner, M. and Mouritsen, J., 2014. On the significance of accounting for managerial work.Scandinavian Journal of Management,4(30), pp.389-394. Investor.qantas.com. (2017). [online] Available at: https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/file/annual-reports/2015_qantas_annual_report.pdf [Accessed 7 May 2017].Qantas.com.au. (2017). Retrieved 7 May 2017, from https://www.qantas.com.au/infodetail/about/corporateGovernance/2016AnnualReport.pdfWalther, L.M. and Skousen, C.J., 2014.Introduction to Manage

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