ACCA SBL Syllabus B. Governance - General principles of remuneration - Notes ^{12 / 12}

Links to strategy

Suitable and appropriate remuneration packages have to be paid to directors in order to attract and retain the most suitable candidates.

These packages should be structured to:

• ensure that they are paid well

• ensure that they achieve shareholders' best interests as well as their own personal interests

• ensure that there are links to the company's strategy

• ensure that they remain motivated

• ensure that there are links to strategic goals and targets such as:
  1.cost of capital, 
  2.return on equity, 
  3.economic value added, 
  4.market share, 
  5.revenue and 
  6.profit growth

Links to labour market conditions.

A basic salary is paid to directors in line with their terms and conditions, and is not related to any other conditions. 

This salary is calculated by taking into consideration the experience of the director, and what other companies are willing to pay which ultimately dictates the current market conditions.

Remuneration packages should be set by a remuneration committee consisting of independent non-executive directors to ensure that packages are equitable, and appropriate according to performance and in line with the organisations remuneration policy.