Executive Remuneration Practices in Australia and Indonesia

The assignment discusses the concept of executive remuneration, its key components, and similarities and differences between Australia and Indonesia. It also touches on issues of concern and recommends a way forward for proper executive remuneration practices.

Executive Remuneration 1
Executive remuneration in Australia and Indonesia
Name of Student
The Name of the Class (Course)
Professor (Tutor)
The Name of the School (University),
Location (City)
Date Due

Executive Remuneration 2
Outline
This is a study of current executive compensation practices in Australia and Indonesia.
First, the study demystifies executive remuneration and its key components. This paper then
focuses on the similarities and differences of the practice in the two countries, pointing out issues
of concern and carefully recommending on the way forward.

Executive Remuneration 3
Contents
Outline.........................................................................................................................................................2
Executive remuneration in Australia and Indonesia....................................................................................4
Definition of executive remuneration.........................................................................................................4
Similarities and differences in executive compensation between Australia and Indonesia.........................5
Discussion....................................................................................................................................................6
Recommendation........................................................................................................................................6
References...................................................................................................................................................7

Executive Remuneration 4
Executive remuneration in Australia and Indonesia.
Definition of executive remuneration.
This is the total payment received by a manager or a CEO of an organization for the services
or work that they do for an organization. This includes but not limited to basic salary, bonuses
and other benefits which may not come in monetary form.
Executive remuneration in both countries have the following basic components.
1. Salary
2. Insurance
3. Long-term incentives plans
4. Paid expenses
5. Short-term incentives
6. Benefits.
Compensation is key when it comes to motivation. For the executive employees, the first way of
making them feel recognized is through proper compensation. This is because they are the image
of the organization. They are also entrusted with making decisions that can either make or break
the organization. According to Aicd.companydirectors.com.au. (2018), a good compensation
package for executive employees, therefore, goes a long way in ensuring that they perform their
duties with enthusiasm.

Executive Remuneration 5
Similarities and differences in executive compensation
between Australia and Indonesia.
Similarities Differences.
1. In both countries, there has been a
steady growth in executive
remuneration over the years. This
shows that executive pay is becoming
a pivotal issue among the top
companies in both countries.
2. In both countries, executive
compensation includes both monetary
and non-monetary benefits. However,
these differ according to the individual
company capabilities.
1. In Australia, shareholders have a
greater power since they can
determine the remuneration for
executive employees through a non-
binding vote. In Indonesia,
Shareholders of companies decide on
executive remuneration based on the
profits of the organization.
2. Australia has aligned its executive pay
structures to suit the current global
trends. This means that their models
focus on attracting the best personnel
to improve company gains. In
Indonesia, there is an inclination to the
traditional model of fixed payments
and base salary.

Executive Remuneration 6
Discussion
Executive remuneration has been surrounded by a lot of controversies, majorly on the issue of
excessive payments. This has called for watchdog organization like the Australian Securities and
Investments Commission to regulate executive compensation. This has been through ensuring
that corporates disclose their executive pay models. Haygroup.com., 2018, argues that in
Indonesia, Expert groups have advised all components in the pay model should have clear
purposes which are well communicated to all key stakeholders in organizations. Both the long-
term incentives and short-term incentives included in the pay structures should be meaningful.
According to a report done by the Australian Government Productivity Commission in 2008-
2009 FY, published as an inquiry report at Pc.gov.au. (2018) , there was a notable difference
between pay for the top 20 CEOs and their counterparts from the smallest listed companies.
Recommendation.
Proper executive remuneration can be achieved by ensuring that key factors are considered while
designing compensation structures. These range from ensuring that all risks related to executive
jobs are factored in and stepping up to global competition as well.
For smooth operations, companies should focus on recruiting remuneration consultants or
establishing independent remuneration committees (staff 2018). On the other hand,
organization’s boards should be held accountable for their decisions on matters remuneration.
Shareholders should also be adequately engaged when dealing with executive remuneration.

Executive Remuneration 7
References.
Aicd.companydirectors.com.au. (2018) Director remuneration. [online] Available at:
http://aicd.companydirectors.com.au/resources/all-sectors/director-remuneration [Accessed 20
Mar. 2018].
Haygroup.com. (2018) Hay Group Indonesia - Executive Remuneration Forum. [online]
Available at: http://www.haygroup.com/id/press/details.aspx?id=33146 [Accessed 20 Mar.
2018].
Pc.gov.au. (2018) Inquiry report. [online] Available at:
https://www.pc.gov.au/inquiries/completed/executive-remuneration/report [Accessed 20 Mar.
2018].
Staff, I. (2018) Remuneration. [online] Investopedia. Available at:
https://www.investopedia.com/terms/r/remuneration.asp [Accessed 20 Mar. 2018].