As a starting point, consideration of the remuneration governance environment adopted by Fishfarm Plc with regard to its directors should be reviewed. To start with it should be noted that the practice of paying the Non –Executive directors, at a flat rate despite the input and responsibility of each of them is exposed to, is risky. This is because this may lead to the non-Executive directors not investing more efforts to realize extra success for the business; as the significant increase in the success of the company and their dedicated contribution will not be remunerated and recognized. As a suggestion as to how this situation can be corrected; the remuneration of each Non-Executive director should be based on their performance and realization of success towards the common set goals of the company, and recognition of exclusive success or efforts that are found to boost the success of the firm. The benefit of remunerating the Non-Executive directors based on their success, performance and dedication is that; in the process of putting in more efforts as a move to secure more salaries and bonuses, the success of the firm, in general, will be affected positively. The perceived increase will be realized because the efforts to improve success that will directly increase the returns for these directors; will increase the levels of cooperation between the different units of performance like finance, marketing and information components like advertising.
Also, the fact that the remuneration levels for the Non-Executive directors are reviewed annually; may have the effect that these officers will invest more energies towards the end of the annual period during which their remuneration levels are reviewed. In this case, this would mean that these officers will work without any significant dedication and extra effort to improve the financial realization of the firm; as the increased returns for the company would only mean review of the return rates to the higher Executive directors and not them. This will in return result in stagnant effort employment and insignificant performance improvement. In an effort to correct the situation; the remuneration levels of these officers should be considered on a more performance-oriented basis, where any significant improvement in the performance of the firm directly improves the remuneration levels of the Non-Executive directors significantly. Failure to employ this; will mean that these directors will only push for more success in the performance of the business during the periods that directly reflect an overall improvement in the performance of the firm; at the time when their remuneration levels are reviewed. In this case, this may mean just a few months within the financial year; which with response to the financial year may mean less impact on their financial success.
The remuneration of the executive directors on the basis of the market rate of their position; to start with may be the cause of the high turnover among the executive staff, where staff is leaving the company and non-is ready to come into the business. A demonstration, in this case, is that assuming a market rate of USD 20,000 per year for the post of an executive accountant; should not mean that an accountant who at an overall count contributes a USD 1 million realization for his company; should be paid the same as one who is only capable of making USD 0.5 Million for his company. As a corrective measure to ensure that this excessive turnover is corrected and that the Executive directors of this company are effectively rewarded; a measure to pay their basic salary based on the market value but subject to improvement based on the realized financial success should be employed. With regard to the 25%, bonus remuneration based on the financial success of the business can still be used; but the company should ensure that they are working hand in hand with information regarding remuneration and performance environments of the businesses, with which they are competing for staff with.
From the account, it is clear that the Company’s chief executive officer Richard Desmond; has been the hub for financial success within the business as he has pushed it to higher levels of financial success. From the account, it was also indicated that the same officer is the main source of ideas, and from the information, the business has been going through financial breakthroughs. Based on these considerations; it should be noted that the services of such officers as well as those of the complementing officers like the finance director should be protected from leaving; as has been witnessed from the high personnel turnover. From the account, it is also evident that the responsibilities of the finance officer are diverse; covering the areas of accounting, information systems and internal control. As a move to protect the interests of the company and the present financial breakthrough; it should be a priority to remunerate such officers based on the levels of responsibility and the returns they contribute to the firm. This is because this would ensure that they feel that their dedicated efforts are realized and that their contribution is appreciated. Based on the impact and role of the administrative and marketing units within any firm; the officers taking these roles should also be given due consideration based on the success of the business; contribution at their areas of responsibility, and impact towards the success of the firm in general.
The consideration for these moves should be based on the ratio that; inappropriate remuneration policies can lead to executive risk taking in almost any area of financial risk. An example of these areas is the credit, liquidity, marketing, and operational risk components of the firm. It should also be noted that inappropriate review of these policies may expose personnel to the temptation of intensive misconduct and fraud. An example here is increasing the chances for officers to miss-mark, miss-state, or exaggerate their performance in the interest of increasing the valuation of their position and responsibility. On the other hand, inappropriate remuneration may lead to excessive risk-taking as the involved risks take different forms. Another consideration to be observed is that the remuneration policies adopted should support effective risk management. The other areas to be observed include that the review of the remuneration policies will lay more responsibilities with the boards and remuneration agencies, as well as raising the governance issues that are fundamental to the business.
The role of a management structure is to plan, organize, lead and control the efforts and resources of a firm towards achieving the organizational goals. This can only be achieved through leading, inspiring and directing the resources and personnel available through the board of directors; through the direction of the managing director. However, in achieving this; the Managing director employs other managers on the basis of regions, functions like sales and resources; departments like retail outputs, or a general manager to whom responsibilities are reported. From the high director’s turnover accounted for; it is evident that the remuneration of these directors is unfavorable as they all leave for better competing businesses. From research it is evident that the role of a director is critical to the success of any firm; as the level of direction determines the responsiveness and performance climate of organizations. From the account two long-standing directors have left the firm; hence this area needs serious consideration. From the account of the number of meetings the three chairing committees have; it is evident that the roles of establishing, prioritizing and enforcing objectives are significantly poor.
Due to the dynamic nature of the business environment; it is clear that the setting of targets, goals, and communication; as well as work patterns reviewed on a regular basis; to ensure that the firm remains perfectly competitive as has been accounted for. This is because it is evident that the firm is losing its executives to other firms. The committees should also from time to time ensure that employees are motivated; make, monitor and ensure that budgets are employed and enforced. Some of these activities and areas of concern that greatly dictate the success of any firm regardless of its operation scale are not accounted for in the current management structure; therefore, should be given consideration or review done to reflect their employment. From the account, the expense of labor has been noted, but the management has not accounted for whether they are utilizing the current labor force to the best achievable success level; instead of first considering the option of moving the business which will negatively impact the public figure of the company; reflect selfish interests of some officers and possibly affect the profitability and performance of the business in general. The reporting of the business’s performance to the directors and business review is done annually. This can be done more often say on a half or quarter-year basis; which would give the management more information on which areas to base their strategies in, during operations.
From the account, it has not been accounted as to whether the cost incurred in the efforts geared towards the selection of a board of governors; as well as the professional or technical skills required from the new board members being recruited was considered. However, some of the issues that should be put into consideration when nominating or discussing the composition of the board of directors are discussed below. First of all, the committee should ask themselves what they want; in terms of what they require from a board member which comprises the qualities that will help the board function best. Some of these considerations may include how much understanding they have about the firm and its needs; the level of passion towards the common cause; the willful dedication to commit time for board meetings, planning meetings, special events and committee gatherings. Other considerations to be accounted for include how much the individuals can work well in a team, and how much thought they are in considering issues as well as listening and collecting views.
The other consideration is that the individuals selected should fill the positions they are supposed to occupy; say a post needing a member who is proficient with accounting. The other consideration is if there are prospects to be considered for the positions; as these are individuals suggested for the posts, by the board or the board is asked to supply them from its sources. The fourth consideration to be considered is whether the application requirements employed; will enable the nominating body to know these candidates the much the process requires so as to choose the best candidates. This is achieved from the application, orientation and later the interview encounters put into action. The last consideration to be observed is the commitments they are supposed to agree to and upon; and those they are supposed to assure like contracts. Other concerns under this area are the disclosure of conflict in interests, orientation to the work then deployment into the duties. Other considerations include that board members should have knowledge or professional achievements that can complement one another, as well as represent different areas so that they don’t fight for the selfish interests of the represented group only. Consideration of the size of the board should also be observed, so as to ensure that it reflects the interest of the group and that it carries out the required responsibilities effectively.
Stakeholders are persons, groups, institutions, or systems and networks that are affected or who affect the organizations’ actions, moves and decisions. The very basic stakeholders, who will be affected by the relocation move by the company, include the employees of the firm who are accounted for as being from the locality of the processing areas. The relocation of the company will render the local employees jobless; thus, this will form a conflict of interest. The basis of the move is the high labor costs incurred during processing, whereby the company has not considered reviewing other areas of expenses rather than relocation making the more than 180 employees jobless. The other way to deal with the conflict is that; the company can cut on the labor expenses incurred through measures like reducing the number of hours worked by each employee, and the number of responsibilities taken by the different employees. The other stakeholders who will be affected by the relocation move are the retailers, restaurants and wholesalers who buy and sell the products of the company.
The conflict involved is that these people will lose the funds, business, and economic sources they used to gain from the company. As a solution to the conflict, other related expenses among labor expenses can be employed to avoid the relocation. Other stakeholders who will be affected by the move include the employees to be maintained; as they will have to relocate to the new areas of operation. The conflict is that they will have to change their residence areas; possibly leave their families and other areas of concern. The solution for the conflict is much the one to be considered for the first two stakeholders. The other stakeholders that will be affected but not to a very significant extent are; related businesses like complementary or competing firms; the revenue collection organizations working in the area; the customers of the products produced by the company; and the country in general as it will lose a source of GDP. Other parties who may be affected by the relocation include the social housing the company in general financially; the press as they will have stories to make about the firm, and the employees whose selfish gains will have been met.
From the account, it is evident that some of the policy moves and decisions made by the company may be a reflection of the selfish interests of the directors. An example here is the move to relocate the business; which may be fueled by the property and business interests of some directors. From this account, it is clear that the policy direction, the decision making and roles of these directors are greatly a reflection of their selfish interests. As a move to ensure that their interest is honored; these directors may be tempted to manipulate the company’s records and operations, to ensure that their interests in having the business relocate are honored. From his, it is clear that the position of these individuals within the company will be compromised; as they will try to manipulate the other directors and resource allocation. As a solution to the conflict of interests; the decision should be based on extensive research of the consequences to be incurred from the enforcement. The company should also consider reviewing the decision-making process; to ensure that the decisions made are disjointed from the directors who could possibly benefit from them.