UNAIR NEWS聽鈥 The 7th聽International Conference and PhD Colloquium for Economic and Business聽(ICEB) took place on Wednesday, September 4, 2023, in the Fajar Hall,聽聽Building, Dharmawangsa-B Campus,聽东京热 (UNAIR).聽Some academics from several countries also attended this event.聽A Canadian academic, Johnny Jermias PhD from聽, was present as a speaker.聽His presentation was about Compensation Equity and Sustainable Performance: The Effect of Governance Structure.
In his presentation, Johnny revealed that inequality in the industrial world is getting worse due to rising CEO salaries and decreasing worker wages. Thus, equal compensation is very important for sustainability.
鈥淭he pay gap聽between CEOs and workers can lead to negative reactions for this injustice.聽For example, employees who are dissatisfied with their compensation tend to express negative attitudes.聽Of course, this will lead to poor service and production,鈥 said the Canadian academic.
Increase transparency
Furthermore, Johnny said that in response to social injustice in the United States, the Senate enacted the Dodd-Frank Act of 2010.
鈥淎s a follow-up, in 2013聽the Security and Exchange Commission聽also issued a guideline recommending that companies listed on the聽New York Stock Exchange聽need first to disclose the median total compensation of workers excluding the CEO, CEO compensation and the ratio,鈥 he explained.
鈥淪o you can read the ratio between CEO salary and worker salary. So you can immediately see the main purpose of this law. The Dodd-Frank Act is to increase transparency,鈥 continued Johnny.
Johnny hoped that this policy can increase company transparency, make companies more careful when raising CEO salaries, and pay constant attention to employee salaries.
According to Johnny, the salary gap indicates a company has an ineffective governance structure. However, this pay gap is also likely to be used to attract talented CEOs who can manage the company well. However, it is necessary to provide incentives to the executor.
鈥淪o a salary gap is a good thing from this perspective because it attracts, retains good talent, and also motivates managers to compete so that they can progress and their compensation will be much more effective,鈥 said Johnny.
Pay attention to other aspects
Apart from聽the pay gap,聽paying attention to other aspects in achieving work balance is also necessary.聽According to Johnny, the company鈥檚 survival depends on the main stakeholders, not just shareholders.
鈥淔or example, customers. If they are not happy, they won鈥檛 buy that company鈥檚 products again, right? If you have a bad relationship with the government or the authorities, the government may interfere with your operations. Or maybe they will oversee your operations. Moreover, this may harm your performance,鈥 he said.
According to Johnny, shareholders will benefit when the company pays attention to key stakeholders, such as business opportunities and access to capital costs. (*)
Author: Aidatul Fitriyah
Editor: Binti Q Masruroh
