This study examines the role of three institutional factors (regulative; normative and cultural-cognitive pillars of institutions) in addressing agency problems of Australia. In the wake of the series of corporate collapses of current decade, director and executive remuneration was identified as one of the major causes behind these scandals. The Australian government and other related organisations made both regulative and non-regulative institutional reforms to manage this agency conflict. These reforms, encapsulated in Corporate Law Economic Reform Program (CLERP) Act 2004 demanded an increased level of disclosure of director and executive remuneration particularly, the disclosure of performance based salary. Subsequently, these amendments provided an opportunity through a non-binding vote to shareholders to participate in executive remuneration decisions. This study proposes a new synthesis of institutional and agency theories by examining how institutional interventions addresses agency conflicts in the Australian context. A conceptual model is developed to measure both the conjoined and distinctive institutional impact on the disclosure level of director and executive remuneration in Australia. To measure and quantify the aforementioned impact a mixed method research strategy was used. First, content analysis as an investigative tool was used to develop a disclosure index which determined the level of disclosure of director and executive remuneration from top 100 Australian listed entities. Second, a conceptual model, positing the relationships between independent and dependent variables was verified through an econometric analysis of collected data, performed through the Statistical Package for the Social Sciences version 15. The findings of this research reveal that there exists a significant difference between the levels of disclosure in the pre and post stages of the introduction of the CLERP Act 2004. This result highlights the significance of regulatory intervention in addressing agency conflicts. The study also indicates that regulative and normative pillars have a higher impact than the culture-cognitive pillar on disclosure practices of Australian firms. In light of these results, the new blend between agency and institutional theories highlight the role of different institutions, particularly the government, in stabilising the organisational practices for good governance and creating national competitive advantages.
| Identifer | oai:union.ndltd.org:ADTP/225773 |
| Date | January 2008 |
| Creators | Riaz, Zahid, Organisation & Management, Australian School of Business, UNSW |
| Publisher | Publisher:University of New South Wales. Organisation & Management |
| Source Sets | Australiasian Digital Theses Program |
| Language | English |
| Detected Language | English |
| Rights | http://unsworks.unsw.edu.au/copyright, http://unsworks.unsw.edu.au/copyright |
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