Swinburne University of Technology School of Business, Law and Entrepreneurship ACC30008 Accounting Theory Question 1 AMP seeks $2.2m rights package for CEO Francesco De Ferrari Under AMP's executive remuneration framework for 2021, Mr De Ferrari will receive fixed pay of $2.2m and a short-term bonus of up to 200 per cent of his base pay, as well as the $2.2m long-term incentive, subject to performance. Approximately 75 per cent of the maximum remuneration he can receive for the current financial year is made up of short and long-term bonuses and was "at risk", AMP said. Mr De Ferrari's long-term bonus will only vest if the wealth manager achieves relative total shareholder return performance at or above the median of its peer group. Long-suffering shareholders will, on April 30, also vote on whether to approve the embattled wealth manager's remuneration report. If 25 per cent, or more, of the votes are cast against the remuneration report, AMP will be hit with a second strike, triggering a vote on a board spill. AMP's first strike at last year's (annual general meeting) AGM came after it was criticised over "disproportionately large" incentives paid to executives. More than two-third of proxies voted against the 2019 remuneration report after proxy advisers Ownership Matters and ISS recommended shareholders vote against the pay packages. Both proxy advisers argued that executive pay was overly generous and performance hurdles not rigorous enough. Extract from O'Dowd, C. AMP seeks $2.2m rights package for CEO Francesco De Ferrari. The Australian. Mar 15, 2021. Required I. Explain AMP's executive remuneration framework for 2021 using agency theory. (8 marks) II. Explain how the two-strike rule could help to mitigate agency problems. (4 marks) (Total 12 marks) Primary Exam Semester 1 - 2022 Page 1 of 5
ACC30008 Accounting Theory Swinburne University of Technology School of Business, Law and Entrepreneurship Question 2 Pandemic offers lessons in better governance While the initial response by governments around the world was rightly on assessing and responding to the imminent risks to human health and wellbeing, it is timely to reflect on what we have learned about our private sector governance structures as well. Corporates need to work within these public policy priorities, but also consider how they can demonstrate tangible support to individuals or businesses that have been disrupted economically. We saw many corporates step up in this regard, from banks granting repayment holidays to airlines flexing refund rules and supermarkets altering opening hours and delivery services, often at great cost to the bottom line. It became apparent there is a point at which the robustness of the modern corporate governance model rubs up against the requirement for flexibility in the face of a crisis. We saw several examples of corporates who suspended the operation of board committees during the height of the crisis and instead "collapsed" decision-making into an expanded board agenda. We saw the emergence of a more collaborative ecosystem between regulators and the private sector in response to the crisis. In the corporate domain,