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IAI Actuarial Core Principles · Business Finance · Corporate governance and the regulation of companies

Which of the following best describes the role of a company's remuneration committee?

The remuneration committee determines pay policy and packages for executive directors and senior management, and is ideally made up mainly of independent non-executive directors so executives do not set their own pay. Approving accounts, appointing auditors and investor relations are handled elsewhere.

  1. ADetermining executive directors' pay policy and packages, ideally composed mainly of independent non-executive directorsCorrect
  2. BApproving the company's annual financial statements on behalf of shareholders
  3. CAppointing the external auditor without reference to the board
  4. DDeciding the dividend paid on preference shares
  5. Managing the company's investor relations calls

Explanation

Remuneration committees set pay policy and packages for executive directors and senior management, linking reward to performance, and are composed mainly of independent non-executive directors to avoid executives setting their own pay. The other tasks belong to the full board, the audit committee or management.

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