Advanced Treasury Management

Many companies around the world normally have at least two schemes; an executive share option scheme to certain sections of management, including executive directors and an employee scheme to employees (Egginton et al., 1993). Now, UWA plc is introducing an executive share option scheme offered to all middle managers of the company by replacing with the existing bonus scheme based on performance. First, the executive share option scheme and the bonus scheme would like to be defined. Executive share option scheme is defined as the arrangement in which directors, including executive directors and senior managers, are given the opportunity to purchase the shares of company at a fixed price at the future date (Chopin, 2000). Bonus scheme is also an incentive scheme for all employees, senior managers and directors of a company which is a payment for employee’s performance (Hassink & Koning, April 2009).

Question 1 (a)

According to the schemes of UWA plc; the existing bonus scheme and the proposed share option scheme, both of these schemes have the relative benefits for the company. First, these two schemes focus on gaining the full efforts of employees, including directors, middle level managers, supervisors and employee to get their effective and efficient performance for the company (Baiman & Rajan, October, 1995). When the employees are interested in these schemes, then they are going to work hard to get high returns more than their salaries. As they can be motivated by using these schemes as incentives, they would like to try to be better for higher returns on their performances. Consequently, the company can get high productivity from their better performances and also generate more profits (Bandiera et al., 2007). As increasing employees’ hard work, the core objective of the company that is mostly to generate many profits can be reached.

In addition, the main merit of these two schemes for the company is aligning the objectives of company and middle...