ACC8000 RESEARCH IN ACCOUNTING PRACTICE
ASSIGNMENT 3; SEMESTER 1 2019
UNIVERSITY OF SOUTHERN QUEENSLAND
Answer to Question no 1 (A)
Agency theory is considered one of the principles that is used in explaining as well as resolving
issues regarding the relationship between business principals and the agents of business
principals. In normal business structure, the relationship of stakeholders is considered as
principals and the relationship of business executives is considered as agents. On the other hand,
executive compensation can be termed as the remuneration packages that have been developed
for business leaders, senior management, and employees of an organisation. There is a close
connection between the agency theory and the executive compensation. Structuring executive
compensation requires ensuring several issues associated with on-target earnings, base-variable
split, plan goals, and measurement period (Kolb, 2012). All these things are associated with the
relationship between the stakeholders and the employees of the organisation. In order to structure
executive compensation, the agency theory suggests that the interests of the stakeholders of the
organisation have to be aligned with the interest of the executives of the same organisation. And
there are many ways of ensuring that. But the most effective one would be the executive
compensation to be tied to the overall output of the organisation.
Answer to Question no 1 (B)
The study of Yusuf et al. suggested that the agency theory should be reconsidered in the
developing countries. All the observations and data were driven from Pakistan in order to draw
the results. The authors investigated whether the agency theory has the ability to explain the
agency conflict in terms of developing countries. Upon utilizing data from a different semi-
structured interview, the authors have found that in Pakistan, there are no noticeable variations
regarding the risk preferences of either the minority stakeholders or the majority stakeholders.
Yusuf et al. presented an argument regarding the less effectiveness of agency theory in terms of
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, determining executive compensations in developing countries. The authors have suggested that
the policymakers have to shift all their focus from the light internal governance mechanism of
board independence and proper remuneration. Yusuf et al. further proposed for the rigorous
external audit function, external audit firms by the regulators of the organisation. Besides, they
have also suggested that the appointment of the independent directors has to be ensured. These
were the main arguments found by the authors as they have found out that board independence as
well as the remuneration packages tend to be less effective tools in terms of governing owner-
managers in Pakistan. They suggest this is also applicable to the developing countries.
Answer to Question no 1 (C)
The Hofstede Insights website allows comparing the differences in scores between two countries
on many aspects. In this section, the comparison would be made regarding the uncertainty
avoidance and the long term orientation between Australia and Pakistan.
Looking at Australia, the uncertainty avoidance score is 51. The score is very intermediate on
this dimension of Australia. The term uncertainty avoidance can be referred to as the way a
culture differs on the amount of tolerance they have got regarding unpredictability. Looking at
the score it can be said that amount of tolerance is not so great of Australia.
Now in the same category, Pakistan scores much better than Australia with a score of 70. It
indicates that the country has a high preference to avoid uncertainty (Shirokova et al., 2016).
They maintain a rigid code of behavior and belief. They are also very much intolerant of any
kind of unorthodox ideas or behavior.
If the category of long term relation is assessed, the score of Australia is 21 which seems to be
pretty much below average. This dimension points out the ways a society needs to maintain links
with their past at the same time dealing with all the challenges of both the present and future.
The score of Australia shows that it has a quite normative culture where the people tend to have
strong concerns in establishing the truth.
In the same category of long term orientation, the score of Pakistan is 50 which happens to be
more than double the score of Australia. With such a high score it cannot be said that the culture
of Pakistan does not indicate a preference.
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ASSIGNMENT 3; SEMESTER 1 2019
UNIVERSITY OF SOUTHERN QUEENSLAND
Answer to Question no 1 (A)
Agency theory is considered one of the principles that is used in explaining as well as resolving
issues regarding the relationship between business principals and the agents of business
principals. In normal business structure, the relationship of stakeholders is considered as
principals and the relationship of business executives is considered as agents. On the other hand,
executive compensation can be termed as the remuneration packages that have been developed
for business leaders, senior management, and employees of an organisation. There is a close
connection between the agency theory and the executive compensation. Structuring executive
compensation requires ensuring several issues associated with on-target earnings, base-variable
split, plan goals, and measurement period (Kolb, 2012). All these things are associated with the
relationship between the stakeholders and the employees of the organisation. In order to structure
executive compensation, the agency theory suggests that the interests of the stakeholders of the
organisation have to be aligned with the interest of the executives of the same organisation. And
there are many ways of ensuring that. But the most effective one would be the executive
compensation to be tied to the overall output of the organisation.
Answer to Question no 1 (B)
The study of Yusuf et al. suggested that the agency theory should be reconsidered in the
developing countries. All the observations and data were driven from Pakistan in order to draw
the results. The authors investigated whether the agency theory has the ability to explain the
agency conflict in terms of developing countries. Upon utilizing data from a different semi-
structured interview, the authors have found that in Pakistan, there are no noticeable variations
regarding the risk preferences of either the minority stakeholders or the majority stakeholders.
Yusuf et al. presented an argument regarding the less effectiveness of agency theory in terms of
1 | Page
, determining executive compensations in developing countries. The authors have suggested that
the policymakers have to shift all their focus from the light internal governance mechanism of
board independence and proper remuneration. Yusuf et al. further proposed for the rigorous
external audit function, external audit firms by the regulators of the organisation. Besides, they
have also suggested that the appointment of the independent directors has to be ensured. These
were the main arguments found by the authors as they have found out that board independence as
well as the remuneration packages tend to be less effective tools in terms of governing owner-
managers in Pakistan. They suggest this is also applicable to the developing countries.
Answer to Question no 1 (C)
The Hofstede Insights website allows comparing the differences in scores between two countries
on many aspects. In this section, the comparison would be made regarding the uncertainty
avoidance and the long term orientation between Australia and Pakistan.
Looking at Australia, the uncertainty avoidance score is 51. The score is very intermediate on
this dimension of Australia. The term uncertainty avoidance can be referred to as the way a
culture differs on the amount of tolerance they have got regarding unpredictability. Looking at
the score it can be said that amount of tolerance is not so great of Australia.
Now in the same category, Pakistan scores much better than Australia with a score of 70. It
indicates that the country has a high preference to avoid uncertainty (Shirokova et al., 2016).
They maintain a rigid code of behavior and belief. They are also very much intolerant of any
kind of unorthodox ideas or behavior.
If the category of long term relation is assessed, the score of Australia is 21 which seems to be
pretty much below average. This dimension points out the ways a society needs to maintain links
with their past at the same time dealing with all the challenges of both the present and future.
The score of Australia shows that it has a quite normative culture where the people tend to have
strong concerns in establishing the truth.
In the same category of long term orientation, the score of Pakistan is 50 which happens to be
more than double the score of Australia. With such a high score it cannot be said that the culture
of Pakistan does not indicate a preference.
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