Measuring and Rewarding Performance - The Role of Management and The Management Accountant
Origin Energy Australia is the leading energy company operating in Australia and worldwide with headquarter in Sydney. It specializes in exploring, generating and selling energy.Origin Energy Australia’s Remuneration Report is serving as an instrument of supervision and reporting on the alignment of executive’s compensation and shareholder’s value.
In current work the remuneration and performance of senior executives in Origin Energy Australia (hereinafter - Company) has been researched. The period of research included three years. Analyzing the Company’s Remuneration Report one must conclude that it corresponds with the provisions of Corporations Act 2001. Thus, according to SECT 300A the remuneration reports of the Company includes the explanation of the worked out principles of compensation and its alignment to performance of the organization; overview of main performance indicators in dynamics; methodological approaches according to which the performance is measured and linked to the remuneration of executives and other provisions. Moreover, in particular in regard to the compensation governance the Board Executive Remuneration Committee has been established according to the demands of this act of the Commonwealth of Australia.
The Remuneration Reports cover the range of executives, namely: Managing Director, Chairman, executive and non-executive directors (in particular, executive director of finance and strategy), CEOs and other members of executive management team. During last three years Origin Energy Australia has been implementing the remuneration system for senior executives (key managerial personnel) that consists of three main components. The first component - fixed remuneration - depends on the level of responsibilities and skills of the executive. It includes the salary itself, cash bonuses, superannuation and salary sacrifice contributions. The second component - short-term incentives (STI) - is linked to the performance of the Company and range of operational measures for each senior executive. It assumes the award in deferred share rights and cash. The third component - long-term incentives (LTI) - is linked to the share price of the Company. The award is allocated in the form of options and/or performance share rights (PSR).
According to the Company’s statements its executive compensation system is annually reviewed and reconsidered in case of ineffectiveness. The remuneration reporting has been developed during the last three years that, in particular, is related to key drivers taken into account by the Board of Directors. Thus, in Remuneration Report 2015 the Company defined such key drivers as the alignment to capital management, linkage to market feedback while defining the ratio of options/performance share rights that constitute LTI.
Summarizing the peculiarities of executive compensation system of Origin Energy Australia one must admit that remuneration structure is diversified and includes such components as cash and equity in form of options and shares. As mentioned above they are also linked to operational and strategic results of Company’s performance that provides additional motivation for management stuff. The other specific feature that increases the shareholders value is that the part of remuneration …
