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EMI - Executive Remuneration

EMI - Executive Remuneration

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Published by Terrence

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Published by: Terrence on Feb 14, 2010
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07/12/2014

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EXECUTIVE REMUNERATION SYSTEMSINCENTIVES AND COMPENSATION SYSTEMINTRODUCTION:Executive remuneration
can be defined as the total compensation a top executive receiveswithin a corporation. This includes basic salary, bonuses, options and other company benefits.Many people consider pay for performance systems along with private ownership, as the hallmarks of capitalism. To these people good organization simply will not function effectivelywithout good pay for performance systems.
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Pay for performance include such examples as, sharing in profits of trading voyager, piece rate pay used since at least the industrial revolution, and profit sharing in themodern corporation; hare cropping, in which the worker shares in the output created onthe land owner’s property.-Pay for performance is an artifact of the widely held belief that if you want to motivate people to pursue organization objectives them you have to reward them based on the performance level they achieve.
THE EXPECTANCY VIEW OF BEHAVIOUR 
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These deals with the expectancy approach to motivation which argues that people act inways that they expect will create the rewards they desire.-Given this view then the role of compensation is to provide individuals with rewards theyvalue when their behavior promotes the organizations objectives.
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Organizations develop compensation system that reward specified individual results or  behavior that advances organization objectives.-Individuals exert efforts to develop skills and knowledge to make decisions that createresults that provide the rewards they value and seek.-Measured results, the domain of management accounting, provide the critical linkage inthis motivation process.-Results must have 2 critical properties.1)They must reflect organizations objectives.2)The decision makers must clearly understand the linkage between results and rewardsthat they value.
EXPECTANCY VIEW OF MOTIVATION
The individuals viewSkills andknowledge
Organization
Results
OutcomesObjectives
Rewards
TYPES OF REWARDS1.INTRINSIC REWARDS
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-These comes from within the individual, such as satisfaction from action in a away that a job well done or taking satisfaction from acting in a way by another person is required for someone to experience an intrinsic reward. Organizations can create the potential for  people to experience intrinsic rewards through job design, organ culture, andmanagement style, but individually feel or experience intrinsic rewards on their own.
2.EXTRINSIC REWARDS
-These are rewards that one person gives to another.
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They include recognition, plaque, prizes, awards and pay based on performance alsoknown as incentive pay or pay for performance.
THE TIE OF REWARDS TO PERFORMANCE
-The management accounts role of identifying the organs desired long term outcomes(such as profitability) and corresponding short-term results (such as product quality andemployee satisfaction) falls out of the strategic learning process. The idea in incentivecompensation is to tie individual rewards to the organization’s target outcomes andresults.
1.REWARDS BASED ON FINNACIAL PERFORMANCE
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Traditionally organs have used measures from the financial control system such ascorporate or divisional profits, as the results to which individual rewards are tied.-Alfred Sloan instituted the general motors bonus plan in 1918 to increase the communityof interests between the senior mangers managers and the stockholders of the firm.Annual bonuses were awarded on the basis of each manager’s contribution to the overall
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