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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Effectiveness and Building Better Boards

Himalaya Energy Ltd, a listed public company, wants its remuneration policy to show how pay is linked to results after the annual board evaluation. Under section 178(4), which requirement must the NRC ensure while formulating the remuneration policy?

The NRC must ensure that the relationship of remuneration to performance is clear and meets appropriate performance benchmarks. Section 178(4) also requires reasonable pay and a balance between fixed and incentive pay reflecting short and long-term objectives.

  1. ARemuneration must be fixed entirely as a percentage of net profit
  2. BThe relationship of remuneration to performance is clear and meets appropriate performance benchmarksCorrect
  3. CRemuneration must be identical for all directors regardless of evaluation
  4. DIncentive pay must be excluded for key managerial personnel

Explanation

Section 178(4)(b) requires that the relationship of remuneration to performance is clear and meets appropriate performance benchmarks. Section 178(4)(c) also requires a balance between fixed and incentive pay, so excluding incentive pay is wrong. No provision fixes pay solely as a profit percentage or equal for all.

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