Definition
Directors’ Remuneration (often referred to as Directors’ Emoluments) encompasses the total compensation that directors receive for their services within a company. This compensation includes:
- Salaries: Regular amounts paid to directors for their services.
- Fees: Payments for specific services that directors provide.
- Wages: Periodic payments for regular employment activities.
- Perquisites: Any additional benefits such as cars, housing, or other personal benefits.
- Other Profit: Bonuses, stock options, and other forms of performance-based compensation.
- Expenses and Benefits: Reimbursements and other benefits provided by the employer, which are considered part of the remuneration.
Examples
- Annual Salary: A director of a company receives an annual salary of $200,000.
- Board Meeting Fees: A director receives $1,000 per board meeting attended.
- Bonus: A director is awarded a bonus of $50,000 for achieving certain performance targets.
- Stock Options: A director is granted options to purchase 5,000 shares of the company’s stock.
- Company Car: A director is provided with a company car valued at $45,000.
Frequently Asked Questions (FAQs)
What is included in directors’ remuneration?
Directors’ remuneration includes salaries, fees, wages, bonuses, stock options, perquisites, and other profits, as well as expenses and benefits paid or provided by the employer.
How is directors’ remuneration determined?
Directors’ remuneration is typically determined by the company’s board of directors or a remuneration committee based on factors such as market standards, individual performance, and company performance.
Do directors receive a fixed salary?
Directors can receive a fixed salary along with other forms of variable compensation like bonuses and stock options.
Are directors’ remuneration packages disclosed publicly?
In many jurisdictions, companies are required to disclose details of directors’ remuneration in their annual financial statements or corporate governance reports.
Is there a difference between directors’ fees and salaries?
Yes, salaries refer to regular compensation while fees are payments for specific services provided by directors, such as attending board meetings.
Related Terms
Executive Compensation
Executive Compensation refers to the payment and benefits that executives of a company receive. This includes salary, bonuses, stock options, and other incentives.
Corporate Governance
Corporate Governance involves the system of rules, practices, and processes by which a company is directed and controlled, including how directors are remunerated.
Stock Options
Stock Options are contracts that give the holder the right to buy or sell shares of a company at a predetermined price.
Perquisites (Perks)
Perquisites or Perks are additional benefits provided to employees or directors on top of their regular salary.
Online References
- Investopedia: Directors’ Remuneration
- Corporate Governance Guidelines
- FASB Financial Accounting Standards
Suggested Books for Further Studies
- “Executive Compensation Best Practices" by Frederick D. Lipman
- “Corporate Governance and Ethics” by Zabihollah Rezaee
- “Remuneration Committee Guide” by Barry W. Colfer
- “Corporate Governance: Principles, Policies, and Practices” by R. I. Tricker
- “The Handbook of Board Governance” by Richard Leblanc
Accounting Basics: “Directors’ Remuneration” Fundamentals Quiz
Thank you for exploring the intricate world of directors’ remuneration. Continue to delve deeper into corporate governance for a robust understanding of executive compensation!
