Collibration as an alternative regulatory approach for remuneration governance: A contextual analysis of Australia

This article seeks to explore the potential of the process of collibration as it applies to the development of controls on the remuneration levels and arrangements for corporate directors in Australia. The study is guided by the research question ‘what approach should be adopted in developing a regulatory framework for corporate governance that aligns state regulation designed to protect shareholder interests with market oriented self-regulation?’ Corporate governance, being a social practice that is shaped by conflicting interests, calls for a flexible approach to its regulation. Drawing on the concept of ‘collibration’, which reconciles tensions between opposing forces – such as the principals and agents, we demonstrate how its application in Australia led to the development of a regulatory framework comprising a mix of state regulation and self-regulation to accommodate conflicting interests in the social practice of corporate governance. Collibration takes us away from the traditional dichotomy in this area, of self-regulation versus state regulation, and seeks to describe the process of balancing persuasive as well as mandatory controls, in an attempt to seek the optimum position in the regulation and governance of executive rewards. Focusing on the specific issue of improving disclosure of director and executive remuneration, we illustrate how development of a mix of state regulation and self-regulation was an application of collibration. By operationalising the concept of collibration we demonstrate its application in a regulatory setting in Australia, balancing tensions in principal- agency relationship. Our study highlights the need for priming of the social arena by an active engagement of conflicting market forces before introducing state-based legislation. For practitioners, it implies that caution should be applied when confronted with decisions about whether or not to reject government efforts for improving corporate governance.