Accounting Theory and

Current Issues
1)CORPORATE GOVERNANCE REFORM AND CEO
COMPENSATION INTENDED AND UNINTENDED
CONSEQUENCES
2) CEO COMPENSATION: THE ROLE OF INDIVIDUAL

PERFORMANCE EVALUATION

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Table of Contents
EXECUTIVE SUMMARY:................................................................................................................................2
INTRODUCTION:..........................................................................................................................................2
REASON FOR SELECTING JOURNALS:...........................................................................................................3
THE PURPOSE FOR TWO STUDIES:...............................................................................................................3
1) CEO compensation: The role of the individual Performance:..........................................................3
2) CORPORATE GOVERNANCE REFORM AND CEO COMPENSATION INTENDED AND UNINTENDED
CONSEQUENCES......................................................................................................................................3
Similarities in the studies:............................................................................................................................4
The difference between the two studies:....................................................................................................4
The Implication of the study:.......................................................................................................................4
CONCLUSION:..............................................................................................................................................5
Works Cited.................................................................................................................................................5

EXECUTIVE SUMMARY:
In the recent corporate scandals the performance of the CEO in the organisation has been questioned.
The debate of the corporate governance reform is on the debate for many years. In this report the
structure of the executive compensation is described along with the agency theory. In the other part of
the report the performance of the individual (CEO) is evaluated as compared to the performance of the
company. The CEO performance is evaluated as compared to the annual incentives plan.

INTRODUCTION:
The CEO performance is very important when the company performance is questioned. CEOs
performance is directly relate with the compensation. This report is about the CEO performance in the
organisation. Recent corporate scandals put questioned marks on the performance of the CEO and the
debate for the change in the corporate governance structure is in headlines. The executive
compensation is also on the debate as it is directly affecting the performance of the CEO. The journals
selected in this paper are about the CEO compensation, compared with the individual performance and
the need of the corporate governance reform. The Aim of this paper is to evaluate the literature review
in the journals selected and produce the result about the importance of the study in Financial Reporting
in Australia.
REASON FOR SELECTING JOURNALS:
In the recent studies the importance of the CEO compensation is increasing in demand. The CEO
compensation is directly affecting the performance of the organisation. Following are the reasons for
selecting such journals:

 CEO performance show direct impact on the performance of the organisation. To evaluate the
relationship with company performance this journal has been selected.
 The Corporate governance reform and the CEO compensation is on the debate from long time.
To show the impact of the corporate governance structure and impact of executive structure
this journal is selected.
 The Ethical issues raised in the executive compensation are evaluated in this report.

THE PURPOSE FOR TWO STUDIES:

In this section the purpose of study behind the two journals is described. The aim of the two topic is
same the CEO compensation. Two journals are individually evaluated in this topic.

1) CEO compensation: The role of the individual Performance:

This report is about the individual performance and along with the compensation provided to them.
From the empirical studies it is evaluated that the motivation is necessary for the individual. But there
are some measure which might de motives the individual this includes the stock price and accounting
measure which might not in control of the individuals. Sometimes the performance of the individual is
also compared with the financial and non financial measures which also contribute in the de
motivational impact. But on the other hand if the performance of the individual is measured on the basis
of the increase in the asset price, age and measured along with the traditional financial measure. Using
the information in the journal it is evaluated that individual performance is increased when the relative
measures are realistic and show impact.

Form the empirical studies it is evaluated that the performance of the individual is directly impacting the
performance of organisation. The annual incentives is impacting should be provided on the basis of the
realistic measures. Sometime the individual are given incentives on the basis of stock price and other
unrealistic measures which not show any comparison and seems to be unrealistic. The Annual incentives
in the organisation should be provided on the things which are under the control of the individuals.

2) CORPORATE GOVERNANCE REFORM AND CEO COMPENSATION INTENDED

AND UNINTENDED CONSEQUENCES
In the second Journal the CEO compensation is evaluated and the need of the corporate governance
reform is evaluated. The recent corporate scandals allegedly linked with the CEO compensation and
reform in the corporate governance structure. In the journal the corporate governance structure is
evaluated and the executive compensation along with this agency theory framework. This will enhance
the knowledge of the executive that they acting on behalf of the shareholders.

This journal also includes the ethical issues that are associated with the executive compensation. Some
of the executive compensation are intended, but some of the unintended compensation should be
considered to reform. This reform requires the great number of independent executives committee to
change in the corporate governance and the executive compensation reform. This also requires great
number of compensation disclosure in the account related to the compensation. This involves direct
disclosure of the compensation in the accounts and it also requires the stock option provided in the
compensation should be expensed out in the profit and loss. This study involves the ethical issues
related to the executive summary and describes the possible future research.

Similarities in the studies:

The studies show many similarities as they both throw light on the CEO compensation provided. The
CEO performance is directly associated with the performance of the company. There are following
similarities in the journals:

1) The CEO compensation and the performance of the individual are directly related to each other
2) The organisation performance is associated with the level of the incentives provided to the
shareholders.
3) The need of the realistic measure of the company performance so that the incentives provided
show some accuracy.

The difference between the two studies:

The difference between the two studies is very minor. One study put light on the incentives provided to
CEO increase the performance of the executives. But the incentives are provided on the basis of the
realistic approach. On the other hand, the second journal put light on the reform of the executive
structure as they set their compensation. It is evaluated from the study that high level of compensation
should be motivating to the factors for the executives but if they are realistic and reachable.

The Implication of the study:

The two studies show great implication on the financial reporting in the companies in Australia. This
section involves the implication on the Accountants and the regulatory bodies and the shareholders.

On Accountants in Australian companies:

The accountants of the Australian companies have following implications from the studies:
1) The accountants of the Australian companies should prepare accounts according to the
reporting standard. The executives’ compensation should be reported in the accounts and
present true figure.
2) The accountants should have knowledge about the disclosure requirements of the executive
compensation. The accounts also present the future compensation to the executive and the
annual incentives because they are acting in the best interest of shareholders.

On regulatory bodies:

The study has implication from the regulatory bodies as they implement rules for the disclosures which
should be followed.
 1) The Regulatory bodies have to implement rules and regulation on the organisation to provide
true information regarding executive compensation.
2) The non inclusion of the executive compensation should be penalized because this is important
to the shareholders because they are working in the best interest of the shareholders.
On stakeholder:

The shareholders have great impact of the executive compensation. They are willing to know about the
compensation because the annual incentives and the compensation are given on behalf of the
performance. They should be informed truly about the compensation given to the executives or CEOs.

CONCLUSION:
The journal provides the information about the compensation given to the CEO and the impact on the
performance of the individual. It is evaluated from the study that high level of compensation should be
motivating to the factors for the executives but if they are realistic and reachable. The compensation
provided to the stakeholders on the other hand is needed to be reform because many of the corporate
scandal are associated with compensation and manipulation of the information. In the journal disclosure
of the executive compensation is also provided.

Works Cited
ATHITAKIS, M. (2017). HOW HIGHER CEO PAY CAN IMPACT AN ENTIRE ORGANIZATION. Retrieved from
https://associationsnow.com/2017/03/higher-ceo-pay-can-impact-entire-organization/

Kagango, S. (2016). The Impact of CEO Compensation on Firm Performance. Retrieved from
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2957899

M.Bushman, R. (1996). CEO compensation: The role of individual performance evaluation. Retrieved
from https://www.sciencedirect.com/science/article/pii/0165410195004165

Matsumura, E. M. (2005). Corporate Governance Reform and CEO Compensation: Intended and
Unintended Consequences. Retrieved from https://link.springer.com/article/10.1007/s10551-005-0175-7