Paul Bryan F.

Perito
BSBA-HRDM 4A

1. Evaluate the effectiveness of the “two-strikes” policy in ensuring greater board

accountability in Australia. How has shareholder activism influenced the behavior of
Cabcharge’s management?
- The two-strikes policy provides a framework once the company suffers from no votes
received from the renumeration report. This improves the accountability and
transparency of executive compensation frameworks and gives shareholders more
power over the pay of company directors. From the case provided shareholder activism
influenced the behavior of Cabcharges management in a way that it helps the company
to see situation about the transparency of votes from the shareholder since the
company seeking for change in their company policy on renumeration. Shareholders
take this action based on their rights as owners. It is mostly employed to rectify a
corporation's blunder or cause a crucial transformation of corporate guidelines.
2. What was the remuneration mix and level of each key management personnel in 2014?
How were they determined by the Board? How did it align management’s interests and
shareholders’ interests as set out in the CGPR?
- 2014 brought focus on Cabcharge's employee compensation practices. The structure of
compensation for important management people, including the CEO and top executives, as
well as the board's decision-making process, were both examined. Fixed pay, short-term
incentives, and long-term incentives made up the compensation package. To comprehend
the significance of management employees, it was critical to recognize their roles and
contributions. The board made decisions about employee compensation by considering
things like individual and business performance. To preserve compliance and openness,
they also made sure that their strategy was in line with Corporate Governance Principles
and Recommendations (CGPR). With a focus on performance-based components, the
examination also considered the harmony between management's interests and those of
shareholders. To make decisions about compensation, past trends and shareholder
comments were analyzed.
3. Do you feel that Kermode’s compensation package was reasonable? In companies where a
director is a controlling shareholder, what measures should be in place to prevent him from
paying himself excessively? Evaluate the effectiveness of the measures implemented by
Cabcharge.
- The CEO of Cabcharge, Reginald Kermode, is the subject of criticism regarding his
disputed salary package. Shareholders were unhappy with their fixed annual pay (FAR)
of A$2–3 million because they thought it was expensive and lacked performance-based
elements. An independent pay committee, open disclosure, and shareholder approval
are critical when evaluating measures to evaluate director compensation in
 organizations with controlling shareholders. Cabcharge implemented the "two-strikes"
rule, restructured the compensation with a long-term incentive plan (LTIP), and
strengthened governance through role separations in response to shareholder
dissatisfaction. Analysis of Kermode's compensation's reasonableness, the success of
implemented measures in preventing excessive pay for controlling shareholders,
ongoing governance issues, the effect of shareholder activism, the long-term viability of
changes, and lessons for other businesses in addressing comparable issues are all
encouraged by discussion questions.
4. Accounting firms provide a variety of services for companies. Are there any potential
conflicts of interest arising from the provision of such services? If so, what are the measures
that can be put in place to avoid such conflicts of interest?
- The implicit conflicts of interest in account enterprises center on businesses like inspection
independence, where providing both inspection and non-audit services to the same client
may jeopardize adjudicators' objectivity and jeopardize the veracity of financial statements.
Conflicts can arise from consulting services, especially when the advice is directly related to
financial reporting or commercial governance, as in the case of administrative
compensation. Figure dependency occurs when a business is overly reliant on one account
establishment, potentially affecting that establishment's impartiality out of concern for the
loss of a sizable client. Measures including separating inspection from non-audit services,
rotating inspection businesses on a regular basis, and openly disclosing services in financial
statements are crucial for resolving these issues. Maintaining a balance between providing
critical services and safeguarding the integrity and independence of fiscal reporting also
benefits from regulatory oversight, rigorous inspection commission review, ethical training,
shareholder activism, and adherence to legal and nonsupervisory compliance.
5. Evaluate Cabcharge’s board independence. Should there be stricter rules with regards to
board independence?

- The extended travels of numerous directors posed difficulties for the independence of
the Cabcharge board, which could have jeopardized that independence. To improve
independence, the recommendation emphasized stronger adherence to the Commercial
Governance Principles and Recommendations (CGPR), advocating for regular reviews,
and encouraging directors to serve for longer than 10 terms. After Kermode's tenure
ended, it was observed that the CGPR recommendations had been followed by
designating distinct Chairman and CEO positions. Rodney Gilmour's independence was
questioned because of his prior consulting work for Cabcharge, which led to a
suggestion for tougher regulations and exposure requirements to help with implicit
conflicts of interest. Following Kermode and Gilmour's resignation, an independent
deputy chairman was appointed, demonstrating a willingness to work with businesses.
The overall evaluation identified areas for improvement and recommended stronger
adherence to CGPR for more responsibility and transparency. The benefits of tougher
regulations included better accountability and investor confidence, while the drawbacks
focused on the potential of gift drain and implicit restrictions on board composition
flexibility. The conclusion emphasized the need for continuous improvement in
corporate governance and emphasized the importance of a balanced strategy that
considers the circumstances of each company. Regular evaluations, transparency, and
responsiveness to shareholder interests are key preconditions for an effective board of
directors' independence.