Executive Remuneration Analysis of Vodafone

Topics: Corporate governance, Board of directors, Executive director Pages: 7 (2221 words) Published: April 23, 2013
Executive Remuneration Analysis of Vodafone
1. Introduction
Executive remuneration is the compensation which company rewards for the executive directors. Since the early 1980s, executive payment increase rapidly. The unjustified increasing of executive remuneration pushes the reform of remuneration policy. The Cadbury code mentioned this problem in the Code of Practice in 1995. Cadbury gives some suggestions to companies about the executive remuneration policy. According to his suggestions, companies should dividend total payment into the basic salary and performance-based bonus, and the remuneration report should publish in the annual reporting every year [1]. In additional, UK government provides the vote right for shareholders to supervise the company’s executive remuneration, it also can force executive directors taking investors’ interest into account when they design the company strategy [2]. The analysis of big companies’ remuneration policy is more emphasize by investors and government, especially after the 2008 financial crisis. Investors are paying more attention to whether the executives deserve the high reward. Therefore, the analysis of executive remuneration is more necessary and valuable. Companies in FTSE 100 have the highest market capitalization in UK, and it means the analysis of FTSE 100 companies is most valuable. Vodafone Group, as one of the biggest company in the FTSE 100 companies, has business in almost 70 countries. And the market capitalization is nearly £90bn [3]. Last year, Vittorio Calao, the CEO of Vodafone received around £30m for remuneration in fiscal year 2012, which is one of the highest remuneration in the FTSE 100 [4]. Although the executive rewards are higher than others in the FTSE 100, there still are 96.12% shareholders voting in favour with the Vodafone’s remuneration policy [5]. This raises the question that why there are a huge amount of shareholders convincingly supports their highest remuneration. This essay analyses the executive remuneration for Vodafone Group. Firstly, it will talk about the remuneration principle. Then the Remuneration Committee will be discussed. This part aims to measure whether the Remuneration Committee according to the UK Corporate Governance Code. The third part will explain the remuneration package of Vodafone Group, both base salary and various bonuses are included. At last, the essay will discuss the rationality of Vodafone’s executive remuneration from the perspectives of remuneration policy itself and the comparison with other companies.

2. Remuneration principle
The aim of Vodafone’s executive remuneration is driving executives to achieve the company’s long-term strategic goals by offering an attractive and competitive reward [6]. Vodafone wishes to make sure that their executive directors keeping in the highest level in work by providing an attractive payment. For example, a part of rewards are measured by the performance for this year. Therefore, executive directors were given an opportunity to achieve the truly exceptional performance. The remuneration package is determined by Remuneration Committee after Comprehensive consideration. The Remuneration Committee will choose some relevant group of comparators when setting total reward. It makes sure that the executive remuneration policies are considered on a total compensation basis. The comparators are choosing from some basic considerations, which are as follows: 1) top European companies, 2) top UK companies, 3) particularly for scarce skills, and 4) the relevant market in question [6]. These comparators mean that Europe is the major region for business for Vodafone, and the company is original from UK. According to above three principles, the external comparators are consisting by similar size companies, and the European top 25 companies and a few other select companies relevant to the sector. Additionally, the external comparator group do not including the financial...
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