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ACCA Strategic Professional · Strategic Business Leader · The board of directors

Meridian plc's remuneration committee wants to design a package for a new finance director that attracts and retains talent without rewarding failure. Which feature is most consistent with this objective?

A balanced package with a significant performance-related element, clawback provisions and limited termination payments best meets the objective. It attracts and retains talent while linking reward to results and avoiding payments for failure, unlike guaranteed bonuses or long notice periods that reward poor performance.

  1. AA guaranteed bonus in each of the first three years regardless of performance
  2. BContract notice period of three years so that any early exit triggers a large payment
  3. CA balanced package with a significant performance-related element, plus clawback provisions and limited termination paymentsCorrect
  4. DA package based entirely on the median salary of the sector with no variable pay

Explanation

Good design links a meaningful part of pay to performance, includes malus or clawback to recover rewards from misstatement or misconduct, and limits compensation on early exit so failure is not rewarded. Guaranteed bonuses and long notice periods reward poor performance, while purely fixed median pay gives no performance link.

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