QUESTION 1 (continued) BACKGROUND Steinhoffs (SHs) remuneration policy (2016) General information Steinhoff (SH) required that all its employees be fairly rewarded for their contributions to achieving the operating and financial performance targets of the business. SH aimed to remunerate all its employees in a competitive manner to attract and retain individuals with the necessary competency levels. A robust remuneration review process was in place, which was aligned with the strategy of SH. SHs managerial remuneration policy The remuneration for managing directors consisted of a base salary, a performance-related

incentive bonus, retirement contributions, medical scheme membership, and participation in long- term incentive schemes.

A significant portion of the remuneration of senior managers was performance related because their remuneration was directly linked to challenging financial performance targets. The target for long-term incentives was guided by industry benchmarks. The design of long-term incentives had to be conservative so as not to put the investments of the stakeholders of SH, or the sustainability of SH, at risk. REQUIRED: 1.5 Discuss whether it was ethical for Steinhoff to link its remuneration policies to its financial performance targets in the manner as stipulated in the background given above. Discuss four points, with applicable examples in support of your discussion, and conclude. Consider, for example, the advantages/disadvantages of linking individual performance appraisals with the financial performance targets of the business. How does an incentive-based remuneration policy align with any of the principles mentioned in the Conceptual Framework for

Ecological Economics as developed by Capra and Jakobsen? Consider whether incentive- based remunerations could encourage the manipulation of financial information.