Executive Compensation and Stock Option in the UK

Executive Compensation and Stock Option in the UK 1 Introduction Todays highly competitive world consists of numerous corporations and these corporations are so huge and so large that it cannot be controlled by the people who own them. The control of these corporations is separated from shareholders who are the owners and vested into the hands of professional executives who are specifically hired for its management. This separation of ownership and control gave rise to agency problem or the principal-agent problem. Principal is referred to the stockholders and the agents are the executives who work for the stockholders. Although stockholders are the owners of the company to whom the executives are accountable, their actual powers are restricted except in the case of those corporations where stockholders are also the directors of that corporation. Stockholders have no right to inspect the books of accounts nor are they aware of the exact functioning and position of the firm. As a result, executives tend to work inefficiently without even bothering to look for profitable new investment opportunities, as well as they may use the firms assets for private purposes and also work to achieve their personal goals all at the expense of the shareholders. Some managers do not take any action whatever state or condition the corporation may be as they are risk averse and fear the threat of losing their job if a decision taken by them goes wrong. Therefore in order to avoid the various problems that arise due to the agency problem, executives must be properly and promptly compensated along with proper monitoring. In the beginning of 1990s, debates on corporate governance mainly focused on directors remuneration and fat cats. Fat cats are referred to those executives who provided themselves with huge compensation packages without any performance criteria. In UK, the most famous Fat Cat episode which saddened the shareholders of many large public companies and dragged the attention of the media was the notorious British Gas incident of the mid 1990s. Various issues arising out of executive compensation and the trouble of framing the deserved level of compensation, that has to be provided to an executive, made executive remuneration a main area of concern under corporate governance. According to Jensen (1993), providing the right level of remuneration to the executives and creating positive incentives in order to achieve the interest of the shareholders has been an important study conducted in many academic literatures. An improvement in corporate governance is brought about by filtering certain aspects of executive remuneration. There exists a wide gap between the remuneration paid to the executives and the remuneration paid to the other employees on the company. This gap keeps on increasing year after year as executives demand more and more for their services and decision making process to boosts the productivity and reputation of the firm which thereby increases the market price of the companys share. In a research mentioned in the Higgs Report (2003), chairmen of FTSE 100 companies in 2003 earned an average of  £ 426,000 as remuneration. Moreover, executives are being rewarded with stock options which would enrich them with abnormal profits in the future when the options granted to them are exercised. Critics argue that, executives are not worth for the remuneration paid because of their poor and unsatisfactory performance. According to Blitz (2003), MORI a leading market research company in the UK, through a survey, found 78% of the people unsatisfied by the remuneration paid to the executives. The pu blic in UK believe that executives are being overpaid for the amount of work they actually do. 2 Methodology This paper is a critical review on the various aspects of executive compensation in the UK and how the executive compensation especially the executive stock option encourage the managers and top executives, for their personal benefit, to take short term high risks and boost up the current value of shares rather than looking into the future and acting in favour of the stakeholders of the company. The tools used for the research mainly consist of various literature reviews of past articles and current working papers with some analysis of some statistical data regarding executive compensation. On the basis of the above mentioned area of research certain questions have been framed which will be critically looked into: a) Brief description of the executive compensation and corporate governance in the UK. b) Basic structure of executive remuneration in the UK and their disclosure requirements in United Kingdom. c) Are stock options considered the best means of remuneration in an executive compensation package? d) A brief historical overview of the introduction of executive stock option in the UK. e) What are the various manipulations done with executive stock option and what are the risk incentives created by executive stock option? f) Brief comparison of the UK executive compensation with the US executive compensation. g) The role of executive compensation in the UK banking towards the current financial crises. 3 Executive Compensation and Corporate Governance in the United Kingdom: During the past decade, various issues on corporate governance established the emergence of many reports and codes of best practice in the United Kingdom. These include the Inland Revenue (1988), Cadbury Report (1992), Greenbury Report (1995), Hampel Report (1998), The Combined Code (1998), Hermes Statement on Corporate Governance and Voting Policy (1998), Internal Control: Guidance for Directors on the Combined Code (Turnbull Report)(1999), Company Law Reform (1999) and Financial Services Market Act (2001) (Konstantinos Stathopoulos, Susanne Espenlaub, Martin Walker, 2003). Among these reports the Cadbury Report, Greenbury Report and the Combined Code, which emerged from the Hampel Report, focused on issues regarding executive compensation. 3.1 Cadbury Report (1992): The first guidelines of good practice on various issues of corporate governance were provided in the year 1992 by the Cadbury Committee which was established in May 1991 and was chaired by Adrian Cadbury. The Cadbury Committee discussed issues that were broader in nature than the executive remuneration but certain suggestions the committee made on altering the executive pay was accepted as permanent. The Cadbury report was titled as the Financial Aspects of Corporate Governance and came out with the Code of Best Practice, which insisted that decisions based on executive remunerations should not be made by the executive directors nor they have to get involved in making such a decision (1992, paragraph 4.42 p. 31). The report therefore recommended the appointment of a remuneration committee which will act in the interest of the shareholders of the firm and express a good opinion on various matters regarding executive compensation to the board. Companies in the UK responded spontaneousl y to this recommendation made in the Cadbury Report and established a remuneration committee within the firm (Bostock, 1995). The remuneration committee consists of a non-executive director as the chairperson and non-executive directors as its members who are all independent and free from the influence of the management. According to Williamson (I985), there always arises a question of doubt whether the directors make remuneration contracts for their own huge benefits and sanction it, if an independent pay committee does not exist. The role of remuneration committee is to ensure that executive compensation levels are set up in a formal, transparent way along with the goals required to be achieved by the executives for any schemes that are performance related. The remuneration committee can take advice from outside sources whenever necessary. The Cadbury report also suggested the establishment of an audit committee within each company which comprises of three non-executive directors (Martin Conyon, Paul Gregg and Stephen Machin, 1995). According to a questionnaire survey conducted by Conyon and Mallin (1997), by 1995, 98% of the companies followed the suggestions made by the Cadbury report and has reported the involvement of the remuneration committee in their annual reports. 3.2 The Greenbury Report (1995): Cadbury report failed to provide detailed guidance on how compensation packages have to be structured. However, it pointed out executive compensation to be the main area of study for the next committee known as the Greenbury Committee. The Greenbury Committee chaired by Sir Richard Greenbury, was formed by the United Kingdom Confederation of Business and Industry, and in 1995 it submitted the Greenbury report which dealt with matters regarding the determination and accounting of top executive pay. The main issues discussed in the Greenbury Report includes the role of the remuneration committee in an organisation, the disclosure requirement required by the shareholders of the organisation, the remuneration policies for compensating the executives and the service contracts provided to the executives. The remuneration policies recommended in the Greenbury Report are: a) Compensation packages must be provided by the remuneration committee to quality executives in order to influence, sec ure and encourage them and any payments extra to this intention must be avoided (Greenbury Report Paragraphs 6.5 – 6.7). b) The payments made and the subsequent resulting performance by other companies in the same industry must be evaluated by the remuneration committee. On the basis of this evaluation, the remuneration committee should relatively place their company (Paragraphs 6.11 – 6.12). c) While making changes to the annual salary of the executives, the remuneration committee should look into the payment and employment situations in other areas of the company rather than only concentrating on the executive pay and increasing them so as to satisfy the executives (Paragraph 6.13). d) The part of remuneration that is related to performance should be designed in such a way that the executives incentives go hand in hand with the interest of the shareholders and the executives are motivated to perform their duties with high standards (Paragraph 6.16). e) The performan ce conditions for executives to avail their annual bonuses, if any, should be designed to support and widen the operations of the business. The maximum possible amount of annual bonus an executive can avail should be taken into consideration by the remuneration committee and in some cases a part of these bonus payments can also be made by shares (Paragraphs 6.19 – 6.22). f) Under the long term incentive scheme, the Greenbury Report suggested that the shares and options granted to the executives should neither vest nor be exercisable, at least for a period of 3 years after such grant. The remuneration committee should encourage its executives to keep possession of their shares, after its vesting or exercise, for a long period of time (Paragraphs 6.23 – 6.34). g) The present existing long term incentive scheme should either be replaced by the new incentive scheme proposed or, the new incentive scheme proposed when combined with the old existing scheme should formulate a well structured incentive plan. The remuneration committee should make sure that the new long term incentive plan does not pay in excess than what is actually required for the executives and this new plan is accepted by the shareholders (Paragraph 6.35). h) The criteria for any long term incentive grant should be challenging and the performance of the executives should help achieve the goals set by the company in order to stand out from rest of its competitors. Key variables like the total shareholders return are used to judge the performance of the company with respect to its competitors (Paragraphs 6.38 – 6.40). i) Executive stock option grant or any other long term incentive grant must not be presented in lump-sum but should be awarded in series of stages. Moreover, no discount should be provided to the executives on the issue of executive stock option (Paragraph 6.29). j) While increasing the annual basic salary of the executives, the remuneration committee should look in to the effect of such increase on the executives pension entitlement and on the future expenses of the company particularly in case of those executives who are nearing retirement. The annual bonuses paid or any benefits paid in kind are not entitled for any pension payment (Paragraph 6.42 – 6.45). The aim of the Greenbury Report was not to cut down the executives remuneration but was to establish a balance between the compensation paid to the executives and their respective performance. On publishing the report in 1995 by the Greenbury Committee, certain tax advantages that was permitted on newly issued share options which comes under the approved executive share option scheme was withdrawn by the UK government. A new type of option scheme was introduced in November 1995 which had an upper limit of only  £20,000 on individual option holdings. Further, executive share options whose exercise price was earlier accepted at a discounted price of 15% on the existing share price at the time of grant was prevented (Konstantinos Stathopoulos, Susanne Espenlaub Martin Walker, 2003). According to Conyon (1994) in UK, the top executive director of a company was also made member of its remuneration committee before the launch of the Greenbury Report. However, the old fashioned executive share options schemes was not benefitted from the recommendations made by the Greenbury Committee as it not only seized the tax benefits but also encouraged to substitute options with long term incentive plans which in the UK is just awarding shares and not cash. The recommendations made by the Greenbury Report were not widely accepted as many of the critics believed that the report failed to link the executive pay with the performance of the company. 3.3 The Combined Code (1998): The Combined Code of the London Stock Exchange controls the various remuneration practices adopted by the companies listed in the London Stock Exchange. It has combined the recommendations given by the Cadbury Report and the Greenbury Report in order to form a regulation for efficient remuneration practice. The annual report of the companies listed should contain in a separate section the remuneration policy adopted by the company. The Combined Code requires a statement, in the annual report, showing that the remuneration standards mentioned in the code are being followed by the company and if any set standard is not complied with, the statement should point out the reason for the non compliance. A high level of executive remuneration disclosure is also required under the combined code and clear explanations about the various compensation packages provided to each executive director and non executive director should be stated (Konstantinos Stathopoulos, Susanne Espenlaub Martin Walk er, 2003). 4 Structure of Executive Remuneration in the UK: The typical structure of executive compensation in UK comprise of base salary, annual bonus, share options and long term incentive plans along with certain additional components like restricted stock and retirement plans. In 1997, an average executive compensation package consisted of 54% of base salary, 24% of annual bonus and 22% of non cash items which include share options and long term incentive plans (Martin J. Conyon, Simon I. Peck, Laura E. Read and Graham V. Sadler, 2000). Base Salary Determination of the base salary of an executive is done by taking into consideration the base salaries paid to executives of other companies in the same industry through surveys and analysis. This system of setting up and providing base salary is known as competitive benchmarking. Certain modifications are carried out on the base salary depending on the size of the firm, thereby linking executive compensation and firm size. In UK, base salary form the major part of the total executive remuneration paid. Base salary is that component of executive remuneration which is fixed and do not vary according to the performance, experience, age, etc of the executives. A  £1 increase in the base salary is preferred by executives who are risk averse than a  £1 increase in other components of executive compensation that are variable. Annual Bonus Bonus is provided to the executives on the basis of their performance during the relevant financial year. It is provided on an annual basis and the amounts paid as bonus to each executive vary from year to year. The performance of the executives is generally measured by taking into consideration accounting numbers which can be cross checked and audited. Executives have a clear idea of their daily performance by looking at the accounting numbers and they can forecast how overall profit of the company is going to look like at the end of the year. The drawback of relying on accounting numbers for measuring performance is that it is fully under the control of the executives and if wanted executives can manipulate the accounts in order to increase their annual bonus entitlement. Share Options Share options are contracts provided to the executives that cannot be traded which gives the executives the right to buy the shares of the firm at a price that is pre-determined known as the exercisable price for a specified time period. These contracts become void and have to be surrendered if the exercisable period mentioned has elapsed or if the executive resigns from the company before the exercisable period. This component of executive compensation is looked more into detail in the later section. Long-Term Incentive Plans – Long-Term Incentive Plans are provided to the executives in order to motivate and compensate them for achieving long term performance for the company. Grant of shares is the most typical form of LTIPs provided in the UK. These shares are vested to the executives only on achieving the objectives set by the company that is related to future performance. Earnings per Share and Total Shareholders Return are the two main elements by which the performance of the company is measured in the UK. Retirement Plans – Apart from the basic pension plans provided by the company, in UK, executives are encouraged to participate in an additional retirement benefit plan. These plans are a major source of concern because it symbolises invisible compensation. The actual value of executive retirement plan cannot be calculated by the available information provided in the books of accounts and the annual report. 4.1 Disclosure Requirement of Executives Remuneration in the UK: The Greenbury Report in 1995 identified three fundamental principles, which are accountability, transparency and performance linkage, in respect to executives remuneration. In UK, the current best practice disclosure pattern failed to compile with these fundamental principles therefore the government introduced certain necessary additions to the existing disclosure pattern. These latest requirements regarding disclosure of UK executives remuneration unifies the existing law, regulation and best practices that are mentioned in the UK Companies Act of 1985, the UK Listing Rules and the UK Combined Code of Principles of Good Governance and Code of Best Practice. The new requirement requires every company in the UK to adopt and prepare the directors remuneration report along with other necessary requirements. 4.1.1 Directors Remuneration Report (DRR): Companies listed in the London Stock Exchange should prepare the directors remuneration report for every financial year (Section 234B Companies Act) and should publish this report along with the accounts and annual report of the company (Section 244 Companies Act). The preparation of the remuneration report is done by the board of directors and not by the remuneration committee being, a committee accountable and responsible to the board and consisting only the non executive directors of the company. The remuneration of both the executive and non executive directors is clearly mentioned in the remuneration report. The fully prepared remuneration report should be filed with the registrar of companies (Section 242 Companies Act) and made available and provided to all the parties interested in the company such as the shareholders, debenture holders, and other persons who are required to attend the general meetings (Section 238 Companies Act). The remuneration report should contain all the information regarding the remuneration of the directors for the financial year completed i.e. the relevant financial year which includes disclosure of the amount receivable by the directors, whether paid or not, during the financial year as well as the disclosure of any amount paid as directors remuneration for any other period during the financial year (Companies Act, Schedule 7A, paragraph 19). The remuneration report should include the payments made to a third party for any services provided to the directors (Companies Act, Schedule 7A, paragraph 18(3)) and a statement showing the future remuneration policy of the directors. In UK, only the disclosure of directors remuneration is needed in the remuneration report. The name and information of every person who is the director, during the relevant financial year, has to be mentioned in the remuneration report. The remuneration report contains information that has to be audited by an external auditor (Companies Act, Schedule 7A, Part 3) and information need not be audited (Companies Act, Schedule 7A, Part 3). a) Information in DRR subject to audit: With regards to information subject to audit, the external auditor in his own consent should mention whether the information provided are prepared according to the necessary requirement and if any information is not complied as needed, the auditor should provide a statement showing them (Sections 235 and 237 Companies Act). The auditor will also look into disclosure information that are not subjected to audit and verify them with the company accounts as well as with the disclosure information that are audited. The various information included in the DRR that are subject to audit are: Emoluments and compensation For the services provided to the company as an executive or for any other services relating to the companys management, the salary, bonus, fees or compensation as termination of qualifying services received or receivable by the executives should be disclosed in the DRR. The overall value of non monetary benefits provided to the executives should be mentioned and the total aggregate of each kind of executive compensation provided in the relevant financial year should be compared with the previous financial year (Companies Act, Schedule 7A, paragraph 6). Share Options – The different types of shares options a company have should be mentioned along with their terms and conditions and besides each share option the total option each executive hold in the beginning of the relevant financial year as well as in the end should be disclosed. Detailed information of the various options provided during the year, its date of grant, its exercise price, date of expiry, number that have become void and number exercised and unexercised by the executives should be mentioned. If the share options are subject to any performance condition then the criteria has to be clearly described. For those shares that have been exercised, the market price during the time of exercise and for those shares unexercised ,the highest, lowest and the year end market prices have to be also mentioned. Since the disclosure of share options is a lengthy process, the aggregate of options each director hold is stated and the disclosure can be made on the basis of weighted average exercise pri ces (Companies Act, Schedule 7A, paragraphs 7-9). Long-term incentive schemes – Disclosure of scheme interests at the beginning and end of the current financial year which each executive hold must be made. Details of the type of scheme interest provided to the executives, its value and when it is vested in the year should be mentioned. If there are any conditions on the basis of which scheme interests will be granted then the relevant conditions should be specified (Companies Act, Schedule 7A, paragraphs 10 and 11). Other Information Details of executives pension scheme transfer value, any benefits that are accumulated over time and amount paid or payable by the company towards the money purchase pension scheme and retirement benefit scheme should be mentioned (Companies Act, Schedule 7A, paragraph 12). Amount received or receivable by the executives as benefits over and above the retirement benefit which he is entitled after 31st March 1997 should be included in the DRR (Companies Act, Schedule 7A, paragraph 13). If any person, who was once the executive of the company, has been given a special reward or if any third party is paid for their services provided to the executives during the relevant financial year it should be stated and disclosed (Companies Act, Schedule 7A, paragraph 14 15). b) Information in DRR not subject to audit: The information in the DRR that are not subject to audit is: Remuneration Committee – If any decision regarding the remuneration of the executives is taken by a committee during the financial year then the DRR must contain the name of all the non executive directors who were the members of such a committee and also should mention the name of any other person who is not the member of the committee but has been appointed by the members to assist them with certain services and advice. The details of the services rendered by the outside party should be clearly mentioned and this is done to ensure that the executive director play no role and influence the decision making of the committee (Companies Act, Schedule 7A, paragraph 2). Statement of policy on executives remuneration – A statement of future policy on executives remuneration for the coming financial years has to be included in the directors remuneration report (Companies Act, Schedule 7A, paragraph 3). The statement of policy should therefore disclose the conditions of performance, by an executive, for the entitlement of share option and long term incentive scheme along with the reasons for setting up such performance condition and the method used to assess the performance condition. If any executive fails meet the performance condition and does not benefit from the stock option grant or long term incentive scheme, the report should clearly state the conditions that are unsatisfactory. Details of the company on the basis of which the performance is measured should be provided in the report. Changes or amendments proposed to the existing terms and conditions for executives entitlement should be highlighted. Explanation should also provide for non-performance related remuneration and company policies on executives service contracts. This statement covers all directors from the end of the current financial year till the time when the report is put for voting by the shareholders of the company Performance graph – Publication of preceding 5 years performance graph should be included in the DRR showing the total shareholder return for holding shares whose listing transformed the company into a quoted company and for holding shares on the basis of which calculations are made for a broad equity market index. A fair method is used for the calculation of the total shareholder return along with various assumptions like the interest received on shares being reinvested (Companies Act, Schedule 7A, paragraph 4). Service Contract – During the relevant financial year if any executive is provided with a service contract, the date at which the service contract has been provided, its duration and its terms and conditions should be mentioned in the remuneration report. A detail of the termination compensation the executive is entitled to receive along with the companys liability on early termination is to be included (Companies Act, Schedule 7A, paragraph 5). On the complete preparation of the remuneration report, in the annual general body meeting it is introduced and called for a vote by the shareholders of the company (Section 241A Companies Act). This concept of voting the remuneration report was a controversial topic as many commentators suggested the voting to be limited to only the remuneration policy rather than the whole remuneration report. The reason they point out is that the executives remuneration policies are futuristic in nature so the shareholders can express their opinion on the policies adopted ra ther than making aware of the actual remuneration paid to each individual director. 4.1.2 Other Requirements: a) Along with the preparation of the DRR, disclosure of the aggregate compensation of the executive, loan given to the executives and other company transactions with the executive should be done in the notes of the annual accounts as mentioned in Schedule 6 of the Companies Act. b) As per Section 251 of the Companies Act and Companies Regulations (1995), listed companies in their summary financial statements should as a statement, state its policies regarding the remuneration of executives and the companys performance graph. 5 Stock/Share Options – Are they the Best in an Executive Compensation package? The most prominent and important component of executive compensation, in order to merge the interests of the executives with that of the interests of the shareholders, is providing the executives with stock options in the firms they serve (Jensen and Meckling, 1976). According to Jeffrey A. Williamson and Brian H. Kleiner, A stock option is a security that represents the right, but not the obligation, to buy or sell a specified amount of stocks at a specified price within a specified period of time. Stock options granted to executives of many large multinational firms are much higher in value than the annual cash pay they are entitled to be paid which in-turn boosts up the overall total compensation provided to the executives. This makes stock options the single largest ingredient in the current scenario of executive compensation. In the United States itself, stock options are held by more than 10 million employees (Simon R. and Dugan J., 2001) out of which around 160,000 of them tur ned out to be millionaires (Tate E.A. and Wilson T.E., 2001). Initially stock options were provided as a bonus to all the key executives of a company, but during the recent years its use is restricted only to the top level management. Providing stock options have resulted in increased productivity of the organisations. Executives are aware that their gain is linked with the stock performance of the organisation therefore they strive harder and work more efficiently to achieve progress. The main objective behind granting stock options is to make sure that executive make a profit on the success of the companys operations and in case of failures they suffer. Hence executive stock options link pay to performance. Critics argue to provide shares of stock rather than providing stock options in order to link pay and performance. The value of a stock option is only one third the value of a share, in case of companies having an average volatile stock price and yielding an average dividend the reason being stockholders receiving the whole value along with the dividend payment and the option holders benefitting only from the additional returns that is over and above the exercise price. This implies that options have a greater leverage and at the same cost, a company can provide its executives with options that are three times as much as that of shares. Stock options are incentive plans that are future Executive Compensation and Stock Option in the UK Executive Compensation and Stock Option in the UK 1 Introduction Todays highly competitive world consists of numerous corporations and these corporations are so huge and so large that it cannot be controlled by the people who own them. The control of these corporations is separated from shareholders who are the owners and vested into the hands of professional executives who are specifically hired for its management. This separation of ownership and control gave rise to agency problem or the principal-agent problem. Principal is referred to the stockholders and the agents are the executives who work for the stockholders. Although stockholders are the owners of the company to whom the executives are accountable, their actual powers are restricted except in the case of those corporations where stockholders are also the directors of that corporation. Stockholders have no right to inspect the books of accounts nor are they aware of the exact functioning and position of the firm. As a result, executives tend to work inefficiently without even bothering to look for profitable new investment opportunities, as well as they may use the firms assets for private purposes and also work to achieve their personal goals all at the expense of the shareholders. Some managers do not take any action whatever state or condition the corporation may be as they are risk averse and fear the threat of losing their job if a decision taken by them goes wrong. Therefore in order to avoid the various problems that arise due to the agency problem, executives must be properly and promptly compensated along with proper monitoring. In the beginning of 1990s, debates on corporate governance mainly focused on directors remuneration and fat cats. Fat cats are referred to those executives who provided themselves with huge compensation packages without any performance criteria. In UK, the most famous Fat Cat episode which saddened the shareholders of many large public companies and dragged the attention of the media was the notorious British Gas incident of the mid 1990s. Various issues arising out of executive compensation and the trouble of framing the deserved level of compensation, that has to be provided to an executive, made executive remuneration a main area of concern under corporate governance. According to Jensen (1993), providing the right level of remuneration to the executives and creating positive incentives in order to achieve the interest of the shareholders has been an important study conducted in many academic literatures. An improvement in corporate governance is brought about by filtering certain aspects of executive remuneration. There exists a wide gap between the remuneration paid to the executives and the remuneration paid to the other employees on the company. This gap keeps on increasing year after year as executives demand more and more for their services and decision making process to boosts the productivity and reputation of the firm which thereby increases the market price of the companys share. In a research mentioned in the Higgs Report (2003), chairmen of FTSE 100 companies in 2003 earned an average of  £ 426,000 as remuneration. Moreover, executives are being rewarded with stock options which would enrich them with abnormal profits in the future when the options granted to them are exercised. Critics argue that, executives are not worth for the remuneration paid because of their poor and unsatisfactory performance. According to Blitz (2003), MORI a leading market research company in the UK, through a survey, found 78% of the people unsatisfied by the remuneration paid to the executives. The pu blic in UK believe that executives are being overpaid for the amount of work they actually do. 2 Methodology This paper is a critical review on the various aspects of executive compensation in the UK and how the executive compensation especially the executive stock option encourage the managers and top executives, for their personal benefit, to take short term high risks and boost up the current value of shares rather than looking into the future and acting in favour of the stakeholders of the company. The tools used for the research mainly consist of various literature reviews of past articles and current working papers with some analysis of some statistical data regarding executive compensation. On the basis of the above mentioned area of research certain questions have been framed which will be critically looked into: a) Brief description of the executive compensation and corporate governance in the UK. b) Basic structure of executive remuneration in the UK and their disclosure requirements in United Kingdom. c) Are stock options considered the best means of remuneration in an executive compensation package? d) A brief historical overview of the introduction of executive stock option in the UK. e) What are the various manipulations done with executive stock option and what are the risk incentives created by executive stock option? f) Brief comparison of the UK executive compensation with the US executive compensation. g) The role of executive compensation in the UK banking towards the current financial crises. 3 Executive Compensation and Corporate Governance in the United Kingdom: During the past decade, various issues on corporate governance established the emergence of many reports and codes of best practice in the United Kingdom. These include the Inland Revenue (1988), Cadbury Report (1992), Greenbury Report (1995), Hampel Report (1998), The Combined Code (1998), Hermes Statement on Corporate Governance and Voting Policy (1998), Internal Control: Guidance for Directors on the Combined Code (Turnbull Report)(1999), Company Law Reform (1999) and Financial Services Market Act (2001) (Konstantinos Stathopoulos, Susanne Espenlaub, Martin Walker, 2003). Among these reports the Cadbury Report, Greenbury Report and the Combined Code, which emerged from the Hampel Report, focused on issues regarding executive compensation. 3.1 Cadbury Report (1992): The first guidelines of good practice on various issues of corporate governance were provided in the year 1992 by the Cadbury Committee which was established in May 1991 and was chaired by Adrian Cadbury. The Cadbury Committee discussed issues that were broader in nature than the executive remuneration but certain suggestions the committee made on altering the executive pay was accepted as permanent. The Cadbury report was titled as the Financial Aspects of Corporate Governance and came out with the Code of Best Practice, which insisted that decisions based on executive remunerations should not be made by the executive directors nor they have to get involved in making such a decision (1992, paragraph 4.42 p. 31). The report therefore recommended the appointment of a remuneration committee which will act in the interest of the shareholders of the firm and express a good opinion on various matters regarding executive compensation to the board. Companies in the UK responded spontaneousl y to this recommendation made in the Cadbury Report and established a remuneration committee within the firm (Bostock, 1995). The remuneration committee consists of a non-executive director as the chairperson and non-executive directors as its members who are all independent and free from the influence of the management. According to Williamson (I985), there always arises a question of doubt whether the directors make remuneration contracts for their own huge benefits and sanction it, if an independent pay committee does not exist. The role of remuneration committee is to ensure that executive compensation levels are set up in a formal, transparent way along with the goals required to be achieved by the executives for any schemes that are performance related. The remuneration committee can take advice from outside sources whenever necessary. The Cadbury report also suggested the establishment of an audit committee within each company which comprises of three non-executive directors (Martin Conyon, Paul Gregg and Stephen Machin, 1995). According to a questionnaire survey conducted by Conyon and Mallin (1997), by 1995, 98% of the companies followed the suggestions made by the Cadbury report and has reported the involvement of the remuneration committee in their annual reports. 3.2 The Greenbury Report (1995): Cadbury report failed to provide detailed guidance on how compensation packages have to be structured. However, it pointed out executive compensation to be the main area of study for the next committee known as the Greenbury Committee. The Greenbury Committee chaired by Sir Richard Greenbury, was formed by the United Kingdom Confederation of Business and Industry, and in 1995 it submitted the Greenbury report which dealt with matters regarding the determination and accounting of top executive pay. The main issues discussed in the Greenbury Report includes the role of the remuneration committee in an organisation, the disclosure requirement required by the shareholders of the organisation, the remuneration policies for compensating the executives and the service contracts provided to the executives. The remuneration policies recommended in the Greenbury Report are: a) Compensation packages must be provided by the remuneration committee to quality executives in order to influence, sec ure and encourage them and any payments extra to this intention must be avoided (Greenbury Report Paragraphs 6.5 – 6.7). b) The payments made and the subsequent resulting performance by other companies in the same industry must be evaluated by the remuneration committee. On the basis of this evaluation, the remuneration committee should relatively place their company (Paragraphs 6.11 – 6.12). c) While making changes to the annual salary of the executives, the remuneration committee should look into the payment and employment situations in other areas of the company rather than only concentrating on the executive pay and increasing them so as to satisfy the executives (Paragraph 6.13). d) The part of remuneration that is related to performance should be designed in such a way that the executives incentives go hand in hand with the interest of the shareholders and the executives are motivated to perform their duties with high standards (Paragraph 6.16). e) The performan ce conditions for executives to avail their annual bonuses, if any, should be designed to support and widen the operations of the business. The maximum possible amount of annual bonus an executive can avail should be taken into consideration by the remuneration committee and in some cases a part of these bonus payments can also be made by shares (Paragraphs 6.19 – 6.22). f) Under the long term incentive scheme, the Greenbury Report suggested that the shares and options granted to the executives should neither vest nor be exercisable, at least for a period of 3 years after such grant. The remuneration committee should encourage its executives to keep possession of their shares, after its vesting or exercise, for a long period of time (Paragraphs 6.23 – 6.34). g) The present existing long term incentive scheme should either be replaced by the new incentive scheme proposed or, the new incentive scheme proposed when combined with the old existing scheme should formulate a well structured incentive plan. The remuneration committee should make sure that the new long term incentive plan does not pay in excess than what is actually required for the executives and this new plan is accepted by the shareholders (Paragraph 6.35). h) The criteria for any long term incentive grant should be challenging and the performance of the executives should help achieve the goals set by the company in order to stand out from rest of its competitors. Key variables like the total shareholders return are used to judge the performance of the company with respect to its competitors (Paragraphs 6.38 – 6.40). i) Executive stock option grant or any other long term incentive grant must not be presented in lump-sum but should be awarded in series of stages. Moreover, no discount should be provided to the executives on the issue of executive stock option (Paragraph 6.29). j) While increasing the annual basic salary of the executives, the remuneration committee should look in to the effect of such increase on the executives pension entitlement and on the future expenses of the company particularly in case of those executives who are nearing retirement. The annual bonuses paid or any benefits paid in kind are not entitled for any pension payment (Paragraph 6.42 – 6.45). The aim of the Greenbury Report was not to cut down the executives remuneration but was to establish a balance between the compensation paid to the executives and their respective performance. On publishing the report in 1995 by the Greenbury Committee, certain tax advantages that was permitted on newly issued share options which comes under the approved executive share option scheme was withdrawn by the UK government. A new type of option scheme was introduced in November 1995 which had an upper limit of only  £20,000 on individual option holdings. Further, executive share options whose exercise price was earlier accepted at a discounted price of 15% on the existing share price at the time of grant was prevented (Konstantinos Stathopoulos, Susanne Espenlaub Martin Walker, 2003). According to Conyon (1994) in UK, the top executive director of a company was also made member of its remuneration committee before the launch of the Greenbury Report. However, the old fashioned executive share options schemes was not benefitted from the recommendations made by the Greenbury Committee as it not only seized the tax benefits but also encouraged to substitute options with long term incentive plans which in the UK is just awarding shares and not cash. The recommendations made by the Greenbury Report were not widely accepted as many of the critics believed that the report failed to link the executive pay with the performance of the company. 3.3 The Combined Code (1998): The Combined Code of the London Stock Exchange controls the various remuneration practices adopted by the companies listed in the London Stock Exchange. It has combined the recommendations given by the Cadbury Report and the Greenbury Report in order to form a regulation for efficient remuneration practice. The annual report of the companies listed should contain in a separate section the remuneration policy adopted by the company. The Combined Code requires a statement, in the annual report, showing that the remuneration standards mentioned in the code are being followed by the company and if any set standard is not complied with, the statement should point out the reason for the non compliance. A high level of executive remuneration disclosure is also required under the combined code and clear explanations about the various compensation packages provided to each executive director and non executive director should be stated (Konstantinos Stathopoulos, Susanne Espenlaub Martin Walk er, 2003). 4 Structure of Executive Remuneration in the UK: The typical structure of executive compensation in UK comprise of base salary, annual bonus, share options and long term incentive plans along with certain additional components like restricted stock and retirement plans. In 1997, an average executive compensation package consisted of 54% of base salary, 24% of annual bonus and 22% of non cash items which include share options and long term incentive plans (Martin J. Conyon, Simon I. Peck, Laura E. Read and Graham V. Sadler, 2000). Base Salary Determination of the base salary of an executive is done by taking into consideration the base salaries paid to executives of other companies in the same industry through surveys and analysis. This system of setting up and providing base salary is known as competitive benchmarking. Certain modifications are carried out on the base salary depending on the size of the firm, thereby linking executive compensation and firm size. In UK, base salary form the major part of the total executive remuneration paid. Base salary is that component of executive remuneration which is fixed and do not vary according to the performance, experience, age, etc of the executives. A  £1 increase in the base salary is preferred by executives who are risk averse than a  £1 increase in other components of executive compensation that are variable. Annual Bonus Bonus is provided to the executives on the basis of their performance during the relevant financial year. It is provided on an annual basis and the amounts paid as bonus to each executive vary from year to year. The performance of the executives is generally measured by taking into consideration accounting numbers which can be cross checked and audited. Executives have a clear idea of their daily performance by looking at the accounting numbers and they can forecast how overall profit of the company is going to look like at the end of the year. The drawback of relying on accounting numbers for measuring performance is that it is fully under the control of the executives and if wanted executives can manipulate the accounts in order to increase their annual bonus entitlement. Share Options Share options are contracts provided to the executives that cannot be traded which gives the executives the right to buy the shares of the firm at a price that is pre-determined known as the exercisable price for a specified time period. These contracts become void and have to be surrendered if the exercisable period mentioned has elapsed or if the executive resigns from the company before the exercisable period. This component of executive compensation is looked more into detail in the later section. Long-Term Incentive Plans – Long-Term Incentive Plans are provided to the executives in order to motivate and compensate them for achieving long term performance for the company. Grant of shares is the most typical form of LTIPs provided in the UK. These shares are vested to the executives only on achieving the objectives set by the company that is related to future performance. Earnings per Share and Total Shareholders Return are the two main elements by which the performance of the company is measured in the UK. Retirement Plans – Apart from the basic pension plans provided by the company, in UK, executives are encouraged to participate in an additional retirement benefit plan. These plans are a major source of concern because it symbolises invisible compensation. The actual value of executive retirement plan cannot be calculated by the available information provided in the books of accounts and the annual report. 4.1 Disclosure Requirement of Executives Remuneration in the UK: The Greenbury Report in 1995 identified three fundamental principles, which are accountability, transparency and performance linkage, in respect to executives remuneration. In UK, the current best practice disclosure pattern failed to compile with these fundamental principles therefore the government introduced certain necessary additions to the existing disclosure pattern. These latest requirements regarding disclosure of UK executives remuneration unifies the existing law, regulation and best practices that are mentioned in the UK Companies Act of 1985, the UK Listing Rules and the UK Combined Code of Principles of Good Governance and Code of Best Practice. The new requirement requires every company in the UK to adopt and prepare the directors remuneration report along with other necessary requirements. 4.1.1 Directors Remuneration Report (DRR): Companies listed in the London Stock Exchange should prepare the directors remuneration report for every financial year (Section 234B Companies Act) and should publish this report along with the accounts and annual report of the company (Section 244 Companies Act). The preparation of the remuneration report is done by the board of directors and not by the remuneration committee being, a committee accountable and responsible to the board and consisting only the non executive directors of the company. The remuneration of both the executive and non executive directors is clearly mentioned in the remuneration report. The fully prepared remuneration report should be filed with the registrar of companies (Section 242 Companies Act) and made available and provided to all the parties interested in the company such as the shareholders, debenture holders, and other persons who are required to attend the general meetings (Section 238 Companies Act). The remuneration report should contain all the information regarding the remuneration of the directors for the financial year completed i.e. the relevant financial year which includes disclosure of the amount receivable by the directors, whether paid or not, during the financial year as well as the disclosure of any amount paid as directors remuneration for any other period during the financial year (Companies Act, Schedule 7A, paragraph 19). The remuneration report should include the payments made to a third party for any services provided to the directors (Companies Act, Schedule 7A, paragraph 18(3)) and a statement showing the future remuneration policy of the directors. In UK, only the disclosure of directors remuneration is needed in the remuneration report. The name and information of every person who is the director, during the relevant financial year, has to be mentioned in the remuneration report. The remuneration report contains information that has to be audited by an external auditor (Companies Act, Schedule 7A, Part 3) and information need not be audited (Companies Act, Schedule 7A, Part 3). a) Information in DRR subject to audit: With regards to information subject to audit, the external auditor in his own consent should mention whether the information provided are prepared according to the necessary requirement and if any information is not complied as needed, the auditor should provide a statement showing them (Sections 235 and 237 Companies Act). The auditor will also look into disclosure information that are not subjected to audit and verify them with the company accounts as well as with the disclosure information that are audited. The various information included in the DRR that are subject to audit are: Emoluments and compensation For the services provided to the company as an executive or for any other services relating to the companys management, the salary, bonus, fees or compensation as termination of qualifying services received or receivable by the executives should be disclosed in the DRR. The overall value of non monetary benefits provided to the executives should be mentioned and the total aggregate of each kind of executive compensation provided in the relevant financial year should be compared with the previous financial year (Companies Act, Schedule 7A, paragraph 6). Share Options – The different types of shares options a company have should be mentioned along with their terms and conditions and besides each share option the total option each executive hold in the beginning of the relevant financial year as well as in the end should be disclosed. Detailed information of the various options provided during the year, its date of grant, its exercise price, date of expiry, number that have become void and number exercised and unexercised by the executives should be mentioned. If the share options are subject to any performance condition then the criteria has to be clearly described. For those shares that have been exercised, the market price during the time of exercise and for those shares unexercised ,the highest, lowest and the year end market prices have to be also mentioned. Since the disclosure of share options is a lengthy process, the aggregate of options each director hold is stated and the disclosure can be made on the basis of weighted average exercise pri ces (Companies Act, Schedule 7A, paragraphs 7-9). Long-term incentive schemes – Disclosure of scheme interests at the beginning and end of the current financial year which each executive hold must be made. Details of the type of scheme interest provided to the executives, its value and when it is vested in the year should be mentioned. If there are any conditions on the basis of which scheme interests will be granted then the relevant conditions should be specified (Companies Act, Schedule 7A, paragraphs 10 and 11). Other Information Details of executives pension scheme transfer value, any benefits that are accumulated over time and amount paid or payable by the company towards the money purchase pension scheme and retirement benefit scheme should be mentioned (Companies Act, Schedule 7A, paragraph 12). Amount received or receivable by the executives as benefits over and above the retirement benefit which he is entitled after 31st March 1997 should be included in the DRR (Companies Act, Schedule 7A, paragraph 13). If any person, who was once the executive of the company, has been given a special reward or if any third party is paid for their services provided to the executives during the relevant financial year it should be stated and disclosed (Companies Act, Schedule 7A, paragraph 14 15). b) Information in DRR not subject to audit: The information in the DRR that are not subject to audit is: Remuneration Committee – If any decision regarding the remuneration of the executives is taken by a committee during the financial year then the DRR must contain the name of all the non executive directors who were the members of such a committee and also should mention the name of any other person who is not the member of the committee but has been appointed by the members to assist them with certain services and advice. The details of the services rendered by the outside party should be clearly mentioned and this is done to ensure that the executive director play no role and influence the decision making of the committee (Companies Act, Schedule 7A, paragraph 2). Statement of policy on executives remuneration – A statement of future policy on executives remuneration for the coming financial years has to be included in the directors remuneration report (Companies Act, Schedule 7A, paragraph 3). The statement of policy should therefore disclose the conditions of performance, by an executive, for the entitlement of share option and long term incentive scheme along with the reasons for setting up such performance condition and the method used to assess the performance condition. If any executive fails meet the performance condition and does not benefit from the stock option grant or long term incentive scheme, the report should clearly state the conditions that are unsatisfactory. Details of the company on the basis of which the performance is measured should be provided in the report. Changes or amendments proposed to the existing terms and conditions for executives entitlement should be highlighted. Explanation should also provide for non-performance related remuneration and company policies on executives service contracts. This statement covers all directors from the end of the current financial year till the time when the report is put for voting by the shareholders of the company Performance graph – Publication of preceding 5 years performance graph should be included in the DRR showing the total shareholder return for holding shares whose listing transformed the company into a quoted company and for holding shares on the basis of which calculations are made for a broad equity market index. A fair method is used for the calculation of the total shareholder return along with various assumptions like the interest received on shares being reinvested (Companies Act, Schedule 7A, paragraph 4). Service Contract – During the relevant financial year if any executive is provided with a service contract, the date at which the service contract has been provided, its duration and its terms and conditions should be mentioned in the remuneration report. A detail of the termination compensation the executive is entitled to receive along with the companys liability on early termination is to be included (Companies Act, Schedule 7A, paragraph 5). On the complete preparation of the remuneration report, in the annual general body meeting it is introduced and called for a vote by the shareholders of the company (Section 241A Companies Act). This concept of voting the remuneration report was a controversial topic as many commentators suggested the voting to be limited to only the remuneration policy rather than the whole remuneration report. The reason they point out is that the executives remuneration policies are futuristic in nature so the shareholders can express their opinion on the policies adopted ra ther than making aware of the actual remuneration paid to each individual director. 4.1.2 Other Requirements: a) Along with the preparation of the DRR, disclosure of the aggregate compensation of the executive, loan given to the executives and other company transactions with the executive should be done in the notes of the annual accounts as mentioned in Schedule 6 of the Companies Act. b) As per Section 251 of the Companies Act and Companies Regulations (1995), listed companies in their summary financial statements should as a statement, state its policies regarding the remuneration of executives and the companys performance graph. 5 Stock/Share Options – Are they the Best in an Executive Compensation package? The most prominent and important component of executive compensation, in order to merge the interests of the executives with that of the interests of the shareholders, is providing the executives with stock options in the firms they serve (Jensen and Meckling, 1976). According to Jeffrey A. Williamson and Brian H. Kleiner, A stock option is a security that represents the right, but not the obligation, to buy or sell a specified amount of stocks at a specified price within a specified period of time. Stock options granted to executives of many large multinational firms are much higher in value than the annual cash pay they are entitled to be paid which in-turn boosts up the overall total compensation provided to the executives. This makes stock options the single largest ingredient in the current scenario of executive compensation. In the United States itself, stock options are held by more than 10 million employees (Simon R. and Dugan J., 2001) out of which around 160,000 of them tur ned out to be millionaires (Tate E.A. and Wilson T.E., 2001). Initially stock options were provided as a bonus to all the key executives of a company, but during the recent years its use is restricted only to the top level management. Providing stock options have resulted in increased productivity of the organisations. Executives are aware that their gain is linked with the stock performance of the organisation therefore they strive harder and work more efficiently to achieve progress. The main objective behind granting stock options is to make sure that executive make a profit on the success of the companys operations and in case of failures they suffer. Hence executive stock options link pay to performance. Critics argue to provide shares of stock rather than providing stock options in order to link pay and performance. The value of a stock option is only one third the value of a share, in case of companies having an average volatile stock price and yielding an average dividend the reason being stockholders receiving the whole value along with the dividend payment and the option holders benefitting only from the additional returns that is over and above the exercise price. This implies that options have a greater leverage and at the same cost, a company can provide its executives with options that are three times as much as that of shares. Stock options are incentive plans that are future

Discrimination of the Homosexual Essay

A simple look into the history of mankind and one can quickly conclude, discrimination of the homosexual is, quite possibly, one of the earliest forms of discrimination to exist. Centuries later tolerance, acceptance, and equal rights continue to have a stronghold on the homosexual community, often fueling public debate and strong opposition within Congress, the workplace, and even in the confines of the family dynamic. Discrimination of the homosexual quite possibly has one of the greater disadvantages of all other forms of human discrimination because many would argue, according to the Holy Bible, God, Himself, disapproves. From the earliest chapters of the Bible, such as Leviticus 18:22 (New King James Version) which reads, â€Å"Do not lie with a man as one lies with a woman; that is detestable. †1 to 1 Corinthians 6:9-10 that states, â€Å"Or do you not know that the unrighteous shall not inherit the kingdom of God? Do not be deceived; neither fornicators, nor idolaters, nor adulterers, nor effeminate, nor homosexuals, 10 nor thieves, nor the covetous, nor drunkards, nor revilers, nor swindlers, shall inherit the kingdom of God. â€Å"2 man quickly comes to the conclusion that God clearly sees the homosexual as unacceptable. Therefore, many feel entitled to discriminate against the homosexual community believing if God says it is wrong, one is somehow given permission to act as they are God and carry forth hatred and zero tolerance for the group. However, if one truly studies or reads the Bible, one will find that God detests quite a few things, one being â€Å"hatred†. And, where one may point to a few of these scriptures with regard to homosexuality, the very group tends to forget to include the many other scriptures that support God’s mandate for all to love one another, to forgive one another, and to avoid judgment of all humankind. Discrimination is painful – it stirs hatred, it destroys individuals, families, communities, nations, and the world at large. Discrimination of homosexuals, in particular, has resulted in countless deaths, suicides, assaults, and shattered lives yet this discrimination continues and shows little signs of coming to an end. And, it remains fact that one of the greatest tools many have to show just cause for their hatred and discrimination continues to be the Bible. Often taken out f context, or neglecting to study the historical or geographic reasoning behind various scriptures, entire churches and denominations band together in direct opposition of the homosexual community all while forgetting God’s direct words, â€Å"My command is this: Love each other as I have loved you. † (John 15:12)3 This one scripture is a far cry from God’s permission to allow homosexual discrimination. Yet, many â€Å"Christians† are quick to dismiss the scripture and opt to use the Holy Bible to support displays of hatred and bitterness all while destroying families and contributing to the suicide rate of the world’s youth in alarming numbers. Discrimination can be defined as â€Å"the unjust or prejudicial treatment of different categories of people or things, especially on the grounds of race, age, or sex. †4 Discrimination shows little room for tolerance or a desire for understanding, compassion, or respect for an individual’s right to chose his or her path in life. Discrimination stirs anger and hatred as evidenced by many acts of violence that have taken place for centuries. Discrimination causes individual self-doubt, feelings of hopelessness and lack of security. Discrimination of the homosexual often leaves an individual feeling out casted by everyone; often alienated by his or her very own family. For the young individual facing such scrutiny and hatred, there often seems no way out, especially for those surrounded by others who have lost compassion and a true loving heart. With no one to turn to, no one to fully understand or provide support, many of these youth turn to the unthinkable: suicide. It is a burden and pressure far too overwhelming for many – often much more so when you belong to an organization that feels they’ve been granted biblical permission to target an individual. Such was so in case of young Eric James Borges. Eric James Borges endured a life-long struggle with coming terms with his sexual identity. Feeling â€Å"different† and unlike other boys from the time he was a young child, he quickly learned to suppress his feelings and emotions for fear of others finding out he was a homosexual – a gender identity that had been made clear to him was unacceptable to society, to his family and, above all, to God. But, it wasn’t long into his life where this became difficult to mask, far too overwhelming of a task to keep hidden. His less han masculine mannerisms and attractions to activities associated as girlish made him a quick target. And, soon came harassment. As though not difficult enough to deal with the bullying, emotional and physical abuse of his peers, young Eric’s fundamentalist Christian home provided little by way of a haven from the pain. If anything, the home provided added reinforcement and strengthened Eric’s certainty that something was deeply wrong with him. Unfortunately, the adults in Eric’s life, including his Christian parents, made life dramatically worse for the young man. Growing up in a home where Christian values and standards were strictly enforced, Eric’s parents viewed his sexual orientation as defiant and wrong in the eyes of God. Eric began a life on display, often the subject of family prayer during which time family members would pray for his â€Å"healing† and â€Å"deliverance† from the â€Å"curse† placed on his life. His family, too, endured pressure by many within the church, some accusing the parents of living a sinful life of their own that resulted in the curse. Rather than learn to love their son and support, guide, and encourage him with compassion and loving arms, Eric’s parents succumbed to their own inner insecurities, often applying far more pressure on the youngster and accusing him of choosing an immoral life, at one point calling upon divine intervention: an exorcism. When performing the ritual exorcism with the anticipation of curing him of his cursed sexual orientation failed, his parents chose the next best course of action: demanding he leave the household. Shattered, torn, and disowned, the young Eric found support in a few who showed him love and compassion. He joined and participated in Lesbian, Gay, Bisexual, Transgendered, and Questioning (LGBTQ) groups which introduced him to others who had led difficult lives – some less devastating than Eric’s, but others just as tragic. During this time, he participated in a movement designed to educate and create awareness and provide information to the public that the homosexual life was neither a â€Å"curse† from God neither the demonic lifestyle so often portrayed by many within the world’s churches. Eric became a guest speaker, a young author, a figure among struggling homosexual youth and a noted survivor of a life targeted by discrimination. But, despite all the advances and his personal accomplishments, the damage had been done to Eric. Without the love and support of his family and relatives, with the pain associated with a lifetime of abuse, Eric, could no longer endure his internal suffering. Young Eric James Borges committed suicide January 14, 2012 at age 19 near his hometown of Visalia, California. Discrimination of the homosexual continues, and it must end. But, will it? Consider the recent development in Australia. Prime Minister Julia Gillard has very recently assured religious organizations new rights under a recently-passed bill will ensure they have the freedom to discriminate against those they have deemed â€Å"sinners,† including homosexuals. Under this law schools, hospitals, and faith-based organizations will be able to refuse to hire â€Å"sinners† with minor stipulations. Discrimination by religious organizations throughout Australia has been a long-standing issue and has now only strengthened its case by the passing of this new law. This law, alone, could produce many with the future of Eric James Borges – one that ends in tragedy largely due to people’s harsh, unkind, and inhumane words – words many feel entitled to use because they use God as means to support their hatred. God is a God of love, mercy, and compassion. In His eyes we are equally and beautifully-made, a perfect Masterpiece, a wondrous work. It’s time for this discrimination to end and for us to embrace the homosexual community with love, compassion, understanding and the true Heart of God.

Untold Stories About Irac Essay Samples That You Must Read or Be Left Out

Untold Stories About Irac Essay Samples That You Must Read or Be Left Out IRAC is devoted to prolonging the potency of insecticides and acaracides by countering resistance. Choose the examples below to observe the method by which the IRAC method can be applied to distinct instances. Before you employ the IRAC method you will need to asses the whole legal problem to discover where IRAC should be applied. As an attorney, you will not merely must make arguments you'll also need to anticipate defenses. Rule The rule of thumb is that a promise won't be enforceable unless it's supported with consideration. During interrogation, the person A doesn't answer and won't cooperate. 1 thing we should say right from the start is that you shouldn't decide to play at a casino solely due to the bonuses which are on offer. The New Angle On Irac Essay Samples Just Released In some, it's slightly more obscure. Breaking the bigger IRAC or issue into a more compact IRAC makes it simpler for the grader to grade the exam and also simpler for the student to organize their ideas and produce an analysis that's on point. In exams, it is going to come down to practice, so make sure that you run through as many practice exams as possible to learn the ideal structure for any specific question (exam topics are many times repeated so you can find out what will be on your exam early). You don't need to return to school to prepare for the GED test. There's a discussion of numerous ACADEMIC legal. GED Online permits you to prepare for the GED test by employing online classes and practice tests. This paper will now think about the law regarding acceptance. Citations and extracts from several sources have to be formatted properly. There's a specific procedure of how essays ought to be written. State the consequence of your analysis. Choosing Irac Essay Samples Is Simple For each appropriate fact, you have to ask whether the truth can help to prove or disprove the rule. The words not possible'' indicate that a remote chance of having the ability to finish the contract usually means the rule doesn't apply. The rule ought to be the overall principle that is relevant to the scenario. Again, the acceptable rules are something which you are going to learn in your very first year of contract law. You ought to use the facts to explain the method by which the rule contributes to the conclusion. If you have trouble issue-spotting, the very best thing to do is to thoroughly read the fact pattern when you have written your draft answer to find out whether there are any issues you missed. You will need to reveal your professor that you comprehend the matter, what the rule with that matter is, the way that it would influence the facts at hand, and what the possible conclusion is from that application. Prior to a student can analyze a legal issue, obviously, they have to understand what the problem is. The secret to issue spotting is having the capability to recognize which facts raise which issues. Explicitly say, The problem is whether Note that numerous times, the fact pattern will not offer you any hints about what the issues are. If there are a number of issues, there has to be multiple conclusions also. Your work is to present the ordinary stuff that happens to you in a manner that will produce the reader want to understand you better. A clever professor will often provide you with a set of facts that could go either way to be able to observe how well you analyze an arduous matter. The cost of an essay rides on the quantity of effort the writer has to exert. Our writers make certain all your demands are met to get the standard of papers you want.

Reciprocal Teaching Definition, Strategies, Examples

Reciprocal teaching is an instructional technique aimed at developing reading comprehension skills by gradually empowering the students to take on the role of the teacher. Reciprocal teaching makes students active participants in the lesson. It also helps students transition from  guided  to independent readers and reinforces strategies for comprehending the meaning of a text.   Reciprocal Teaching Definition In reciprocal teaching, the teacher models four comprehension strategies (summarizing, questioning, predicting, and clarifying) through guided group discussions. Once the students are comfortable with the process and the strategies, they take turns leading similar discussions in small groups. The reciprocal teaching technique was developed in the 1980s by  two University of Illinois educators (Annemarie Sullivan Palincsar and Ann L. Brown). Using reciprocal teaching, improvements have been noted in  student reading comprehension in as little as three months and maintained for up to one year. The Highland Park School District in Michigan saw gains of nearly 20% with fourth-grade students and improvement across the board for all students, K-12. The Four Strategies The strategies used in reciprocal teaching (sometimes called the Fab Four) are summarizing, questioning, predicting, and clarifying. The strategies work in tandem to dramatically increase comprehension. Summarizing Summarizing is a vital, though sometimes challenging,  skill for readers of all ages. It requires that students use a summarizing strategy to  pick out the main idea and key points of the text. Then, the students must put that information together in order to concisely explain the meaning and content of the passage in their own words. Start with these summarizing prompts: What is the most important part of this text?What is it mostly about?What happened first?What happened next?How did it end or how was the conflict resolved? Questioning Questioning the text helps students develop critical thinking skills. Model this skill by asking questions that encourage students to dig deep and analyze, rather than summarize. For example, prompt the students to consider why the author made certain stylistic or narrative decisions. Start with these prompts to encourage students to question the text: Why do you think†¦?What do you think†¦?When [specific incident] happened, how do you think†¦? Predicting Predicting is the skill of making an educated guess. Students can develop this skill by looking for clues in order to figure out what will happen next in the text, or what the storys main message will be. When studying a non-fiction text, students should preview the text’s title, subheadings, bold print, and visuals such as maps, tables, and diagrams. When studying a work of fiction, students should look at the book’s cover, title, and  illustrations. In both instances, the students should look for clues that help them predict the author’s purpose and the topic of the text. Help students practice this skill by giving open-ended prompts that include phrases like I believe and because: I think the book is about†¦because†¦I  predict I will learn†¦.because†¦I think the author is trying to (entertain, persuade, inform)†¦because... Clarifying Clarifying involves using strategies to understand unfamiliar words or complicated texts as well as self-monitoring to ensure overall reading comprehension. Comprehension problems may arise due to difficult words in the text, but they can also result from students being unable to identify the main idea or key points of the passage. Model clarifying techniques such as rereading, using the glossary or a dictionary to define difficult words, or inferring meaning from context. Additionally, show students how to identify problems with phrases  such as: I didn’t understand the part†¦This is difficult because†¦I am having trouble†¦ Example of Reciprocal Teaching in the Classroom To better understand how reciprocal teaching works in the classroom, consider this example, which focuses on The Very Hungry Caterpillar by Eric Carle. First, show students the book cover. Read the title and author’s name out loud. Ask, â€Å"What do you think this book is going to be about? Do you think the author’s purpose is to inform, entertain, or persuade? Why? Next, read the first page out loud. Ask, â€Å"What kind of egg do you think is on the leaf? What do you think will come out of the egg?† When the caterpillar eats all of the food, pause to determine if the students need any clarification. Ask, â€Å"Has anyone eaten a pear? What about a  plum? Have you ever tried salami?† Later in the story, pause to find out if the students know the word cocoon. If not, help the students infer the words meaning from the text and pictures.  Ask them to predict what will happen next. Finally, after finishing the story, guide the students through the summarizing process. Help them identify the main idea and key points with the following questions. Who or what is the story about? (Answer: a caterpillar.)What did he do? (Answer: He ate more food every day. On the last day, he ate  so much  food he had a stomach ache.) Then what happened? (Answer: He made a cocoon.)Finally, what happened at the end? (Answer: He came out of the cocoon in the form of a beautiful butterfly.) Help students turn their answers into a concise summary, such as, â€Å"One day, a caterpillar started eating. He ate more and more every day until he had a stomach ache. He made a cocoon around himself and, two weeks later, he  came out of the cocoon as a beautiful butterfly. As students become  comfortable with these techniques, ask them to take turns leading the discussion. Make sure that every student has a turn leading the discussion. Older students who are reading in peer  groups can begin taking turns leading their group.