Five years ago, Mr. Hafiz was appointed Chief Executive Officer (CEO) of Vegetable Bank, one of...
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Five years ago, Mr. Hafiz was appointed Chief Executive Officer (CEO) of Vegetable Bank, one of the largest global bank. Mr. Hafiz had a successful track record in senior management in America and was rated as one of the world's best bankers. The other directors of Vegetable Bank looked forward to his appointment to make a significant strengthening on business. Prior to his acceptance of the position, the remuneration committee (comprised entirely of non- executive) received a letter from Mr. Hafiz to assure Vegetable Bank on many years of sustained growth under his leadership with his strong track record. He then asked for a generous non- performance related pension settlement in his contract whenever he decided to leave the company (subject to a minimum term of years) and regardless of his performance as CEO. In the hasty way Mr. Hafiz's reward package was agreed, the split of his package between basic and performance- related components was not scrutinized. In fact, two of the non-executive directors on the remuneration committee were former colleagues of Mr. Hafiz. In addition, the Vegetable Bank's Finance Director, Lee Min Ho, wrote to the remuneration committee saying, in direct terms that they should offer Mr. Hafiz 'whatever he wants to get him joining the company. Once in post. Mr. Hafiz led an excessively aggressive strategy that involved high growth in the loan and mortgage books financed from a range of sources, some of which proved unreliable. In the fifth year of his appointment, the failure of some of the sources of funds upon which the growth of the bank was based led to severe financing difficulties at Vegetable Bank. Shareholders voted to replace Mr. Hafiz as CEO and the press reported Mr Hafiz was being rewarded for failure' as he walked away with 'obscenely large' pension. Some shareholders were angry and asked Mr. Hafiz to voluntarily forego some of his pension in recognition of his failure in the job. He refused and claimed that he was contractually entitled to it. REQUIRED: (a) Critique the performance of Vegetable Bank's remuneration committee in agreeing Mr. Hafiz's reward package. (13 marks) (b) Interpret the components of an appropriately designed executive reward package and explain why a more balanced package of benefits should have been used to reward Mr. Hafiz. (12 marks) (TOTAL 25 MARKS) Five years ago, Mr. Hafiz was appointed Chief Executive Officer (CEO) of Vegetable Bank, one of the largest global bank. Mr. Hafiz had a successful track record in senior management in America and was rated as one of the world's best bankers. The other directors of Vegetable Bank looked forward to his appointment to make a significant strengthening on business. Prior to his acceptance of the position, the remuneration committee (comprised entirely of non- executive) received a letter from Mr. Hafiz to assure Vegetable Bank on many years of sustained growth under his leadership with his strong track record. He then asked for a generous non- performance related pension settlement in his contract whenever he decided to leave the company (subject to a minimum term of years) and regardless of his performance as CEO. In the hasty way Mr. Hafiz's reward package was agreed, the split of his package between basic and performance- related components was not scrutinized. In fact, two of the non-executive directors on the remuneration committee were former colleagues of Mr. Hafiz. In addition, the Vegetable Bank's Finance Director, Lee Min Ho, wrote to the remuneration committee saying, in direct terms that they should offer Mr. Hafiz 'whatever he wants to get him joining the company. Once in post. Mr. Hafiz led an excessively aggressive strategy that involved high growth in the loan and mortgage books financed from a range of sources, some of which proved unreliable. In the fifth year of his appointment, the failure of some of the sources of funds upon which the growth of the bank was based led to severe financing difficulties at Vegetable Bank. Shareholders voted to replace Mr. Hafiz as CEO and the press reported Mr Hafiz was being rewarded for failure' as he walked away with 'obscenely large' pension. Some shareholders were angry and asked Mr. Hafiz to voluntarily forego some of his pension in recognition of his failure in the job. He refused and claimed that he was contractually entitled to it. REQUIRED: (a) Critique the performance of Vegetable Bank's remuneration committee in agreeing Mr. Hafiz's reward package. (13 marks) (b) Interpret the components of an appropriately designed executive reward package and explain why a more balanced package of benefits should have been used to reward Mr. Hafiz. (12 marks) (TOTAL 25 MARKS)
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a The remuneration committee of Vegetable Bank failed to appropriately scrutinize Mr Hafizs reward package and allowed personal relationships to influ... View the full answer
Related Book For
Modern Advanced Accounting in Canada
ISBN: 978-1259087554
8th edition
Authors: Hilton Murray, Herauf Darrell
Posted Date:
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