问题详情

SectionB–TWOquestionsONLYtobeattempted
Fiveyearsago,GeorgeWoofwasappointedchiefexecutiveofficer(CEO)ofTomatoBank,oneofthelargestglobalbanks.MrWoofhadasuccessfultrackrecordinseniormanagementinAmericaandhisappointmentwasconsideredveryfortunateforthecompany.Analystsratedhimasoneoftheworld’sbestbankersandtheotherdirectorsofTomatoBanklookedforwardtohisappointmentandasignificantstrengtheningofthebusiness.
OneofthefactorsneededtosecureMrWoof’sserviceswashisrewardpackage.Priortohisacceptanceoftheposition,TomatoBank’sremunerationcommittee(comprisedentirelyofnon-executives)receivedaletterfromMrWoofsayingthatbecausehistrackrecordwassostrong,theycouldbeassuredofmanyyearsofsustainedgrowthunderhisleadership.Indiscussionsconcerninghispension,however,heaskedforagenerousnon-performancerelatedpensionsettlementtobewrittenintohiscontractsothatitwouldbepayablewheneverhedecidedtoleavethecompany(subjecttoaminimumtermoftwoyears)andregardlessofhisperformanceasCEO.Suchwastheeuphoriaabouthisappointmentthathisrequestwasapproved.FurthermoreinthehastymannerinwhichMrWoof’srewardpackagewasagreed,thesplitofhispackagebetweenbasicandperformance-relatedcomponentswasnotcarefullyscrutinised.EverybodyontheremunerationcommitteewassocertainthathewouldbringsuccesstoTomatoBankthattheindividualdetailsofhisrewardpackagewerenotconsideredimportant.
Inaddition,theremunerationcommitteereceivedseverallettersfromTomatoBank’sfinancedirector,JohnTemba,saying,indirectterms,thattheyshouldofferMrWoof‘whateverhewants’toensurethathejoinsthecompanyandthatthebalanceofbenefitswasnotimportantaslongashejoined.Twoofthenon-executivedirectorsontheremunerationcommitteewereformercolleaguesofMrWoofandtoldthefinancedirectortheywouldtakehisadviceandmakesuretheyputapackagetogetherthatwouldensureMrWoofjoinedthecompany.
Onceinpost,MrWoofledanexcessivelyaggressivestrategythatinvolvedhighgrowthintheloanandmortgagebooksfinancedfromarangeofsources,someofwhichprovedunreliable.Inthefifthyearofhisappointment,thefailureofsomeofthesourcesoffundsuponwhichthegrowthofthebankwasbasedledtoseverefinancingdifficultiesatTomatoBank.ShareholdersvotedtoreplaceGeorgeWoofasCEO.Theysaidhehadbeenrecklessinexposingthecompanytosomuchriskingrowingtheloanbookwithoutadequatelycoveringitwithreliablesourcesoffunds.
Whenheleft,thepressreportedthatdespitehisfailureinthejob,hewouldbeleavingwithwhatthenewspapersreferredtoasan‘obscenelylarge’pension.SomeshareholderswereangryandsaidthatMrWoofwasbeing‘rewardedforfailure’.WhenMrWoofwasaskedifhemightvoluntarilyforegosomeofhispensioninrecognitionofhisfailureinthejob,herefused,sayingthathewascontractuallyentitledtoitandsowouldbekeepingitall.
Required:
(a)CriticisetheperformanceofTomatoBank’sremunerationcommitteeinagreeingMrWoof’srewardpackage.(10marks)
(b)DescribethecomponentsofanappropriatelydesignedexecutiverewardpackageandexplainwhyamorebalancedpackageofbenefitsshouldhavebeenusedtorewardMrWoof.(10marks)
(c)ConstructanethicalcaseforMrWooftovoluntarilyacceptareductioninhispensionvalueinrecognitionofhisfailureaschiefexecutiveofTomatoBank.(5marks)
请帮忙给出正确答案和分析，谢谢！