Monitoring directors' remuneration, fat cat packages and perks of office

DOIhttps://doi.org/10.1108/13590791211190696
Date29 December 2011
Published date29 December 2011
Pages6-19
AuthorJoseph E.O. Abugu
Subject MatterAccounting & finance
Monitoring directors’
remuneration, fat cat packages
and perks of office
Joseph E.O. Abugu
University of Lagos, Lagos, Nigeria
Abstract
Purpose – This paper revisits existing regulatory approaches in tackling the practices of bogus and
extravagant company directors’ remuneration packages, often called “fat cat packages” which erode
company capital and dividend return to shareholders. It explores the efficacy of existing rules,
pointing out their inadequacy and ineffectiveness. It emphasizes the need to hold directors accountable
to shareholders for remuneration received. The object is to proffer a more comprehensive and effective
regulatory regime for directors’ remuneration packages.
Design/methodology/approach – The paper is analytical, reviewing several literature and case
law on the subject. It adopts a comparative approach drawly primarily from the Nigerian Companies
and Allied Matters Act 2004 which is compared in critical areas with the provisions of the English
Companies Act 1985 and 2006.
Findings – The analysis concludes that existing rules monitoring directors’ remunerations packages
are ineffective. The rules do not address directors’ pecks, expenses and other perquisites of office.
Often these pecks are more valuable to the director than the actual remuneration package and they
constitute a veritable avenue for dissipating company capital. The articles also finds that audit
committees and their members are presently not subjected to any liability rules for their role as
financial gate keepers verifying the performance of the accounting and audit functions.
Practical implications – The article points out that until regulations are formulated to regulate
or cap directors’ pecks and expenses, there exists ample room for fraudulent dissipation of
company resources resulting in blotted costs of administration and reduced rewards for
shareholders. It also advocates the need to subject audit committees to a higher regime of liability
in public companies.
Originality/value – The paper draws the attention of scholars, law reformers and law enforcement
agencies to the inadequacies of the rules regulating directors’ remuneration packages and suggests
additional rules. It will certainly incite further scholarly discussion and challenge law reformers to
address the issues raised in several jurisdictions.
Keywords Nigeria,Directors, Remuneration,Legislation,Regulation, Directors’remunerationpackages,
Fat cat packages,Directors’ perks and expenses, NigerianCompanies and Allied MattersAct,
Companies Act (UK)
Paper type Conceptual paper
All directors hold positions of trust. They are expected to behave accordingly. In their
everyday duties, they must be mindful of their responsibilities to the company, its
shareholders, its employees, and to the public at large. Corporate law treats them as
fiduciaries – persons in a position of trust, expected to act in utmost good faith in their
dealings with, for and on behalf of the company. Their fiduciary responsibilities are
essentially covered by a wide range of statutory provisions. Associated with directors’
fiduciary obligation is the issue of remuneration. Remuneration of directors has in recent
times been the subject of much discussion, inquiry and analysis as part of efforts
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1359-0790.htm
JFC
19,1
6
Journal of Financial Crime
Vol. 19 No. 1, 2012
pp. 6-19
qEmerald Group Publishing Limited
1359-0790
DOI 10.1108/13590791211190696

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT