Decision Making and Motivating Performance

Question: Discuss about the Decision Making and Motivating Performance. Answer: Introduction: Scentre Group has been selected for the purpose of analysis in context with the remuneration of the executives of the company. The mission of the Group is to own interest in the highest quality regional centers and to make investment in the assets through the redevelopment opportunities. It would ensure that the communities of the Group are enriched by the shopping centers by providing extraordinary retail spaces. It intends to provide the customers with leisure and unique shopping experience. The goal of the company is to ensure that the shopping centers of the Group meets the highest expectations of the customers and retailers (Crosson and Needles 2013). Discussion: Scentre group prepares the remuneration report in accordance with the requirement of the ASX corporate governance council and Corporation Act. Remuneration report focuses on the approach to remuneration of the key management personnel. Established indicators do the assessment of the performance of the executives. Remuneration of the Group needs to be aligned with the interest of the security holders and business strategy of the Group (Needles and Crosson 2013). The remuneration package of CEO of Scentre Group has remain unchanged and the fees of Chairman has witnessed an increase in the financial year 2016. Remuneration practice of Group is benchmarked against its competitors (Datar et al. 2013). Total remuneration of the executive teams such as Chairman and CEO comprise of fixed remuneration and the potential maximum at the risk remuneration through the short-term and long-term incentive plan. Fixed remuneration of Executives such as CEO and Chairman is awarded in cash. The targeted and potential long-tern incentive (LTI) and short-term incentive (STI) is calculated as a percentage of fixed remuneration. Under the short-term incentive (STI) plan, CEO, CFO and COO, 70% of short-term incentives are paid in cash and the balance amount are delivered as the performance right at the end of three years. Under the deferred STI awards, there are no additional performance hurdles. The targeted maximum STI opportunity for CEO was 127.5 and 150. For the LTI, it stood at 135 and 170 (Scentregroup.com 2017). The performance of the top executives such as CEO and Chairman is measured by establishing the KPIs under the development system and performance review. Measuring the performance of the executive against the agreed KPIs determines the actual STI awarded. Performance weighting of CEO under the financial measures comprise of 65% of the group target and for the non-financial measures, it stands at 35% (Scentregroup.com 2017). The LTI are awarded under Performance Incentive Right plan as performance rights. The performance objectives of the KPIs vary according to the role of executives. Senior executive such as CEO is subjected to the performance review in the manner discussed. Valuation of awards made to the executives under the equity-linked plan reflects the performance of the securities on the Australian stock exchange. The value of the awards of the executives fall if the price of share falls (Matherly and Burney 2013). CEO of scentre group can become one of the highest paid according to revelations at the group annual general meeting. It was thought that the remuneration was a misunderstood overpay. In lieu of this, the investors voted against the potential payment made to Mr. Allen and it was related to the structure of remuneration. Chairman of the company Brian Schwartz said that the remuneration practices of the Group is under review (Financial Review 2015). The bonus structure of the company are such that the remuneration paid to the executives are better linked to the performance rather than focusing on the components of fixed salary. On the other hand, Performance of the Scentre Group is measured by using a number of key metrics, which includes growth in the security price and earnings. The Group as the key performance measure uses FFO. FFO is an accepted measure of profitability used by the real estate industry that is recognized internationally. The key performance indicator of Scentre Group is based on financial and non-financial measures and this include construction, retail management, sustainability, strategic targets and the value of the Group. The review of the executive is done annually and there are various performance criteria. The various category of the key performance indicator of Scentre Group are development projects, digital strategy, acquisition, strategic sales, joint venture, financial targets, portfolio management and risk management (Scentregroup.com 2017). KPIs for each executive are set on the annual basis with the intention of motivating them to achieve their performance objectives. Conclusion: Scentre Group is a geographically focused business and the executives of the company has been empowered to operate with autonomy. This help them in achieving their business objectives efficiently. It is clearly observed from the above discussion that the remuneration of the senior executives are paid based on their performances. Performances of senior executives are monitored, as there are established performance indicators. The policies and practices reflecting remuneration of the executives reflect high level of governance. However, it was reviewed by the journal presented from few newspaper that the senior executives are being over paid and in light of this, there is a need to restructure the remuneration policies. Reference: Crosson, S.V. and Needles, B.E., 2013.Managerial accounting. Cengage Learning. Datar, S.M., Rajan, M.V. and Horngren, C.T., 2013.Managerial Accounting: Decision Making and Motivating Performance. Pearson Higher Ed. Financial Review. (2015).Scentre Group CEO Peter Allen could become one of country's best-paid execs. Available at: https://www.afr.com/real-estate/commercial/scentre-group-ceo-peter-allen-could-become-one-of-countrys-bestpaid-execs-20150507-ggw68l [Accessed 9 Jan. 2017]. Guinea, F.A., 2016. The Need For Managerial Accounting Systems.SEA-Practical Application of Science, (12), pp.465-470. Matherly, M. and Burney, L.L., 2013. Active learning activities to revitalize managerial accounting principles.Issues in Accounting Education,28(3), pp.653-680. Needles, B.E. and Crosson, S.V., 2013.Managerial accounting. Nelson Education. Scentregroup.com. (2017).News | Scentre Group. Available at: https://www.scentregroup.com/media/ [Accessed 9 Jan. 2017]. Scentregroup.com. (2017).News Archives | Scentre Group. Available at: https://www.scentregroup.com/news_announcements/?type=media_releases [Accessed 9 Jan. 2017].