A hybrid of state regulation and self-regulation for remuneration governance in Australia

Abstract

Purpose This paper aims to explore an alternative approach to regulation for addressing governance problems relating to director and executive remuneration in publicly listed firms. The author investigates the development of hybrid regulatory framework, composed of state regulation and self-regulation, for remuneration governance in Australia. Design/methodology/approach The synthesis of constructs borrowed from agency and institutional theories and its contextual analysis examines the effectiveness of formal (state regulation) and informal (self-regulation) institutions for the development of a hybrid of regulation. Thereafter, the author examines the impact of hybrid regulation on remuneration disclosure behavior in Australia. Findings The author finds that improvement in disclosure is primarily driven by the establishment of remuneration committees and separate role of chief executive officer (CEO) and chairperson but weakened by the presence of CEO at remuneration committee and presence of remuneration consultant. Originality/value Global crises have called for greater transparency and protection of investors through state regulation alone. However, corporate governance, being a social practice that is shaped by diverse interests, calls for a holistic approach. A useful contribution of this study is that through an in-depth examination into the stages and actors of the government interventions involving the balancing of tension between conflicting forces, it provides insights for developing an effective regulatory hybrid which has greater acceptance for corporate governance. In conclusion, it implies the significance of priming the social arena through active engagement of diverse market forces prior to introducing state regulation.

Understanding self‐regulation for political control and policymaking: Effects of governance mechanisms on accountability

“…Third, the study responds to calls in literature to analyze laws and self‐regulation more synergistically (Aragon‐Correa et al, 2019; Kirkbride & Letza, 2004; Riaz, 2016). In the context of SOEs, the complementary adoption of both self‐regulation and law has the strongest effects on agents' behavior and awareness, which provides empirical support for the employment of both governance mechanisms.…”

“…Several studies in leading journals deal with self‐regulation, focusing on its effects for the context of private, mainly listed, firms (Mensi‐Klarbach, Leixnering, & Schiffinger, 2019; Riaz, 2016) and non‐profit organizations (Perego & Verbeeten, 2015) providing mixed results (Aragon‐Correa, Marcus, & Vogel, 2019). These studies examine the effects of self‐regulation on firms' disclosure (Nowland, 2008; Perego & Verbeeten, 2015; Point & Tyson, 2007; Riaz, 2016), firms' compliance and market reactions (Hooghiemstra & van Ees, 2011), and firms' strategies and performance (Aragon‐Correa et al, 2019). However, no empirical study has analyzed the effects of self‐regulation in the special public sphere of SOEs.…”

The Mediating Effects of Procedural Justice on the Relationship between Performance-based Remuneration Management and Job Satisfaction

“…employees) directly (Schwab 2017). This situation has changed the way organizations reward their employees who are considered competent in accordance with the sophistication of technology used by the organizations (Antonietti, Antonioli & Pini 2017;Riaz 2016). Based on the Research Institute of Economy, Trade & Industry, adoption of performance-based remuneration among Japanese organizations shows a significant increase of 30% since 2000.…”

“…Conversely, how procedural justice acts as an important mediating variable and its effect size in the relationship between management of performance-based remuneration with job satisfaction classification have not been emphasized in the above studies (Heffernan & Dundon 2016;Tremblay & Landreville 2015). As a result, the research outcomes produced only general recommendations and this may not be sufficient to be used as useful guidelines by practitioners in understanding the complexity of performance-based remuneration construct and drawing innovative human resource policies for organizations to become the employer of choice in this era of the fourth industrial revolution (Antonietti et al 2017;Riaz 2016;Schwab 2017;Takao & Kodaman 2015).…”

Governance of director and executive remuneration in leading firms of Australia

“…However, little evidence is forthcoming to demonstrate the effect of such a mix on corporate governance practices, including disclosure behaviour relating to director and executive remuneration. Further, with the exception of a handful of studies (Ford, 2010;Riaz, 2016;Smith, 2004;Verbruggen, 2009), little attention has been given to design and applied governance outcomes.…”