FSR Forum jaargang 13, editie 3 by Eefke van der Meer

13th Volume April 2011 issue #3

Diversity Interview Else Bos Member Executive Committee PGGM

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Column Prof. dr. S.G. van der Lecq Diversity as opportunity

p33

Active Members Weekend 2011 Liverpool A weekend to remember

p 47

Ondernemers helpen groeien met jouw cijfermatig inzicht?

Financieel talent Sta jij aan het begin van een carriĂ¨re als accountant of fiscalist? Dan is het goed om jezelf af te vragen waar jouw financieel inzicht het best tot zijn recht komt. Bij Baker Tilly Berk controleer je niet alleen het verleden, maar adviseer je ook over de toekomst van een bedrijf. Baker Tilly Berk combineert een landelijke aanwezigheid en een internationaal netwerk met kleinschalige kantoren dichtbij onze klanten. Die jij al snel persoonlijk kunt adviseren. Je werkt bijvoorbeeld mee aan de uitbreiding van een transportonderneming, de fusie van twee bedrijven of een audit in de publieke sector. Om ondernemers te helpen groeien zoeken we medewerkers die zelf ook ondernemend zijn en zich continu willen ontwikkelen. Denk jij dat de rol van adviseur bij jou past? Dan hebben we voor jou ook een goed advies: werkenbijbakertillyberk.nl.

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ACCOUNTANTS EN BELASTINGADVISEURS

fsrforum • volume 13 • issue #3

Diversity

Preface

Dear reader, You are holding the third edition of this year’s FSR Forum in your hands and with a total of five FSR Forum editions a year it means that we are more than halfway through another year of the Financial Study association Rotterdam. The theme of this FSR Forum edition is linked to the theme of this year’s International Research Project which is heading to Singapore and Kuala Lumpur. For this year, the IRP committee chose a very broad theme: Diversity. For the participants of the International Research Project the theme is kept very broad, but the participants can specify the theme in the way they want to specify it in their own research The theme of this edition is Diversity, as already said, in the spectrum as broad as you can image. For example, you can find an interesting interview in this FSR Forum. Drs. Else Bos was willing to share her view on the subject. Drs. Else Bos is Chief Institutional Business and deputy CEO of PGGM (pension fund for employees in the healthcare sector) and besides that she is member of the supervisory boards of the following companies: AlpInvest, De Nederlandse Waterschapsbank, Prismant Holding and Amvest. This woman, ranked 8th in the top-100 most powerful business women in the Netherlands, answered questions about diversity. As you could expect, in the broadest spectrum of this editions theme. We asked her questions about the percentage and necessity of women in the board of directors, but also about the long run diversity of the asset portfolio of PGGM. In this issue, you can also find some interesting articles about diversity. One of the articles is about diversity within the accounting sector. Many of our members and business partners have affinity with accountancy, so it is a very interesting article to read. The main thing that will be discussed in the article is the diversity of accounting principles within Arab and Islamic countries in particular. Muiz Alia and Joël Branson analyzed differences in accounting policies in several Islamic countries. The output will help to harmonize the international accounting standards. The next article is about differences in politics in Asia and especially in China. The writers discuss opinions about the survival of divers companies in the Asian market. They zoom in on the ‘Political Embeddedness’ and how it facilitates or hinders the development of capitalistic structures in the Asian Markets. The third article is about gender and ethical diversity. Many business organizations have a growing percentage of diversity in gender and background within their company. This article about so called “lower-status” groups, such as women and minority ethnic groups will review the aspect that the percentage of those lower-status groups within companies is increasing, but not through the whole company. The article describes the limited access that those groups have to develop their careers. Due to ‘glass ceilings’ it is difficult for those groups to become executives or board members. In the previous issue we introduced the returning column from an employee of the Erasmus University. Hence the fact that the subject of this issue is diversity, we asked Prof. dr. S.G. (Fieke) van der Lecq to write an interesting column about the topic and the way she thinks about it. Prof. dr. S.G. (Fieke) van der Lecq gives her opinion about diversity, since she thinks that there are equal opportunities for everybody. But minority groups, for example groups

2 • Preface

based on gender, ethnic backgrounds or body size, should exploit the opportunities they get, to move from equal opportunities to equal outcomes. Looking forward to the upcoming FSR activities with the theme of this issue in my mind, I would like to give some special attention to the FSR Female Business Tour. This event will be organized for the first time this year. It will be a special event for all female students in the Netherlands who are interested in finance. In two days we will visit four interesting companies who recognize the importance of motivated women in their companies. During the two days we will visit Aegon, Heineken, TNT Post and The Boston Consulting Group, between the visits we will have a company dinner and we will stay at a business hotel in the heart of Amsterdam. The goal of this event is to look inside the participating companies, during the two days you will get a good view of the activities of the companies, you will find out why women are a necessity in business and during the company dinner you can get to know the companies in an informal way. As you can read in this preface, diversity is a very broad theme. The FSR also thinks about diversity, within the events we organize and the people we invite to join a committee. The FSR gives you a good opportunity to put some diversification into your life as an academic student. At the FSR you can organize or participate in many events and you can even think of applying for a year in the FSR Board. I hope you will enjoy reading this edition of the FSR Forum and I wish to see you at some of our activities. Sincerely, Kim de Vries Editor in chief FSR Forum FSR board 2010-2011

× Preface • 3

fsrforum • volume 13 • issue #3

Diversity

Table of contents

Environmental factors and accounting diversity Muiz Alia & Joël Branson Accounting diversity refers to the differences that exist between the characteristics of the ﬁnancial reporting frameworks used in different countries. This diversity appears as a result of differences in the factors that affect the development of ﬁnancial reporting frameworks. The accounting literature presents several factors that cause this diversity. These factors are mainly related to environmental factors. p6

Women in top management and their impact on ﬁrm performance: The Indonesian evidence Salim Darmadi Business organizations recently have employees that are increasingly diverse in terms of their age, ethnic background, and gender (Jackson and Alvarez, 1992). The number of women pursuing managerial career also signiﬁcantly increases (Omar and Davidson, 2001). Nevertheless, the representation of women holding seats on the board of directors is generally low, including in developed economies. A census conducted by Australia’s Equal Opportunity for Women in the Workplace Agency-EOWA (2008) reveals that the average percentage of female directors is 10.7 percent in the country, compared to 15.4 percent in the United States. p22

"Juridisch niet haalbaar" K(r)anttekening drs. Joost G. Groeneveld RA RV “Veel werknemers gaan nog altijd uit van de gedachte dat zij na hun pensioengerechtigde leeftijd 70 procent van hun laatstverdiende loon krijgen. Een ﬁctie inderdaad omdat die 70 procent nu ook niet altijd wordt gehaald”. Ja, als je het zo ziet, komen die vele werknemers al bedrogen uit. “Maar toch is het lastig om nu met de boodschap te komen dat pensioenen meer onderhevig zullen worden aan de nukken van de markt”. Ja dat blijft lastig. Vervelend ook. p36

Colofon FSR FORUM appears ﬁve times a year and is an edition of the Financial Study Association Rotterdam KvK Rotterdam no: V 40346422 VAT no: NL 805159125 B01 ISSN no: 1389-0913

Editor in chief Kim de Vries

13th volume, number 3, circulation 1300 copies

Editorial advisory Dr. M. B. J. Schauten Dr. W. F. C. Verschoor Drs. R. Van der Wal RA

4 • Table of contents

Editorial department Rick Klootwijk Barnabé Lacroix Rishi Sripal

With the cooperation of Drs. J. G. Groeneveld RA RV Dr. S.G. van der Lecq E. Bos M. Alia J. Branson S. Darmadi B. Krug

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Table of contents • 5

fsrforum • volume 13 • issue #3

Environmental factors and accounting diversity Muiz Alia & Joël Branson Muiz Alia, Professor accounting at the An-Najah National University in Nablus, Palestine Joël Branson, Professor accounting at the Solvay Business School from the Vrije Universiteit Brussel and auditor at PKF Bedrijfsrevisoren.

6 • Environmental factors and accounting diversity

1. Introduction Accounting diversity refers to the differences that exist between the characteristics of the financial reporting frameworks used in different countries. This diversity appears as a result of differences in the factors that affect the development of financial reporting frameworks. The accounting literature presents several factors that cause this diversity. These factors are mainly related to environmental factors. In this article, we briefly review the accounting literature to learn about the reasons for accounting diversity, and to better understand how accounting diversity affects accounting harmonization. We explore the environmental factors that are considered most influential in causing accounting diversity in general and in developing countries in particular; with a special focus on the Arab and Islamic countries. This literature review is useful for two reasons. First, in general, we strengthen awareness of the existence of and the causes for accounting diversity. It is important to understand the current limitations of the drive towards international accounting harmonization. Second, more specifically, we prepare the road for a more in-depth analysis of the environmental factors that are considered most influential in causing accounting diversity. This analysis can assist policy-setters in their efforts to realize further international accounting harmonization.

2. Accounting diversity Financial reporting frameworks are oriented to meet the needs for accounting information of the environment in which they are applied. These needs are determined by factors that can be country-specific. Hence, different financial reporting frameworks with different characteristics are found in different countries. Accounting diversity refers to the differences that exist between the characteristics of the financial reporting frameworks used in different countries. The international diversity in accounting standards and practices has drawn the attention of researchers to the importance of revealing the underlying reasons behind this phenomenon. Research in this area is particularly interesting in an environment with increasing calls for international accounting harmonization. An understanding of the factors that cause accounting diversity will enhance the possibility of realizing accounting harmonization and/or show the limits of this endeavor. It is generally agreed that the financial reporting framework of a particular country is the product of the environment of this country. The prevailing environmental factors are influential in shaping the financial reporting frameworks. Adhikari and Tondkar (1992) establish that accounting diversity exists because financial reporting and disclosure standards and practices do not develop in a vacuum but reflect the particular environment in which they are developed. Many studies focus upon the influence of environmental factors on the processes of accounting in general and on accounting harmonization in particular. Below, we discuss this body of accounting literature.

3. Environmental factors affecting the international accounting diversity Our review reveals that many environmental factors contribute to determining the characteristics of the financial reporting frameworks. These factors can be classified into several groups. We identified the economic environment, the political

environment, the legal and tax environment, the professional environment, the business environment, the cultural factors, the level of education, and the international factors including past colonization, as inﬂuential factors that affect the ﬁnancial reporting standards and practices.

In this article, we consider the environmental factors that relate to the economic environment, the business environment and the cultural environment, We will address these groups separately and explore the most inﬂuential factors in each group. For a more complete literature review, we refer the ssrn page at http://papers.ssrn.com/sol3/papers.cfm?abstract_ id=1780479.

3.1. Economic environment The economic environment exerts an important influence on financial reporting frameworks. This claim is made in many studies (e.g. MacArthur, 1996; Needles et al., 2002; Archambault and Archambault, 2003; Belkaoui and AlNajjar, 2006; Baker and Barbu, 2007; Ding et al., 2007; Spathis and Geograkopoulou, 2007; and Mashayekhi and Mashayekh, 2008). The economic environment provides structures which determine the information that needs to be reported. We will consider the following factors of the business environment: - Importance of private sector; - Economic openness; - Stage of economic development; and - International trade. Importance of the private sector. Privatization increases the need for publicly available financial information. As such, Ashraf and Ghani (2005) relate the evolution of Pakistan’s accounting practices to different economic developments including the increasing role of the private sector. Mashayekhi and Mashayekh (2008) also mention privatization as one of the factors that has affected accounting development in Iran. Kamla (2007), Al-Shiab (2008), Alsharairi and Al-Abdullah (2008), and Al-Akra et al. (2009) consider that privatization was one of the motives for adopting International Financial Reporting Standards (IFRSs) in Jordan. From another viewpoint, Chamisa (2000) asserts the irrelevancy of IFRSs for communist developing countries because they are designed to serve the needs of capital markets in which the private sector and equity capital dominate. Economic openness. In an open economy, the investment environment must be attractive to foreign investors. This

Environmental factors and accounting diversity • 7

fsrforum • volume 13 • issue #3

implies the presence of a good financial reporting framework that ensures the quality and the comparability of financial statements. Many developing countries have changed their financial reporting frameworks in the hope of increasing foreign investment. Haniffa and Cooke (2002) argue that the demand for disclosure is greater when a high proportion of companies’ shares are held by foreigners. Mashayekhi and Mashayekh (2008) confirm that improving accounting standards and financial reporting makes financial reporting more useful to investors and is a way to attract more foreign investment. Irvine and Lucas (2006) and Irvine (2008) claim that the United Arab Emirates (UAE) adopted and implemented IFRSs to generate higher levels of Foreign Direct Investment (FDI). Al-Shammari et al. (2007) find a positive relationship between foreign ownership in banks and the adoption of the IFRSs by Gulf Cooperation Council (GCC) states. IFRSs obviously give adopting counties the credibility to compete for FDI in the world capital markets. Stage of economic development. Ding et al. (2007) claim that countries at different stages of economic development are expected to have different accounting practices. Archambault and Archambault (2003) declare that firms need to raise more capital when the economy becomes more developed. As a result, the need for financial reporting increases. In his early study, Nobes (1983) states that economic factors (the degree of development of the economy and the nature of the economic system) are influential factors on the financial reporting practices in developing countries. Nobes (1998) also observes that the level of economic development is not the key predictor for the split between Anglo-Saxon accounting and continental European accounting. Roudaki (2008) and

In summary, accounting standards and practices are affected by economic factors, such as privatization, economic openness, the stage of economic development and international trade. These factors determine the characteristics of the accounting information needed, and accordingly the characteristics of ﬁnancial reporting frameworks.

3.2 Business environment The business environment determines to a large extent the form and the content of the information needed and thus helps shape the financial reporting framework rules and practices. We will consider the following factors of the business environment: - Firm characteristics; - Degree of capital market development; and - Prevailing type of financing system. Firm characteristics. In the accounting literature, different firm characteristics are believed to affect the type of accounting information needed and hence the necessary features of the financial reporting framework. The most influential characteristics are size, industry sector, legal form, ownership concentration, and listing/cross-listing status. Size. Many authors assert that firm size is an important determinant for the disclosure level and the financial reporting framework in general (e.g. Jaggi and Low, 2000; Joshi and AlMudhahki, 2001; Joshi and Bremser, 2003; Naser et al., 2006; and Elsayed and Hoque, 2010). Boesso and Kumar (2007) believe that large firms disclose more information because they have a wider ownership base than smaller companies. Rahman et al. (2002) add that large firms have a greater amount as well as a wider variety of activities than small

Large firms will have a greater need for using a variety of accounting policies Mashayekhi and Mashayekh (2008) find evidence for the effect of economic development on the accounting profession and standard setting in Iran. In the Arab world, several studies emphasize the effect of economic development on financial reporting frameworks. Al-Shammari et al. (2007) and Al-Shammari et al. (2008) find that economic growth has encouraged the adoption of the IFRSs by GCC states. Along the same lines, HassabElnaby et al (2003) and HassabElnaby and Mosebach (2005) confirm the impact of the stage of economic development on the development of accounting in Egypt. Naser et al. (2006) conclude that the degree of social disclosure in Qatar is related to the stage of economic development. International trade. The financial reporting approaches that are used by international trade partners affect the national financial reporting framework. Irvine (2008), for example, argues that trade partners pushed the UAE to adopt IFRSs. The trade relationships between the UAE and European countries put a pressure on the UAE to adopt these standards. The influence of international trade is also confirmed by other studies (e.g. Gray, 1988; and Irvine, 2008).

8 • Environmental factors and accounting diversity

firms, leading to greater variability in practices among them as they have more to disclose. Large firms will have a greater need for using a variety of accounting policies. Therefore, across countries there will be a higher variability of disclosure and measurement practices for large firms than for small firms. International accounting harmonization is also affected by the firm size. Many studies conclude that firm size affects the adoption of IFRSs and the degree of compliance with their requirements. Hung and Subramanyam (2007) suggest that early adopters of IFRSs are larger than the typical German firm. Joshi and Ramadhan (2002) confirm the effect of company size on the degree of relevancy of IFRSs for Bahraini companies. Floropoulos (2006) shows that company size affects compliance with IFRSs and the familiarity with these standards. The effect of company size on the compliance degree with the requirements of IFRSs is also confirmed by other studies (e.g. Aljifri and Khasharmeh, 2006; Jagannath and Nanjegowda, 2008; and Al- Shammari et al., 2008). Industry sector. Financial reporting frameworks and accounting harmonization are influenced by the dominant industries (e.g. Rahman et al., 2002; Haniffa and Cooke, 2002; Boesso and Kumar, 2007; Al-Shammari et al., 2008).

Industries such as oil and banking are influential in orienting the accounting standards and practices. In the second half of the last century, accounting was introduced to some developing countries following the appearance of the oil industry. The effect of this industry is still perceived in the financial reporting frameworks of these countries. Ritchie and Khorwatt (2007) indicate that the British and American oil companies in Libya have strongly influenced Libyan accounting practices. They add that this effect is still reflected in the financial reporting used in Libya. The high risk associated with the operations of banks and other financial institutions requires the adoption of strict regulations. Several quantitative and qualitative disclosures are required. Thus, the prevailing of the banking industry is an indicator for the level of disclosure and accordingly the content of the financial statements. Elsayed and Hoque (2010) argue that the level of disclosure by firms in highly regulated industries such as banking, insurance and securities will be primarily conditioned by regulatory practices. Legal form. Tzovas (2006) declares that accounting policies are affected by the legal status of the firm (public or private). Based on the legal form, Abd-Elsalam and Weetman (2007) distinguish between two types of companies listed on the Egyptian Stock Exchanges (ESE): public sector companies and private sector companies. Public-sector companies have been listed on the ESE in preparation for full privatization. These companies are more in the public eye through news coverage and regular governmental evaluation for privatization programs. They are likely to disclose more than privatesector companies. The same results are found by Elsayed and Hoque (2010). They provide evidence that the voluntary disclosure of non-financial listed companies on the ESE is affected by a company’s legal form. In another study, Abd-Elsalam and Weetman, (2003) find further evidence that compliance with accounting standards by companies is affected by the legal status of the company. Ownership concentration. There is less need for disclosure with a small number of stockholders. Rahman et al. (2002) find that firms with lower shareholder concentration disclose more. Haniffa and Cooke (2002) add that disclosure is greater for companies with diffused ownership because it helps owners to monitor behavior of management as predicted by agency theory. In the same context, Rahman et al. (2002) find that ownership concentration is negatively correlated with voluntary disclosure. Listing/cross-listing status. Generally, listed companies disclose more than unlisted companies because they seek to meet the information needs of different stakeholders. A company’s disclosure policy is influenced by the disclosure policies of the exchanges it is trading on (Archambault and Archambault, 2003). With respect to the adoption of IFRSs, listed firms tend to comply with IFRSs earlier and more easily than unlisted companies. The compliance of these firms with IFRSs is also greater than for the unlisted firms (Floropoulos, 2006). Companies that are looking for more capital sometimes go for cross-listing on foreign stock exchanges. These companies disclose more information because they have to comply with foreign regulations and must meet the needs of capital markets to obtain funds on favorable terms (Haniffa and Cooke, 2002). Foreign stock exchanges may require more information to be disclosed than local stock exchanges. These companies also

tend to disclose more since this will lead to greater investor confidence (Elsayed and Hoque, 2010). The adoption of IFRSs is also affected by cross-listing. Multiple listing on foreign stock exchanges affects the multinationals’ compliance with IFRSs (El-Gazzar et al., 1999). Taylor and Jones (1999) argue that the use of the IFRSs is a primary method to facilitate cross-border listings of securities. Hung and Subramanyam (2007) confirm the effect of cross-listing on the adoption of IFRSs by German firms. They find that firms with cross-listed shares were more inclined to adopt IFRSs than other firms.

There is less need for disclosure with a small number of stockholders Capital market development. Capital markets influence accounting rules and enforcement practices. In some counties, accounting is regulated mainly by the regulations of capital markets. Furthermore, the push for changes in accounting practices appears to come from the capital markets (Perumpral et al., 2009). Ding et al. (2007) link the financial reporting quality with the capital market development. They indicate that the mere changing of the accounting standards may not be sufficient to substantially improve the financial reporting quality unless changes to the capital market development are brought about simultaneously. Archambault and Archambault (2003) argue that the nature of capital markets influences the information requirements of investors. Companies from countries with large capital markets disclose more information than companies from countries with small capital markets. The effect of capital markets on disclosure is confirmed by Roudaki (2008). He argues that capital markets play an important role in persuading companies to use accounting standards effectively and in enhancing their financial reporting frameworks towards more disclosure, uniformity and comparability. Other authors also point to the influence of capital markets on accounting rules and practices including the adoption of IFRSs (e.g. Adhikari and Tondkar, 1992; Chamisa, 2000; Needles et al., 2002; Zeghal and Mhedhbi, 2006; and Mashayekhi and Mashayekh, 2008). However, Jaggi and Low (2000) reveal that the degree of capital market development is not associated with the financial disclosures. HassabElnaby et al. (2003) also find no relationship between the development of the equity market and the development of accounting in Egypt. Type of financing. The type of financing determines to whom companies must orient the financial disclosure. Hence, it affects the form and the content of the financial statements. In general, there are two types of financing systems, the equity (market) based system and the debt (bank) based system. Several studies confirm the importance of the financing system on the financial disclosure and/or the adoption of IFRSs (e.g. Hoarau, 1995; Archambault and Archambault, 2003; Naser et al., 2006; and Tzovas, 2006).

Environmental factors and accounting diversity • 9

fsrforum • volume 13 • issue #3

Ali and Hwang (2000) cite Berglof (1990) who outlines the differences between bank- based and market-based systems and considers the effect on disclosure. In bank-based systems, businesses generally have very close ties to their banks. Banks supply most of their capital needs, have concentrated and long-term debt and equity holdings, and have direct access to company information, reducing the demand for published ﬁnancial statements. In contrast, in market- based systems, there are numerous and diverse investors without direct access to company information. Investors are likely to rely heavily on ﬁnancial accounting disclosures to value securities and to monitor management.

terms of both amount and variety. This, in turn, leads to more measurement methods being used and greater variety in the use of measurement methods. The consequence of this would be greater variability in the use of disclosure and measurement methods between firms of countries where equity financing is high in comparison to debt financing. ElGazzar et al. (1999) find that firms complying with IFRSs employ more equity financing, relative to non-IFRSs firms. Joshi and Bremser (2003) provide evidence supporting the effect of the type of financing system on the adoption of IFRSs (i.e. IAS 34: Interim Financial Reporting) by Bahraini companies.

The type of ﬁnancing determines to whom

Perera and Baydoun (2007) argue that IFRSs are designed to facilitate a particular ﬁnancing system, the ‘equity-outsider system’. In equity-outsider systems, commercial pressures give strong power over ﬁnancial reporting to professionals. Rules are set by professional accountants, independent bodies, stock exchanges and other equity market regulators.

companies must orient the financial disclosure Nobes (1998) indicates that the financing system determines the purpose of the financial reporting. The difference of purpose will lead to differences in accounting practice. He identifies four types of financing systems: a credit-based system, a credit-based system with a large amount of listed debt with outsider owners, an equity-based system where most shares are owned by insiders, and an equity-based system where most shares are owned by outsiders. The equity/creditor split leads to different kinds of objectives for financial reporting. Nobes adds that financial reporting frameworks serving equity markets are required to provide relevant information on performance and the assessment of future cash flows in order to help investors make financial decisions. These financial reporting frameworks are characterized by a high level of disclosure and independence from tax accounting. On the other hand, the level of disclosure is low in the financial reporting frameworks serving creditors. These systems are oriented to meet the needs of creditors and tax authorities who can obtain needed information through means other than external financial reporting. Rahman et al. (2002) underscore the effect of the diversity in financing systems on accounting harmonization. They state that firms with higher equity disclose more information in

10 • Environmental factors and accounting diversity

3.3 Cultural environment A considerable body of prior studies addresses the relationship between the financial reporting framework and cultural environment. The most widely known studies are by Hofstede (1980, 1983, and 1984) and Gray (1988). Hofstede (1984) identifies culture as the collective programming of the mind which distinguishes the members of one group or society from those of another. He highlights four dimensions of international differences in cultural values relating to the environment of a country’s financial reporting framework. These are strong versus weak uncertainty avoidance, large versus small power distance, masculinity versus femininity, and individuality versus collectivism. In turn, Gray (1988) explores the extent to which international differences in accounting may be explained and predicted by differences in cultural factors. He proposes a framework which links culture with the development of financial reporting frameworks internationally. Based on Hofstede’s cultural dimensions, Gray identifies four accounting sub- cultural dimensions, namely professionalism versus statutory control, uniformity versus flexibility, conservatism versus optimism and secrecy versus transparency. The first two dimensions describe attitudes toward regulation and the type and the level of control that is preferred. The third dimension is related to attitudes towards measurement. The fourth dimension is concerned with attitudes towards disclosure.

Culture inﬂuences how

people perceive situations and organize institutions

The Hofstede-Gray model has been used in many studies to examine the effect of culture on accounting (e.g. Amat et al., 1999; Jaggi and Low, 2000; Dahawy et al., 2002: HassabElnaby and Mosebach, 2005; Askary, 2006b; and Abd-Elsalam and Weetman, 2007). MacArthur (1996) investigated the influence of cultural factors on the corporate comment letters sent on the IASC’s E32 (Comparability of Financial Statements). He finds that cultural and accounting sub-cultural factors affect the international accounting preferences of corporate management. Dahawy (2009) confirms the effect of cultural values on disclosure. He finds that the degree of disclosure by Egyptian companies is affected by the highly secretive Egyptian culture. Qu and Leung (2006) find that Chinese corporation disclosure is affected by the changes in cultural and social norms. In the same context, Perera and Baydoun (2007) declare that Indonesia’s accounting profession is likely to rank highly in terms of both conservatism and secrecy, given the lower level of individualism and professionalism and the large power distance in Indonesia. This results in a low level of transparency in financial reports. The effect of culture on accounting harmonization is highlighted widely in the accounting literature. Archambault and Archambault (2003) find a strong relationship between disclosure and cultural systems. Culture influences how people perceive situations and organize institutions. They conclude that acceptance of mandated disclosures from a body such as the IASC may meet with resistance. Several other studies (e.g. Zeghal and Mhedhbi, 2006; Baker and Barbu, 2007; and Perumpral et al., 2009) stress the effect of culture on the success of international accounting harmonization. Askary (2006a) argues that different forms of culture prevent unified accounting practices globally. He defines the cultural environment as a national (or regional) system comprising language, religion, morals, values, attitudes, law, education, politics, social organization, technology, and material culture. He asserts that the interaction of these cultural elements on accounting is expected to be exceedingly complex. In turn, Hill et al. (1998) divide cultural factors into two categories. The ‘constants’ are factors inherent to the culture over time. They tend to be dominant and are very resistant to change. Examples include geography, currency, social norms, and traditions. The ‘changeables’ are factors that are more readily changed. They include GNP, technology, employee morale, and education level. Religion is a main cultural component and it thus affects the financial reporting framework. The effect of religion on

accounting is more likely in developing countries (Nobes, 1998), especially Islamic countries. Islam exerts a deep influence on Muslim societies and individuals. The influence of Islam on its followers extends to business affairs. “Islam does not recognize the separation between spiritual and temporal affairs, and considers commerce as a matter of morality and is subject to the precepts of the Shari’a” (Karim, 2001, p. 172). Business structure and financing in Islamic countries are affected by the Shari’a law (see for example, Hamid et al., 1993; Lewis, 2001; Mellahi, 2001; and Perera and Baydoun, 2007). Accounting has also been affected by the teachings of Shari’a. Several studies confirm that Islam influences the structure, the underlying concepts and the mechanisms of accounting in the Islamic world (Pomeranz, 1997; Sulaiman, 2003; Roberts et al., 2005; Kamla et al., 2006; and Kamla, 2007). Hamid et al. (1993) argue that the Islam’s potential for influencing accounting policy is illustrative of religion as a confounding element in the analysis of national idiosyncrasies in accounting practice and in deconstructing the impediments to international harmonization. The authors believe that religion in general and Islam in particular have the potential to exert a profound influence on the international harmonization of accounting. Like other aspects and systems, the development of accounting in a country may be influenced by language. Several studies such as Needles et al. (2002), Abd-Elsalam and Weetman (2003), Aljifri and Khasharmeh (2006), and Tyrrall et al. (2007) highlight the importance of language in the development of financial reporting frameworks in general and the achievement of accounting harmonization in particular.

4. Conclusion In this article, our main aim was to explore the environmental factors that are mentioned in the international accounting literature as affecting accounting diversity. The existence of such diversity in environmental factors has an important implication for accounting harmonization. It is essential that accounting policy-setters and more speciﬁcally the IASB, are aware of the environmental differences between countries in order to better achieve the overall objective of international accounting harmonization.

References For full bibliographical references, we refer to the ssrn page at http://papers.ssrn.com/sol3/papers. cfm?abstract_id=1780479

Environmental factors and accounting diversity • 11

Belangen afwegen… daar weten wij alles van. Hoe los je schijnbaar tegenstrijdige zaken op? Liever een biertje drinken met je vrienden of toch maar het tentamen voor morgen leren? Het lijkt misschien een makkelijke keuze, maar welke kant je ook kiest, beide kanten hebben gevolgen. Dilemma’s oplossen is bij het Rijk alledaagse kost. Je bent steeds weer bezig met het verenigen van belangen en het samenbrengen van (ogenschijnlijke) tegenstellingen, op elk terrein, voor de hele maatschappij. Bij het Rijk kun je dus alle kanten op. Zowel tussen de ministeries als binnen de ministeries. De beleidsterreinen bij het Rijk zijn enorm gevarieerd: veiligheid op straat, afvalbeheer, wachtlijsten, internetcriminaliteit, klimaatverandering, voedselveiligheid, infrastructuur en nog veel meer. Er werken onder meer economen, accountants, auditors, bedrijfskundigen, beleidsmedewerkers, controllers en financieel specialisten. Nieuwsgierig? Kijk dan op onze website wat je mogelijkheden zijn, bijvoorbeeld bij ‘stages/afstuderen’ of ‘vacatures’. Of word jij een van onze nieuwe rijkstrainees?

fsrforum • volume 13 • issue #3

Political Embeddedness in China: Strengths and Limitations Barbara Krug

Introduction

Political Embeddedness

The East Asian model is characterised by having an authoritarian political system over a liberalizing economic system managed by neutral, technocratic bureaucracies. Singapore, South-Korea and Taiwan are cases where economic development can be attributed to the credible commitment of political elites through, for example, efficient rules enforcement. In contrast, in China we observe an authoritarian regime committed to maintaining the notion of a socialist state, yet embracing local experiments which since the beginning of the reforms in 1978 have questioned the ideological blueprint. Instead of a bureaucracy strictly implementing national guidelines, we observe a political elite flexibly ‘reacting’ to the wide-ranging policy changes at the local level. Thus, for example, firms enjoyed property rights protection long before private property rights were acknowledged in national legislation in 2004. The fact that reform initiatives are often situated at the local level is not the only feature which distinguishes “Chinese-style socialism” from other forms of capitalism. We also observe a variety of different forms of economic governance within China, as well as the co-existence of formal rules and informal procedures. Subsequently, we face economic actors who apparently have no problem switching between different forms of governance.

Establishing and maintaining good relationships with state agencies in China is crucial for the survival and operation of firms. Whether these relationships are seen as strategic alliances (Zhou & Peng 2010; Krug & Mehta 2004), culturally determined (Xin & Pearce 1996) or commercially oriented (Hendrischke 2007), all empirical studies confirm the ubiquity of close relationships between firms and the state.

These aspects of China’s emerging variant of capitalism are provocative. They question the way we analyse China’s economy (Walder 2003). They ask us to reconsider the role of the state in economic transformation and development. Moreover, they point to the inﬂuence of locality, informal norms and institutional innovation in shaping a new capitalist economy, something which is rarely systematically analysed in “macro” studies where the nation state is the focus of interest (Hall & Soskice 2001). The question is whether and how Political Embeddedness (PE) facilitates or hinders the emergence and development of markets and a capitalist system. An analytical tool needs to be found which allows for the assessment of PE with respect to the development of ‘markets’, competition and organisational capabilities. Here, the usual macro structures of (perfect) markets (e.g. private property rights, the number of market participants, etc.) are appraised, and variants in capitalism are examined. However, these need to be supplemented by an analysis of the interaction at the micro level. We offer Market Design as one way to supplement the concept of PE, and explain the emergence and development of sustainable or ill-functioning markets in China.

The concept of ‘political embeddedness’, that is, a specific form of social embeddedness characterized by a mix of formal and informal ties with political agents (Granovetter 1985; Grabher & Stark 1997) allows one to enquire: (1) how does political embeddedness function within the general setup of China’s institutional architecture, and (2) what are the consequences of PE for the emergence of functioning markets? To answer these questions, we need to disaggregate ‘the state’. To insist on analysing the general principles of conventional economics which stress the necessity of dismantling the state and introducing private property rights does not help in the case of transition economies where markets need to be designed by political agents, entrepreneurs, managers of state firms or other groups in control of resources. As empirical studies show, it is far from clear whether the state facilitates or hinders the emergence of functioning markets (Frye 2002; Frye & Shleifer 1997). This is best exemplified by the ‘Grabbing Hand, Helping Hand’ discourse, which shows the importance of focusing on specific government agencies and their contribution to the development of markets instead of taking the state as a single unit of analysis. Firms are connected to, and controlled by, local governments, bureaus representing ministries, and branches of (state) banks and local tax offices. As the literature on state capture has further shown, firms are not merely recipients of law, regulation and policy. They can force local government agencies to use their discretionary power to the advantage of firms. They can also persuade local government agencies to ‘encode’ rules which offer advantages to firms and sectors (Hellman et al. 2000). The analytical challenge is therefore to identify under which circumstances PE leads to the emergence of sustainable markets. The question is of more than academic interest. After all, if political embeddedness results in functioning markets then we cannot expect political embeddedness to be only of a transitory nature. Rather, political embeddedness will become entrenched in the institutional architecture of the business system of China (Yang 2002).

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The analytical tool ‘imported’ into the concept of PE is Market Design (MD), the ﬁndings of which allow us to specify criteria for functioning markets. We now present a short introduction to MD, followed by three illustrative cases of political embeddedness.

interaction in market places where ‘market failure’ is diagnosed. For MD, a functioning market is achieved when ‘market clearance’ occurs, in that each market player (such as a ﬁrm) has matching business partners and no incentive to search for better partners or opt for a different organizational/coordination mechanism (Kittsteiner & Ockenfels 2006).

Market Design Market Design (MD) provides the analytical tools to evaluate endogenous institution-building in local market places irrespective of the institutional setting of the national economy. Implicit to this analysis is the recognition of institutional diversity, which in our case is linked to PE. MD originates from computer-based theoretical experiments aimed at achieving market clearance in individual markets – that is, in achieving interactions between players that result in a functioning market capable of both attracting and retaining players. By focusing on market clearance, MD proceeds from a study of interactions and not from a study of defined players. It is for this reason that MD complements the PE perspective. While PE identifies the market players, MD focuses on their interaction and the consequences of that interaction for the development of markets. MD developed as a response to requests from companies and industry-specific regulatory agencies looking for a better way to organize ‘auctions’ or, as in the best known example, a better way to allocate internships for medical students. MD in its original form was applied to game theory and computer simulations and used to interpret empirical data, with a view to restructuring impeded private exchanges into functioning market places. Provided there is sufficient data, MD proceeds by testing, through repeated experiments, the systematic character of features identified through game theory iterations. Experiments using computer simulation first assume standard economic

What matters for the present topic is that the MD approach is less concerned with a general notion of effective government than with the institutional capacity of political and administrative agencies in structuring specific markets. MD suggests that the political leadership or bureaucracies have to be seen not only as regulators but as active market players, whose influence is defined by their interaction in the market. Ultimately, the influence of the political leadership and bureaucracies is limited by the ‘economic power’ of firms, including the mobility of their assets in terms of their ability to move operations to other market places (which could be other sectors or localities). From this perspective, both the private sector and government agencies are motivated to align the interests of all players in search of a suitable local market design and favourable local institutions. While the exit option granted by the mobility of the firm’s assets may constrain the ‘predatory’ state at the micro-level, and compliance with the formal institutional frame may set benchmarks, the fact that firms derive their comparative advantage from negotiation with local government agencies contributes to a diversity of local market places and local business environments. In its practical application MD prescribes institutional configurations which are able to sustain functioning market places. By insisting that the strategic behaviour of firms and their performance in a market-place depend on micro-level

Ultimately, MD analysis aims to improve interaction in market places where ‘market failure’ is diagnosed. behaviour, that is, rationality. If this assumption does not offer satisfactory results, the simulation proceeds to search for ‘effects’, that is, non-standard economic behaviour provided by experimental economics or organizational psychology (Maskin 2008). Ultimately, MD analysis aims to improve

14 • Political Embeddedness in China: Strengths and Limitations

institutions that evolve from the interaction of ﬁrms with other market players, the MD perspective is well-grounded in institutional economics and the institution-based view of the ﬁrm. MD has formulated three requirements for functioning markets: institutional devices agreed upon in one market

The fact that ﬁrms derive their comparative advantage from negotiation with local government agencies contributes to a diversity of local market places and local business environments.

place such as PE must, at a minimum, be able to motivate a sufficient number of players (‘thickness’); they must provide safe participation and interaction for these players; and they must achieve market clearance. Taking PE as the starting point, the MD criteria for the emergence of well-functioning markets translate into three questions: 1) Can PE mobilize a sufficient number of economic players who are willing and able to interact in a market place? 2) Can PE generate sufficient trust among all market players to sustain their participation (the requirement of safe participation)? 3) Can PE match market participants to ensure market clearance at explicit or implicit relative prices, and what coordination mechanism is needed to let demand meet supply (the requirement of effective co-ordination)? These three requirements serve as the yardstick for explaining why PE at the local level succeeds in generating sustainable markets, why PE in the state bureaucracy cannot lead to the development of sustainable markets, and whether the promulgation of a new insolvency law will lead to institutional choice between legally embedded or politically embedded firms.

Township and Village Enterprises (TVEs) and the emergence of functioning markets One of the most surprising features of China’s economic development in the 1980s was the emergence of local firms under ‘collective ownership’ which were able to initiate and cope with market competition (Li 2005; Huang 1990; Kung 1993; Jiang & Hall, 1996). The overall economic performance of these so-called Township and Village Enterprises (TVEs) and private entrepreneurship in the 1980s was so strong that they became the engine of growth in the 1990s and the major source of tax revenue and export earnings. This development seems to contradict the tenet of conventional institutional (North-based) theory that private property rights and the rule of law are prerequisites for market economies. In contrast to other transition economies, the empowerment of China’s firms was not dependent on private property rights. Instead, Chinese reforms started with a ‘gift’ in the form of a widespread transfer of decision making rights (and control) to local government agencies, firms and individuals: decentralization of administrative decision making power within the state apparatus established a form of fiscal federalism if not local autonomy (Weingast 1995; Qian & Weingast 1997). The discretionary power of local government agencies

with respect to control over assets, including land use, in combination with the right to levy local taxes and local fees led to variations in local business regimes and increased jurisdictional (tax-) competition. From the perspective of firms, these variations presented choice over where to expand their business. Decentralization of managerial decision making powers, including the right to allocate resources, where and when to invest, and the right to claim residual profit (Hansman 1996) turned managers and entrepreneurs into participants in a new business sector. From an MD perspective, we can argue that decentralization of decisionmaking rights and widespread transfer of control rights to individual firms and local government agencies ensured the ‘thickness’ of the new market place with concomitant opportunities for private exchange. Decentralization of decisionmaking rights to individual firms and local government agencies form the first building block by which the three market requirements of MD are met. In general, the transfer of decision-making power can be enough to unleash the search for self-help devices that harness the positive incentives in repeated games situations. However, the decision of economic agents to take an opportunity depends on safe participation. So long as market participants refrain from revealing their true preferences, disclosing valuable information about business opportunities, or forego innovation, economic exchange gets stuck in short-term and arbitrage dealings. While trust attributed to (Chinese) culture or guanxi (Clegg & Redding 1990; best critique in(Goodman 2007) does not survive empirical scrutiny, more generic approaches have shown that trust depends on repeated interaction (Axelrod 1984) and participation (Bohnet 2006). Furthermore, trust relies on rational decision making when, for example, exchange partners agree on dispute settlement schemes (Güth & Ockenfels 2003). Trust, finally, will be provided by social groups or guilds (Coleman 1990; Greif 1989; Hendrischke 2007) and can be generated within a social frame (Greif 1997) or via institutions and organizations (Nooteboom 1996). The Chinese answer to the safe market participation problem was to politically embed private exchange and investment, which forms the second building block for securing functioning market places. TVEs are an example of this local and political, rather than resource or industry-specific, embeddedness. It is noteworthy that the TVEs were not local state firms, but included an increasing number of private firms or mixed-ownership firms with a solid base of private investment.

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Both groups, the business community and local government agencies, that is, the dominant controllers of resources, share an interest in

maintaining and increasing the value of local resources from which they both proﬁt

The sharing of collective and later registered ownership rights was the most prominent feature of these Chinese firms. By initially allocating ownership shares to local government agencies, incentives were created to protect assets and contracts, share (political and market) knowledge, and secure a favourable mix of taxation and regulation. Political embeddedness turns local government agencies into market players, as they are directly involved in market transactions instead of being the representatives and executors of formal institutions. The dominant coordination mechanism between the market players is negotiation, which forms the third building block for meeting market requirements. Negotiations can be an effective device for coordinating interaction in a market place. Yet, as has been shown elsewhere, it is the combination of decentralization, political embeddedness and the exit/voice (negotiation) option of the new business community which turns the coordination challenge into a restricted non-cooperative game (Zhu & Krug 2007). The structure of this appears as follows. Both groups, the business community and local government agencies, that is, the dominant controllers of resources, share an interest in maintaining and increasing the value of local resources from which they both profit. Each party has an incentive to increase the individually appropriable share of overall outcome. This can be done by (re-)investing in the local resource base and/or by unilaterally increasing their individual share to the detriment of other players. In this game, local state agencies increase their share of overall returns by increasing taxes while firms play a role depending on their ability and willingness to threaten to leave a locality (exit) or object to renewed negotiations (voice). Thus, both have an incentive to find a solution, that is, a sharing of local net returns, in which no partner can change strategy without hurting the total outcome (equilibrium solution, see Greif 1997; also in Zhu & Krug 2007). This game can be interpreted as an implicit contract which gives local ‘firms’ operational autonomy and profit in return for workplace generation and (tax-) revenue. There is also an implicit contract about joint investment (and cost sharing) into the local resource base that goes beyond mere infrastructural development. It includes innovation when private investment in R&D is accompanied by access to state-controlled research, and perhaps also tax breaks and other subsidies. All in all, PE at the local level is successful as it offers incentives for both firms and political agents to join the market.

16 • Political Embeddedness in China: Strengths and Limitations

Moreover, ongoing negotiations and contractual security offered by political agents prove to be effective surrogates for missing private property rights. The outcome does not reflect a static equilibrium. In the 1980s the organizational form of TVEs was seen as the best-fitting organizational form, while in the 1990s a change of the institutional setting saw incorporated firms with registered capital and dividends take over. This organizational change within the market place points to a further advantage of PE, namely its ability to orchestrate ownership and organizational change in firms. In summary, political embeddedness in combination with decentralization of decision-making power and ongoing negotiations were the three building blocks for the emergence and development of functioning markets for TVEs as they ensured thickness, safe market participation and effective coordination.

Public utilities and the failure to secure safe market participation At first sight, state-run public utilities seem to exemplify the extreme form of PE, in that they are protected from competition and rarely need to turn a profit. Yet, unlike the TVE sector, in which decentralization activated PE for pursuing and aligning economic interests and led to functioning markets, the development of public utilities points to the opposite. Decentralization of decision making, and in particular regulatory decision-making power, destroyed the ability of PE to generate ‘trust’, while frequent renegotiation points to opportunistic behaviour and rent-seeking rather than to a search for the best fitting organizational response to changes in the environment. As the literature on regulation (Laffont & Tirole 1991) and MD has stressed, and as no less than the present discussion around the Twelfth Five Year Plan illustrates, coordinating different interests within the administration of the state and the design of enforceable government contracts are crucial for the development of a public utility market with private sector participation. Analysis from an MD perspective identifies four factors which severely hamper any attempt to design a functioning market: lack of administrative capacity, limited accountability, limited commitment and limited fiscal efficiency. In other words, if PE offers a means to mitigate these four factors then functioning markets will develop. The decentralization of decision-making rights in public utilities started around 2002 with the decentralization of the

State Development and Planning Commission (SDPC). While the central SDPC remains in charge of setting prices, controlling market entry, and approving investment in ‘large’ projects, local branches of the SDPC do the same for small projects and are also in charge of price adjustment proposals (Laffont 2004). At the same time as decision-making rights were decentralized (around 2004), more and more regulatory powers, including the right to sign contracts with individual private producers or operators, were transferred from the local branches of the SDPC to local government agencies. While China’s remarkable investment in infrastructure, sometimes as high as ten per cent of GDP, could rely on ‘private’ (that is, non-state or local state investment and operations) before 2003, the right to hand out government contracts to private investors after 2003 did not lead to a thicker market. In general, it is assumed that government contracts are an effective coordination mechanism for aligning the interests of investors and producers with those of the state (Richter & Wellisch 1996). In other words, market design in the case of public utilities turns into contract design. This, however, implicitly assumes that contracts effectively allocate enforceable decision-making rights while coordination is secured by one coordination agency and (yardstick) competition (Johnson et al. 1999; Guasch et al. 2008). Under segmented administrative authority, conﬂicts about dispute settlement procedures arise when investors and local producers dismiss regulation agencies and dispute settlement regimes on the grounds that these have no formal authority over competition policy, or when local agencies or central ministries lack local authority but insist on hierarchical rules and regulations for dispute settlements. Furthermore, the central state regards infrastructure as part of the ‘public order’ notion in the Chinese constitution and insists on the prerogative to nullify agreements ex post through additional ‘amendments’ or new regulations. Local government agencies and local branches of banks contest the legitimacy of other agencies to regulate and implement national laws and sign contracts (World Bank 2007). Depending on the local power play or interference from ‘above’ (usually from the ministries), contracts can be declared null and void, investors or operators can ask to renegotiate with another local government agency or regulatory body (Clarke 2008), while local regulatory agencies can renegotiate with superior bureaus or local government agencies. Unless more is known about the interactions between these different government

agencies, the overall game-play will remain unclear (examples given in Estache & Wren-Lewis 2009). For the functioning of PE, this means that coordination failure can be described but not explained, and this will remain so long as making mechanisms are opaque. This ex post interference from above means that political embeddedness offers neither an effective coordination mechanism nor the assurance of contractual security. On the contrary, strategic decision-making by firms further aggravates the problems of safe participation. This is because asymmetric information, the large sunk investment upfront, and the unpredictable behaviour of business partners offer strong incentives to private firms to strategically ‘underbid’ in order to ask for renegotiation later. Depending on the size and political leverage of firms, renegotiation reflects rent-seeking if not ‘regulatory capture’ (Laffont & Tirole 1991) when a coalition between regulatory bodies or local government agencies dismisses national or local regulation or fights off competition. On the other hand, settling on one contract partner exposes firms to the risk that their contracts lack legitimacy and cannot be enforced. In other words, the inability to politically embed contracts in the public utility markets makes market participation an unsafe strategy, and leads to frequent renegotiation which acts as a further deterrent to private investment. Comparing the development of the public utility sector with the development of TVEs and functioning markets highlights two aspects of PE. First is the importance of informal rules or traditions. Villages or townships were regarded as the ‘natural’ or quasi-owners of the land and industrial assets within their boundaries, with the effect that their right to re-allocate assets, sign (land deal) contracts or fully privatize village firms was never contested. This is however not the case in the public utilities sector, where the prevalence of contested decision-making has broad ranging consequences. The co-existence of different kinds of regulatory agencies, whose interaction depends more on ad hoc coalitions than on a coordination mechanism, makes any attempt to establish effective regulatory regimes in one locality an unlikely affair. This points to the second aspect of PE, namely that its spatial dimension needs to be acknowledged. The interplay between formal and informal rules based on tradition or past experience is linked to localities. The analysis suggests that whenever the spatial dimension of an economic problem exceeds the spatial dimension of PE, additional coordination mechanisms have to be sought.

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there is no principle of free access to court documents in China

All in all, Market Design in the case of public utilities turns into contract design. If decision-making rights in contracting are contested, then major coordination failures lead to opportunistic renegotiation ex post and ineffective local (and national) regulatory agencies. For non-state market players, this signals a lack of commitment or regulatory capacity to offer enforceable contracts. Ultimately, private sector participation shrinks.

Enterprise Bankruptcy Law (EBL) and the failure to secure market clearance For conventional economics, the rule of law is the condition sine qua non for the emergence of a functioning market. However, more recent analysis questions this causality, arguing that the law emerges as a response to a failing self-enforcement mechanism, state capture and rent-seeking (Laffont & Tirole 1991), or generally weak institutions (Aoki 2007). China offers a new view on the emergence of laws and the rule of law, and draws attention to the gap between a national written law and variations in local enforcement. The usual accounts mention an unequal distribution of legal infrastructure and ignorance as factors that help to explain the poor performance of China’s commercial laws (Peerenboom 2001). From the MD perspective, the market for legal services and court-mediated dispute settlement between market players remains ‘thin’. Instead, economic actors rely on administrative solutions as coordinated by PE. Yet, PE does not facilitate the emergence of the rule of law (in business life) in the way PE facilitated the emergence of functioning markets, as described in the TVE example above. Why this is so will be explained with the example of the insolvency law, or Enterprise Bankruptcy Law (EBL) which, generally speaking, claims to offer a coordination mechanism for debtors, creditors, work forces, banks and firms. The first Chinese insolvency law was stipulated in 1986 and was followed by numerous amendments and clarifications. Nevertheless, in the first eight years of its existence, not more than 1,153 firms filed for bankruptcy at a time where around fifteen million firms were registered and where it was known that many incurred losses. From 2006, the new ‘state of the art’ Enterprise Bankruptcy Law (EBL) harmonized the various insolvency processes in China and enacted a unified law that replaced the old patchwork of insolvency legislation (Kargman, 2007). Yet, between 2006 and 2009, not more than 5,000 court cases have been reported. Moreover, it does not look as if the

18 • Political Embeddedness in China: Strengths and Limitations

decreasing trend in the use of court-mediated arbitration has stopped (Clarke et al. 2006). In other words, the law remains underused, offering a very ‘thin’ market for court-mediated litigation and arbitration. As with the case of a product market, which develops if a sufficient number of market players makes use of the market, court-based litigation and arbitration develops only if a sufficient number of players make use of the courts, and when enough (local) government agencies are committed to employing and enforcing court rulings. The under-use of the law can be explained by the coordination failure and unsafe participation engendered both by the written law and in the way local government agencies are included in the process. The first problem is ambiguity. In particular, the creation of a bifurcated insolvency system for SOEs and non-SOEs between 1986 and 2006 generated massive confusion over the employment of the legal process: the state responded with clarifications and amendments which added to the confusion rather than improving content and process. As a result, knowledge about the law and insolvency processes remains low. This is compounded by the fact that there is no principle of free access to court documents in China. Thus, it is only through use of the courts that legal procedures get entrenched, general knowledge is disseminated and problems of asymmetric information are mitigated. The second problem is verifiability. The usage of courts depends crucially on the verifiability of claims. In China, verifiability takes two forms, both of which are problematic. The first is the correct identification of plaintiffs and defendants, creditors and debtors. For example in the late 1980s, local government agencies forced local banks to convert their (faulty) loans into shares. The effect was that banks were no longer the creditors but the owners of bankrupt firms. Similarly, cross share-holding and unrecorded bank loans by private investors makes the identification of the claimants in a bankruptcy case difficult and time-consuming. Likewise, it is also difficult to put a monetary value on the different claims, with the effect that the costs for calculating whether a firm is bankrupt at all can be prohibitively high. The murky situation of ownership, loopholes in corporate law and poor auditing procedures do not allow easy calculation of the balance sheet. It is also worth stressing that litigation is often used simply as a mechanism to verify claims and, once this is done, the plaintiff retreats from the procedure (Clarke et al. 2006).

The problem of verifying claimants and the value of their claims is connected with the missing ranking scheme for claims stipulating which debts will be serviced first. One peculiarity of the EBL is that before the net debt position of a firm is calculated, all housing estates owned by the firm are set aside and transferred to the local government agency in charge of the ‘resettlement’ of the unemployed workforce. It is not hard to see that the allocation of decision making rights over the distribution of returns from land sales or from the disposal of other industrial assets unleashes a ‘race for assets’ between competing courts and local government agencies rushing to execute confiscation orders, even before a court order is issued (Zhang & Booth 2002). This assetscrapping often leads to a situation where firms which otherwise would have had a chance to restructure are left without the means to service debt (Rona-Tas 1994; Roth 2007). There is also evidence that the courts know that enforcement lacks credibility due to ‘out of court’ settlements. Both the confiscation of assets and the pressure to privately settle cases prior to any court order unleash a kind of unravelling effect. As has been shown in other markets, this contributes to the ‘thinness’ of the market, which leaves those parties which insist on using the EBL with few courts and enforcement agencies at their disposal. In other words, there is no market clearing. In short, courts cannot offer safe participation in the sense that there is a coordination failure in the proceedings forcing all parties concerned to wait for court orders and court mediated ranking of debts and claims. Instead, which claimant gets served first is locally and inconsistently determined. Even if they are not immediate players in an insolvency case, local government agencies will use their discretionary power over local enforcement to manipulate procedures in favour of firms under their jurisdiction. Thus, resolving local issues cause by coordination failure and the allocation of rights depends on prestige, nomenclatural rank, short-term ad hoc coalitions, or normative appeals to superior courts (Peerenboom 2002). All in all, PE does not, in this case, contribute to the developing of a functioning market. Ambiguity and unverifiability limit the use of courts, and contested ranking schemes for claims and the need to rely on the discretion of local government agencies for enforcement set incentives for opportunistic behaviour. As in the case of the market for public utilities, decision-making rights remain contested within the state

administration, and the problem of the spatial dimension of PE forestalls stable solutions while similarly undermining the ‘the letter of the law’.

Findings To sum up, political embeddedness, in combination with the decentralization of decision-making powers and ongoing negotiations, are the three building blocks identified by Market Design theory for the emergence and development of functioning markets. This was demonstrated in the example of TVEs as these three elements ensured thickness, safe market participation and effective coordination. In contrast, in the public utility sector, PE has been shown to be of limited help in situations where decision-making rights, whether formal or informal, are contested (resulting in opportunistic renegotiations) and where the spatial dimension of ‘marketplaces’ exceeds the spatial dimension of PE. In the final example, PE fails in the market for court orders. Ambiguity and unverifiability limit the use of courts, and contested rating schemes for claims unleash an unravelling process wherein uncoordinated asset scrapping prior to court ordering forestalls the use of the EBL. The findings are summarized in Table 1. Table 1. Political embeddedness: success and failure Case 1 Empirical domain Township and village enterprises (TVEs) as initial stage of a private sector Interaction Negotiated participation Political embeddedness Renegotiated contracts Outcome Development of functioning markets

Case 2

Case 3

Public utility sector

Enterprise Bankruptcy Law

Opportunistic ex post renegotiation Contested decision making rights Contractual insecurity Thinning out of private participation in public utility sector

Unveriﬁability of claims Unclear priorities of claims ‘Unravelling effect’ Under-usage of law

A longer version will appear in R. Whitley and S. Caspar, Capitalism in the 21st Century; Oxford University Press.

Political Embeddedness in China: Strengths and Limitations • 19

rotterdam.nl/werkenbij

Rotterdam is in veel opzichten een voorloper, een stad die durft. Zonder durf, had de modernste haven ter

'H VWDG GLH GXUIW LV MH ZHUN VQHO ]LFKWEDDU

wereld niet in Rotterdam gelegen. Zonder durf, was Rotterdam de wolken niet zo dicht genaderd. Zonder durf, waren veel debatten over grootstedelijke problemen niet in Rotterdam gestart. De gemeente zoekt deze

Het traineeprogramma is bedoeld voor studenten

We bouwen aan de stad ĂŠn aan de samenleving. We

met een universitaire of hbo-opleiding. Door de

houden de regie goed in handen, maar geven veel

omvang van de organisatie, de variatie in het werk

ruimte voor initiatieven. Met 13.500 medewerkers zijn

en de Rotterdamse dynamiek is dit bij uitstek een

we een grote werkgever in het Rijnmondgebied. En met

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een paar duizend uiteenlopende functies ook een

lende projecten. Je maakt kennis met de hele

veelzijdige. Samen werken we voor meer dan 600.000

gemeentelijke organisatie en de grote diversiteit

Rotterdammers aan de stad.

aan werk. Wat bieden we? Een veelzijdig traineeprogramma

durf ook bij nieuwe

De gemeente Rotterdam werkt aan een stad die durft.

in een interessante stad die durft! Het traineeprogramma

talenten en biedt daarom

De Maasstad is een jonge stad waar veel gebeurt. Een

start elk jaar op 1 november en 1 mei met elke keer tien

stad in beweging, waar naar de toekomst wordt gekeken.

trainees. In twee jaar tijd werk je aan vier projecten bij

Een stad met veel verschillende culturen en met veel

vier versschillende diensten of deelgemeenten. Zo

daadkracht. In een stad die durft, is je werk leuker en

maak je kennis met de diversiteit binnen de gemeente.

interessanter. Dat maakt de gemeente Rotterdam een

Afhankelijk van je leeftijd en opleiding bieden we je een

aantrekkelijke werkgever met aantrekkelijke functies.

aanvangsalaris tussen â&#x201A;Ź 2.300,- en â&#x201A;Ź 3.000,- bruto per

elk jaar studenten de kans een tweejarig traineeprogramma te volgen.

maand bij een 36-urige werkweek.

William Klem is sinds mei 2010 trainee bij de gemeente Rotterdam. Na zijn opleidingen HBO International Business and Management Studies en een Master Bedrijfskunde Strategisch Management, was hij op zoek naar een afwisselende baan bij de overheid. ‘Na mijn studie wilde ik graag verbonden blijven met Rotterdam en daarom zocht ik hier naar een baan. Ik wilde graag werk waarbij ik iets kan bijdragen aan de maatschappij. Zowel de gemeente als een traineeship spraken me erg aan, dus de keuze was snel gemaakt.’ William’s eerste opdracht was bij de Gemeentelijke Gezondheidsdienst (GGD) op de afdeling Financiën. Sinds november werkt hij bij de af-

William Klem, trainee bij de gemeente Rotterdam

deling Internationale Betrekkingen van de Bestuursdienst. De gemeente heeft wel eens de naam ‘saai’ te zijn. William had deze associatie niet:

betrekkingen past meer bij mijn studieachtergrond en bevalt me ontzet-

‘De overheid spreekt me erg aan, vooral het maatschappelijke tintje. Je

tend goed. De afwisseling van een traineeship houdt je scherp. Ontzet-

werkt echt voor de stad.’ En het is allesbehalve saai.’

tend leuk is het contact met de andere trainees. We zien elkaar elke vrijdag bij de opleidingsdag en zo krijg je echt een band met elkaar.’

³'H DIZLVVHOLQJ KRXGW MH VFKHUS´

William heeft er geen moeite mee elk half jaar afscheid te nemen van een dienst. ‘Natuurlijk is dat soms best vervelend. Je hebt veel geleerd en een band opgebouwd met je collega’s en dan ga je weer weg. Maar als trainee wil je juist alle kanten van de gemeente leren kennen, het hoort er echt bij.’

Het traineeship bevalt William tot nu toe goed. ‘Ik vind het geweldig! Je krijgt de unieke ervaring om in twee jaar tijd de gemeente vanuit allerlei

Durf jij? Heb je (bijna) je universitaire of hbo-studie afgerond en lijkt

invalshoeken te leren kennen. En het is echt gericht op je persoonlijke

een traineeship bij de gemeente Rotterdam je wat? Stuur dan je sollici-

ontwikkeling. Bij mijn eerste opdracht wist ik weinig van ﬁnanciën, dus

tatie met je CV en je motivatie naar werkenbij@rotterdam.nl. Kijk voor

dat was een pittige uitdaging. Maar met inzet en de juiste begeleiding

meer informatie op www.rotterdam.nl/werkenbij

leer je wel de kneepjes van het vak. Mijn huidige opdracht bij interne

fsrforum • volume 13 • issue #3

Women in top management and their impact on ﬁrm performance: The Indonesian evidence Salim Darmadi

22 • Women in top management and their impact on ﬁrm performance: The Indonesian evidence

1. Introduction Business organizations recently have employees that are increasingly diverse in terms of their age, ethnic background, and gender (Jackson and Alvarez, 1992). The number of women pursuing managerial career also signiﬁcantly increases (Omar and Davidson, 2001). Nevertheless, the representation of women holding seats on the board of directors is generally low, including in developed economies. A census conducted by Australia’s Equal Opportunity for Women in the Workplace Agency—EOWA (2008) reveals that the average percentage of female directors is 10.7 percent in the country, compared to 15.4 percent in the United States. In diverse organizations, it appears to be a common phenomenon that minority or “lower-status” groups, such as women and minority ethnic groups, are likely to be marginalized and given limited access to develop career (Ibarra, 1993). This condition leads to increasingly attempts to promote equal opportunity among different groups in the organization. The governments of developed countries, such as the US and Australia, have established equal-opportunity commissions. Proposals on governance reform also increasingly state the importance of gender diversity on the board of directors (Adams and Ferreira, 2009). Furthermore, the Norwegian and Swedish governments have imposed gender quota on the boards of directors (Medland, 2004; Randøy et al., 2005), which results in 28.8 and 22.8 percent of board seats to be held by women in Norway and Sweden, respectively (European Professional Women’s Network—EPWN, 2006). Gender diversity on the board of directors and top management team has attracted the interest of researchers in the past two decades. Compared to the diversity of other demographic attributes, gender diversity appears to be the most widely addressed in the literature (Erhardt et al., 2003). In numerous studies in the management, organization science, and psychology literature, scholars examine the relationship between gender diversity and various aspects, such as managerial advancement (Tharenou et al., 1994), management style (Eagly et al., 2003; Rigg and Sparrow, 1994), occupa-

lands (Marinova, 2010), and Denmark (Smith et al., 2005). While these studies emphasize solely on gender diversity, other studies focus on the diversity of gender along with other demographic attributes, such as race or ethnic background (Carter et al., 2003; Erhardt et al., 2003; Richard et al., 2004), nationality (Randøy et al., 2006), and age (Kilduff et al., 2000). Such studies in the context of developing economies are very rare. Hence, this study contributes to the literature by examining the link between gender diversity and financial performance for a developing economy that has different economic and cultural environments from those of developed economies. This study investigates the association between gender diversity on the board of management and financial performance of the Indonesian listed firms. Our empirical evidence reveals that the ratio of women on top management team is negatively related to financial performance, providing evidence that the presence of female top executives does not necessarily improve firm value. Further, through bivariate analysis, it is found that higher proportion of women on the management board is more likely to be employed by smaller firms, which are likely to be family-contolled firms. As regulated by the country’s corporation law, Indonesian firms have two types of board in their organizational structures, namely Dewan Komisaris (supervisory board) and Dewan Direksi (management board). This two-tier board structure is also adopted in a number of countries, such as Germany, the Netherlands, and Japan (Weimar and Pape, 1999). Supervisory board conducts supervisory and monitoring roles on the management, whereas management board conducts the day-to-day management of the firm. In other words, executive function of the firm is merely conducted by the management board. For the purpose of this study, we emphasize on the influence of the representation of female top executives on financial performance, thus we only address women holding seats on management boards. The remainder of this paper is structured in the following manner. Section 2 reviews prior studies and develops hypotheses.

Gender diversity on the board of directors and top management team has attracted the interest of researchers in the past two decades tional merit (Lobel and Clair, 1992), occupational pressures (Granleese, 2004), personal networks (Ibarra, 1993), and board effectiveness (Nielsen and Huse, 2010). In the accounting literature, previous studies have addressed the association between gender diversity and accounting earnings quality (Krishnan and Parsons, 2008; Ye et al., 2010), social responsibility (Coffey and Wang, 1998; Siciliano, 1996), and intellectual capital performance (van der Zahn, 2008). In addition, there are also a growing number of studies that link gender diversity and firm profitability or financial performance. Those studies, however, are conducted in the context of a few developed economies, such as the US (Adams and Ferreira, 2009; Krishnan and Park, 2005), Canada (Francoeur et al., 2008), Spain (Campbell and Minguez-Vera, 2008), the Nether-

In Section 3, we describe the data and methodology used in this study. Section 4 presents and discusses empirical results, and concluding remarks are presented in Section 5.

2. Literature Review and Hypotheses Development 2.1. Gender Diversity As argued by Cox (1991), diversity within the members of top management team could bring potential costs to the organization, such as communication problems and interpersonal conﬂicts. On the other hand, the diversity may also bring advantages to the entity, such as broader perspectives in decision making, higher creativity and innovation, and successful marketing to different types of customers (Cox, 1991; Cox and Blake, 1991; Robinson and Dechant, 1997).

Women in top management and their impact on ﬁrm performance: The Indonesian evidence • 23

fsrforum • volume 13 • issue #3

Gender diversity is believed to bring advantages to the organization for

the reason that women are considered to have a “feeling” cognitive style

In terms of the association between gender diversity on the management team and the organization’s competitive advantages, different arguments persist in the literature. Gender diversity is believed to bring advantages to the organization for the reason that women are considered to have a “feeling” cognitive style (Krishnan and Park, 2005). This type of cognitive style emphasizes on organizational values and harmony (Hurst et al., 1989), encourages sharing of information and resources (Earley and Mosakowski, 2000), facilitates conflict resolution, and shows more democratic leadership (Eagly and Johnson, 1990). Women on top management teams are also considered “tough” since they have to face challenges prior to holding seats in a maledominated hierarchy, and this achievement thereby provides them with psychological advantages, improved interactions with peers, and highly-regarded positions in the business environment (Hambrick and Pettigrew, 2001; Krishnan and Park, 2005; Tharenou, 2001). Increased creativity and innovation is likely to be achieved when gender diversity exists in the management team (Campbell and Minguez- Vera, 2008; Cox, 1991). On the other hand, gender diversity on the management team is also likely to bring disadvantages to the organization. Greater gender diversity may increase the likelihood of intragroup conflicts (Richard et al., 2004; Treichler, 1995), which in turn may result in slower decision-making process (Goodstein et al., 1994; Hambrick et al., 1996). Further, women are considered more risk averse than men in financial decision making (Jianakoplos and Bernasek, 1998), and thereby may affect the organization’s resource allocation. As mentioned in Section 1, some studies in the accounting literature have addressed the link between gender diversity of top management team and accounting aspects of the firms. Krishnan and Parsons (2008) find that gender diversity in senior management is positively associated with reporting quality of accounting earnings. Using a sample of not-forprofit organizations, Siciliano (1995) indicates that gender diversity of board members is positively related to social performance. In the context of South African market, van der Zahn (2008) suggests that greater gender diversity leads to higher intellectual capital performance. When the gender diversity is associated with financial performance, prior studies show contradicting results. Based on a sample of US firms, researchers find that the proportion of women on the board is positively related to market performance based on Tobin’s q (Carter et al., 2003). Using accounting-based performance, the positive association is found

24 • Women in top management and their impact on ﬁrm performance: The Indonesian evidence

between ROA and the fraction of women on the board (Erhardt et al., 2003). Addressing the fraction of female proportion in management teams, Krishnan and Park (2005) and Shrader et al. (1997) also indicate the similar results. In contrast, Adams and Ferreira (2009) indicate that the percentage of women on the board of directors has a negative relationship with both Tobin’s q and ROA. From outside the US, the evidence of positive associations between the proportion of women in the boardrooms or management teams and firm performance is provided by studies using a sample of firms in Canada (Francoeur et al., 2008), Denmark (Smith et al., 2005), and Spain (Campbell and Minguez-Vera, 2008). The different result is suggested by Bøhren and Strøm (2007), which find that female representation on the board is negatively related to Tobin’s q, based on the Norwegian data. Indeed, some studies fail to find a significant association between female proportion and financial performance. Using a sample of Scandinavian firms, Randøy et al. (2006) find that the proportion of women on the board has no significant association with both accounting and market performance. Eklund et al. (2009), Marinova et al. (2010), and Rose (2007) indicate similar results. For the Indonesian case, the proportion of female top executives of the firms included in our sample is 11.2 percent on average, which is greater than that of several European countries such as Germany, France, Switzerland, and Spain (EPWN, 2006). As in other Southeast Asian emerging market, the nature of the Indonesian capital market is relatively unique since the listed firms are mainly family controlled (Claessens et al., 2000). Thus, women holding seats on the board are partly due to family ties with the controlling shareholder (Mak and Kusnadi, 2005; Westhead and Cowling, 1998), instead of their professional expertise and experiences. Since the lack of competence may in turn affect firm performance, we predict that the proportion of female executives on management boards is negatively related to firm performance. Hence, we state the first hypothesis as follows: H1: Ceteris paribus, there is a negative relationship between the proportion of women on the management board and financial performance. Some researchers indicate the presence of women on the board or management team using dichotomous variables, so that they can examine whether firms that have at least one woman in their boardrooms are better or worse performers compared to their counterparts that have no female board members. Employing the dichotomous variables, the evi-

dence of prior studies is also mixed. Using a sample of US Fortune 500 ďŹ rms, Carter et al. (2003) indicate that ďŹ rms with at least one female board member have signiďŹ cantly higher Tobinâ&#x20AC;&#x2122;s q. The same result is also shown by LĂźckerathRovers (2010) based on the Dutch data. On the other hand, other studies fail to identify signiďŹ cant relationships between the presence of female members on the board or management team and ďŹ nancial performance, such as Campbell and Minguez-Vera (2008), Marinova et al. (2010), and Rose (2007). Hence, these studies conclude that ďŹ rms employing female members in their boardrooms perform neither signiďŹ cantly better nor worse than ďŹ rms with no female board members. In an Indonesian study, Kusumastuti et al. (2007) provide no evidence of signiďŹ cant relationship between the presence of women on the board of management and Tobinâ&#x20AC;&#x2122;s q, using a small sample of Indonesian manufacturing companies.

(2004) ďŹ nd that gender diversity is positively related to ďŹ rm productivity. Using Tobinâ&#x20AC;&#x2122;s q as the measure of performance, Ararat et al. (2010) and Campbell and Minguez-Vera (2008) also indicate the positive association in the Turkish and Spanish markets, respectively. In contrast, Dwyer et al. (2003) ďŹ nd no signiďŹ cant relationship between gender diversity and ďŹ nancial performance. Heterogeneity indices other than Blauâ&#x20AC;&#x2122;s are also used in measuring gender diversity. Campbell and Minguez-Vera (2008) employ Shannon index of diversity and ďŹ nd that gender diversity is positively related to market performance based on Tobinâ&#x20AC;&#x2122;s q. In addition, using Teachman entropybased index, BĂ¤r et al. (2009) indicate a negative association between gender diversity and fund returns, based on a sample from US mutual fund industry.

Researchers ďŹ nd that the proportion of

women on the board is positively related to market performance based on Tobinâ&#x20AC;&#x2122;s q Our prediction is similar to that of the ďŹ rst hypothesis. We expect that the presence of women executives has a negative relationship with ďŹ nancial performance. Thus, our second hypothesis is stated as: H2: Ceteris paribus, there is a negative relationship between the presence of women on the management board and ďŹ nancial performance. Since it is argued that the proportion of board members with particular attributes is not an appropriate measure of diversity (Campbell and Minguez-Vera, 2008), some researchers use heterogeneity indices to measure the diversity level of board or management team members. A number of studies in our literature review use Blau heterogeneity index to indicate the level of gender diversity. This index is introduced by Blau (1977) and is computed as follows: Blau index = 1 â&#x20AC;&#x201C; Yin Pi2 where Pi2 is the percentage of board members in each category and n is the total number of categories used. Richard et al.

For the purpose of this study, we use Blau index of diversity for the reason that it is used in a number of studies in our literature review. In the case of Indonesia, we predict that the level of gender diversity on the management board has a negative relationship with ďŹ rm performance. This prediction leads to the formulation of our third hypothesis: H3: Ceteris paribus, there is a negative relationship between gender diversity on the management board (as measured by Blau index) and ďŹ nancial performance.

3. Data and Methodology 3.1. Sample Data The initial sample of the present study consists of 383 ďŹ rms, the total number of ďŹ rms listed on the Indonesia Stock Exchange (IDX) as at 31 December 2007. In the ďŹ nancial years 2008 and 2009, Indonesian capital market was affected by the global ďŹ nancial crisis, which made the market capitalization of the listed ďŹ rms distorted from normal periods. Thus, the ďŹ nancial year 2007 is the most recent normal period captured in this study. After excluding ďŹ rms with negative equity

Âť

Women in top management and their impact on ďŹ rm performance: The Indonesian evidence â&#x20AC;˘ 25

fsrforum • volume 13 • issue #3

and incomplete data, our final sample consists of 354 firms, or 92.4 percent of the total number of the IDX’s listed firms. We obtain financial data, consisting of total assets and ROA, from the Indonesian Capital Market Directory 2008. Additionally, from the same source, the data of total assets, shareholders’ equity, and market capitalization are collected to compute Tobin’s q. To collect the data of the gender of board members, as well as corporate governance characteristics and ownership structure of the firms, we use published annual reports and financial statements that are available on the Internet.

3.2. Methodology Cross-sectional regression models are used in this study to explain the extent to which financial performance is affected by gender diversity of the top executive team, along with the control variables. Since we use three different proxies to indicate the gender diversity, the following regression equations are employed in this study: PERF = `0 + `1 PWOMEN + `2 LNASSET + `3 LNBSIZE + `4 INDEPCOM + `5 LARGEST + `6 BLOCK + `7 FAMILY + ¡ PERF = `0 + `1 DWOMEN + `2 LNASSET + `3 LNBSIZE + `4 INDEPCOM + `5 LARGEST + `6 BLOCK + `7 FAMILY + ¡ PERF = `0 + `1 BLAUGENDER + `2 LNASSET + `3 LNBSIZE + `4 INDEPCOM + `5 LARGEST + `6 BLOCK + `7 FAMILY + ¡ where PERF is financial performance, measured by ROA and Tobin’s q; PWOMEN is the proportion of women on the management board; DWOMEN is a dichotomous variable that equals 1 if the firm has at least one women on the management board and 0 otherwise; BLAUGENDER is Blau heterogeneity index for gender diversity of management board members; LNASSET is natural logarithm of total assets as the proxy for firm size; LNBSIZE is natural logarithm of the number of management board members; INDEPCOM is the proportion of independent members on the supervisory board; LARGEST is the proportion of common shares owned by the largest shareholder; BLOCK is the proportion of common shares owned by blockholders (having 5 percent of common shares or more); and FAMILY is a dichotomous variable equaling 1 if the firm is family controlled and 0 otherwise.

4. Results and Discussions Regression Results We conduct multivariate regression analysis to examine

26 • Women in top management and their impact on ﬁrm performance: The Indonesian evidence

whether female representation on management boards, along with corporate governance and ownership structure variables, has significant impacts on financial performance. Before running the regressions, the models are tested to identify whether they suffer from multicollinearity and heteroskedasticity. Using correlation coefficients and variance inflation factors (VIF), we conclude that our models do not suffer from multicollinearity problem. Gujarati (2003) suggests that multicollinearity may exist when the correlation coefficient exceeds 0.80 and the VIF exceeds 10. To deal with potential heteroskedasticity problems, White heteroskedasticity-consistent standard error estimates are used (Brooks, 2008). Table 1: Descriptive statistics This table reports the descriptive statistics of firms in our sample. The final sample comprises 354 firms or 92.4 percent of the total number of firms listed on the IDX as at 31 December 2007. The data are obtained from the Indonesian Capital Market Directory 2008, as well as annual reports and financial statements of the sample firms. Variables

Mean

Median

Standard Deviation

ROA (percent) Tobin’s q Proportion of women Presence of women (dummy) Gender heterogeneity index Total assets (billion Rupiahs) Size of management board Proportion of indep. commissioners Largest shareholder ownership Blockholders ownership Family-controlled (dummy)

3.61 1.85 0.12 0.38 0.14 6,969 4.46 0.40 0.49 0.71 0.54

2.60 1.22 0.00 0.00 0.00 892 4.00 0.33 0.50 0.75 1.00

9.95 3.70 0.19 0.49 0.19 26,893 1.97 0.12 0.21 0.18 0.50

Minimum Maximum -89.50 0.24 0.00 0.00 0.00 10 2 0.20 0.06 0.06 0.00

62.20 65.40 1.00 1.00 0.50 319,086 13 1.00 0.99 0.99 1.00

Table 1 reports the regression of ROA, as the proxy for accounting-based performance, on the representation of women. We specify three models based on three equations in Section 3. The presence of women on the management board is found to be significantly and negatively associated with ROA, marginally at the 10 percent level. Hence, this finding supports Hypothesis 2 when ROA is used as the performance measure. This suggests that higher fraction is female executives is associated with lower level of performance. Additionally, the fraction of women on management boards is found to be insignificantly related to accounting performance. This implies that board composition does not contribute to the improvement of the firm’s performance (Tacheva and Huse, 2004). They suggest that firm performance is more affected by task performance of the individuals sitting the board. Furthermore, since listed firms in Indonesia are mainly family controlled (Claessens et al., 2000), the positions held in the boardrooms may partly be based on family relationships rather than occupational expertise and experiences, hence making gender diversity of board members is unlikely to improve firm performance.

Gender diversity is believed to bring advantages to the organization for

the reason that women are considered to have a “feeling” cognitive style

Overall, our models explain from 7.4 to 7.8 percent of the variability in ROA at the 1 percent level. Hence, the variability in accounting performance may also be explained by many variables other than independent variables used in our models. Table 2: Correlation coefficient matrix This table reports correlation coefficients between variables included in regression models. ROA is return on assets. LNTOBINQ is log value of Tobin’s q. PWOMEN is the proportion of women on the management board. LNASSET is log value of total assets, the proxy for firm size. LNBSIZE is log value of the number of management board members. PINDEP is the proportion of independent commissioners on the supervisory board. LARGEST is the proportion of common shares owned by the largest shareholder. BLOCK is the proportion of common shares owned by blockholders (shareholders with 5 percent of ownership or more). FAMILY is a dichotomous variable, which equals 1 if the firm is a family-controlled firm and 0 otherwise. *, **, and *** indicate significance at the 0.10, 0.05, and 0.01 levels, respectively. ROA ROA

LNTOBINQ PWOMEN LNASSET LNBSIZE

PINDEP LARGEST BLOCK

FAMILY

1.00

LNTOBINQ 0.16*** 1.00 PWOMEN

–0.05

LNASSET

0.22*** 0.04

–0.11**

1.00 –0.16***

1.00

LNBSIZE

0.17*** –0.13**

–0.12**

0.65***

PINDEP

0.01

–0.10*

–0.05

0.20***

0.03

1.00

LARGEST

0.14**

0.11**

0.01

0.06

0.09

0.02

BLOCK

0.05

0.01

–0.05

–0.12**

0.04

–0.11** 0.54***

FAMILY

–0.13** –0.09*

0.11**

–0.17*** –0.17*** –0.05

1.00 1.00 –0.08

1.00 –0.11** 1.00

As presented in Table 2, the proportion of women on the management board is found to have a negative impact on Tobin’s q. The negative impact is marginally significant at the 5 percent level. Hence, this result is consistent with Adams and Ferreira (2009) and Bøhren and Strøm (2007). Again, this implies that higher proportion of female executives is associated with lower level of market performance. As suggested by Adams and Ferreira (2009), another possible explanation of this negative association is that higher fraction of women on the board could lead to overmonitoring. Furthermore, when a dichotomous variable is used to indicate the presence of female executives, such a negative relationship also exists. Thus, this contradicts Carter et al. (2003) and Lückerath-Rovers (2010) who suggest that the presence of female board members has a positive relationship with market performance based on a sample of US and Dutch firms, respectively. Our findings support Hypotheses 1 and 2 when Tobin’s q is used as the performance measure. This negative impact on the market performance may also be explained by propositions mentioned in Section 2, namely intragroup conflicts, slower decision-making process, and different response to the risks; however it needs further investigation. Our three models in Table 2 have the explanatory power (R2) from 5.6 to 6.2 percent.This suggests that only 5.6 to 6.2 percent of the variation in Tobin’s q can be explained by the representation of women on management boards and the control

variables, while the rest may be explained by other variables not captured in our models.

5. Conclusion This paper examines the influence of gender diversity among the members of management boards on financial performance of the Indonesian listed firms. To the best of our knowledge, the present study is the first of its kind for the Indonesian context. Hence, this study contributes to the literature by examining the link between gender diversity and financial performance for a developing economy that has different environment from that of developed economies, where previous studies have been conducted. Our final sample comprises 354 firms listed on the IDX as at 31 December 2007. Following Adams and Ferreira (2009) and Carter et al. (2003), we include both financial and non-financial firms in our sample. From correlation analysis, it is found that the proportion of female executives has a negative association with total assets. Hence, we conclude that higher proportion of women on management boards is more likely to belong to smaller firms, which tend to be family controlled. Women holding seats on the boards of this type of firms may be partly due to family ties with the founder or the controlling shareholder. Therefore, larger firms are considered “tougher” for women in terms of opportunities to sit on management boards. Cross-sectional regression analysis is conducted to examine the influence of the representation of women on financial performance. The representation of women on management boards is indicated using two variables in separate regression models, namely the proportion of women (indicated using a percentage) and the presence of women (indicated using a dichotomous variable). Using ROA as the proxy for accountingbased performance, empirical evidence obtained reveals that the presence of women negatively and significantly influences firm performance. When Tobin’s q is used as the proxy for market-based performance, the proportion of female executive also shows such a negative association. This implies that higher fraction of female executives is associated with lower level of performance. Furthermore, we employ Blau heterogeneity index to indicate the level of diversity among management board members. Our result shows weak evidence of the influence of the diversity index on Tobin’s q. In robustness checks, we run regressions separately for larger and smaller firms and find that the negative impact of female representation on ROA and Tobin’s q is significant for larger firms only. References on request.

Women in top management and their impact on ﬁrm performance: The Indonesian evidence • 27

A N D E R H A L F U U R V O O R D E E I N D B E S P R E K I N G VA N D E J A A R R E K E N I N G VA N E E N G R O OT R E C L A M E B U R E A U

W W W.G A A A N . N U

fsrforum • volume 13 • issue #3

Interview with Else Bos Chief Institutional Business and Deputy Chair of Executive Committee at PGGM By Rick Klootwijk, Rishi Sripal and Kim de Vries

Diversity has become a hot topic within the corporate world. What do you think diversity means in practice? Diversity is indeed important to me. It covers much more than the question whether or not women should be in a board position. In discussions regarding this topic means and ends are often mixed up. The goal should always be to create stronger teams by bringing people with different skill sets and different views together. Often women can bring something to the table men do not (and vice versa).

Do you think that the topic deserves so much attention? Yes I sure do. History has shown us that it is not a natural process to diversify. Teams, more often than not, are homogeneous. The idea is that diversity leads to a more effective organization i.e. a maximum of competitiveness. For this reason this topic deserves so much attention.

As board member of PGGM, a large pension administrator, you have a large responsibility. How do you experience this responsibility? It is a challenge and a joy. As an administrator for pension schemes PGGM inﬂuences the life of more than 2 million people. The company manages over EUR 100 billion of pension assets. This incorporates a huge responsibility. It faces you with complex issues with big impact for many people that are dependent on the quality of your work. But it also means

Else Bos studied Econometrics in Rotterdam. She held a range of posts at ABN Amro and at NIB Capital Asset Management, where she was responsible for the switch to a multi-client-oriented business. She subsequently held the posts of Chief Operations Officer and Chief Financial Officer. In 2002 she joined PGGM, where she served as Director TOS and subsequently as Chief Executive Officer Investments and was appointed to the Executive Board. From 1 January 2010 Else Bos is Chief of Institutional Business and Deputy Chief Executive Officer.

30 • Interview Else Bos

you are involved with many very interesting and high impact dilemma’s that need a solution.

reason may be I do not always experience the willingness to

It is a privilege to be part of that.

go through all this with women that have the ambition to step up. You need to believe in yourself, and those that do, I

Within PGGM you are responsible for the institutional business. How do you ﬁt diversity within your business?

think can get there. I do not believe the so called glass ceiling

PGGM has a strong focus on equal chances for all. We have many women working at PGGM

and a bit of luck are equally important.

is the only issue. The required commitment, a long breath

(57%). In management positions about 25% is woman. The EC has 1 out of 6, the non executive board 2 out of 6. We are on the right track! Furthermore PGGM has recently introduced a ﬂexible work format (Het Nieuwe Werken) which is expected to deliver a positive contribution to the work/life balance of both women and men with children.

Do you think the current situation of the investment markets, has made diversity of investments become more important? Diversification in the investment portfolio has always been crucial for an asset manager like PGGM. But in this context diversification has a much broader meaning. Moreover PGGM beliefs that financial and social returns can walk hand-in-hand on the long run.

There are rumours for many years to promote women at the top of the business by committing to a quota. Do you think this would be a good thing?

I am the only woman in our Executive Committee as well as in most of the non executive boards which I am member of.

The number of women in board positions in the Netherlands is low and is growing quite slowly. A breakthrough can be achieved by introducing legal quota. But I wonder if that is a good idea on the long run. I prefer a road of evolution over that of revolution. Although we need to set a clear ambition to enforce progress.

It is said that if the board of a company contains one woman, she will start thinking and acting like a man. This would mean that diversity will only have effect if two or more women take place on a board seat. Do you agree with this? I am the only woman in our Executive Committee as well as in most of the non executive boards which I am member of. I do not recognize this statement at all.

How do you think young women could be encouraged to grow to the top of a company? Are there really more opportunities for young women needed? Encouragement of talent is absolutely important. But most important is if you are prepared to persevere.

You are ranked eighth in the top 25 most powerful women of 2010. Do you attach much value to this? Not in itself. But I do realize I can be an example for others.

How you experience the combination of working and managing a family? Do you think there are enough opportunities in companies to combine this properly? From which possibilities did you make use yourself? My work is quite demanding and sacriﬁcing for me and my family. It is only possible with their support. My husband is working part time and he lets everything run smoothly in my absence.

What is your opinion about the ‘glass ceiling’? Does it really exist for women? Full effort is needed to join the top. Compare it with top sport. You have to go for it and you need a good coach, an opportunity to learn and grow (and a bit of luck maybe). Whatever the

Interview Else Bos • 31

fsrforum • volume 13 • issue #3

Diversity as opportunity

Prof. dr. S.G. (Fieke) van der Lecq

At the Erasmus School of Economics we are very lucky to have students and staff from all over the world. This allows us to mingle and collaborate with people from different language groups, ethnic origins, religious backgrounds, body size, and so forth. Usually we can only conjecture about other types of diversity, such as sexual orientation, lifestyles, food habits, and other traits people may have. With English as a Foreign Language (EFL) and a bit of tolerance, we manage just fine. After all, we are all linked to the school because of our interest in the workings of the economy and business world. This common ambition unites us. In 1986 an exceptionally good book on diversity was published. In A Tale of ‘O’, the first female management guru professor Rosabeth Moss Kanter gave a picture story of a world full of X’s. In this world all was well and fine, until an O arrived. Somewhat later, more O’s came in. Even nowadays, many people are inspired by the clear cut way in which this story describes what happens if someone is different from the group. On You Tube, you can find a video with a summary of the story. It shows the group dynamics and the adverse impact of them on equal opportunities for O’s. Just take ten minutes to watch and you will be aware for the rest of your life. Basically, diversity is about abolishing the standard and thereby including the exception. When we stop thinking in terms of the standard, we no longer denote others as exceptions. For instance, this university has stopped addressing female professors with Ms. without adding Mr. for male professors. Thereby they confirmed that men are no longer considered the standard and women the exception. However trivial this may seem, many instances of exclusion are subconscious. Everyone is aware that explicit discrimination is prohibited. What remains is implicit discrimination. By denoting people as the exception, their qualities are degraded. This is not only illustrated by the X-O story, but also by methodological research on duality (e.g. Dow, 1990) and feminist economics (e.g. Nelson, 1995). Although this holds for all kinds of diversity, let’s get somewhat more concrete by zooming in to gender diversity. After all, our economics school has only two female full professors and very few female research staff, so we are all familiar with a situation of gender imbalance. Now the issue of gender diversity can be discussed along several lines of arguments. One line of reasoning which is very popular, is the business case. In 2007, Catalyst launched their report on differences in profitability between firms with female board members

32 • Diversity as opportunity

and men-only boards. From 2007 through 2010, McKinsey has released their annual studies on the statistical relationship between women on the board and corporate performance. Whereas the Catalyst report indicates correlation, McKinsey even claims causality. This may point to a business case. If so, diversity is an opportunity for both women and their employers. Another approach to (gender) diversity consists of making clear what diversity policy aims at. Do we strive for equal opportunities or equal outcomes? Just declaring that women have equal opportunities is not enough. We all know that people tend to select new staff members who are like themselves, so there is work to be done in order to correct subconscious ideas on the image of a good new employee. This also holds for business leaders, who are usually visualised as white heterosexual men, at least in The Netherlands. In order to break through such limiting ideas, a critical mass of about thirty percent of people who are different is necessary. Not just one O, as she will be stigmatized, but a lot of them. For that purpose, quota can be useful. In order to move on from equal opportunities to equal outcomes, women need to exploit the opportunities they get. This implies that they exercise ambition, and not degrade ambitious women as un-feminine. It also implies that their partners support them while they pursue their career, instead of playing strategic games at home on childcare and housekeeping. In other words, the mind shift in business organisations needs to be accompanied by a mind shift within the women and men in the workforce. Only then can we attain true gender diversity – and many other forms of diversity, too.

References Catalyst (2007) The Bottom Line: Corporate Performance and Women’s Representation on Boards, report downloadable via www.catalyst.org Dow, Sheila C. (1990) Beyond Dualism, Cambridge Journal of Economics, 14, 143-157. McKinsey (2007 and onwards) Women Matter, reports downloadable via www.mckinsey.com Moss Kanter, Rosabeth (1986) A Tale of ‘O’: on Being Different in an Organisation, Harper Collins Childrens Books. Nelson, Julie A. (1995) Feminism and Economics, Journal of Economic Perspectives, 9(2), Spring 1995, 131-148.

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Marc Buijs (27) is bezig met zijn post-master aan de Universiteit van Tilburg. Tijdens de afrondende fase van zijn master Accountancy is hij in dienst getreden bij Grant Thornton. Inmiddels werkt Marc ruim anderhalf jaar als assistent accountant op de vestiging in Rotterdam. “Het was tijd om het studentenleven (deels) achter me te laten en me te oriënteren op de arbeidsmarkt. Oftewel, op zoek naar een werk-gever. Tijdens mijn studie had ik reeds werkervaring opgedaan binnen een klein accountancykantoor. Nu richtte ik mij meer op de middelgrote en grote kantoren. Gedurende mijn bachelor en master was ik actief lid van zowel een studie- als een studentenvereniging. Hierdoor was ik al met meerdere kantoren in aanraking gekomen, ook met Grant Thornton. Belangrijke pijlers voor het maken van mijn keuze waren: de sfeer, de doorgroeimogelijkheden en het cliëntenpakket. Vooral het laatste punt vond ik erg belangrijk. Voor zowel mijn bachelor- als masterscriptie deed ik onderzoek naar familiebedrijven. Een cliëntenpakket met familiebedrijven past bij mij.” Aansluiting gevonden

Naast het grotere mkb-segment met (inter)nationale ondernemingen richt Grant Thornton zich ook op familiebedrijven. “Ik werk vooral voor middelgrote en grote, internationaal opererende familiebedrijven. Daarnaast bedien ik ook een aantal private ondernemingen. Mijn klanten komen voornamelijk uit de Rotterdamse haven, bijvoorbeeld bedrijven in scheepvaart, offshore, transport, open overslag. Ik heb hier echt de mogelijkheid gekregen om ervaring op te doen binnen het marktsegment dat mijn voorkeur heeft.” Ik ben verantwoordelijk!

Ruimte voor ontwikkeling vindt Marc erg belangrijk. “Als starter krijg je al snel veel verantwoordelijkheid. Vanaf dag één ben je een volwaardig teamlid. Je mag direct mee naar klanten. Niet alleen managers doen het woord, ook ik mag het gesprek met de klant voeren. Het is belangrijk dat je snel ‘allround’ wordt. Niet weken achter elkaar dezelfde posten controleren, maar steeds nieuwe dingen leren. Zo coördineer en beoordeel ik ook het werk van junior assistent accountants. Natuurlijk onder goede begeleiding van meer ervaren accountants.”

*UDQW 7KRUQWRQ ELHGW PLM GH]H UXLPWH ´ Marc Buijs, assistent accountant bij Grant Thornton

Mijn eigen coach

De vestiging in Rotterdam is een typisch Rotterdams no-nonsense kantoor. De communicatielijnen zijn kort en de besluitvorming is snel. Een goede kwaliteit van werk en service leveren is essentieel. “Aandacht voor vaktechnische en persoonlijke ontwikkeling van medewerkers is belangrijk. Starters krijgen een mentor toegewezen. Hiermee bespreek je zaken zoals voortgang van je studie en punten waar je gedurende het werk tegenaan loopt. Het is prettig om een centraal aanspreekpunt te hebben. Daarnaast kun je door de informele sfeer en persoonlijke aandacht bij alle andere collega’s terecht. Hier in Rotterdam wordt van alle medewerkers een proactieve houding verwacht. Het geven van je mening wordt zeer op prijs gesteld.”

Traineeship

Grant Thornton organiseert jaarlijks een negendaags traineeship voor onder andere startende accountants. “Gedurende het traineeship kruip je in de huid van een accountant van een ﬁctieve cliënt. In een levensechte case leerde ik hoe je in de praktijk maximale toegevoegde waarde kunt creëren. Tegelijkertijd maakte ik kennis met de vestigingen, specialismen en het internationale netwerk.”

Internationaal samenwerken

“Samenwerken met verschillende disciplines komt veelvuldig voor, bijvoorbeeld met ﬁscalisten, bedrijfsjuridisch adviseurs en consultants van de afdeling specialist advisory services. Hier in Rotterdam wordt veel met internationale klanten gewerkt. Het internationale netwerk van Grant Thornton International geeft je de kans om internationaal samen te werken met collega’s in circa 100 landen.”

Meer informatie over Grant Thornton

Grant Thornton is een sterk groeiende middelgrote accountancyen adviesorganisatie met ruim 500 medewerkers, geworteld in de Randstad en verankerd in het gerenommeerde internationale netwerk van Grant Thornton International. Je hebt hiermee toegang tot de expertise van meer dan 30.000 professionals wereldwijd in circa 100 landen.

Grant Thornton is dé vertrouwde lokale accountant van wereldklasse met passie voor resultaat! Grant Thornton kenmerkt zich door een pragmatische aanpak en een open en persoonlijke sfeer. We begeleiden je goed en waarderen een eigen inbreng. Meer informatie is te vinden op www.carrierebijGT.nl.

Wij zijn trots op onze sterke positie in het midden- en kleinbedrijf. Ook op de corporate markt hebben wij inmiddels onze eigen plek veroverd. Daarom durven wij te zeggen:

www.carrierebijGT.nl

Accountancy - Belastingen - Advies

fsrforum • volume 13 • issue #3

“Juridisch niet haalbaar”

K(r)anttekening | Drs. Joost Groeneveld RA RV

“Juridisch niet haalbaar”. Je kunt je er een wereld bij voorstellen. We doen een gedachte-experiment: er is een bespreking waaraan alleen maar nette mensen deelnemen. Dat het echt nette mensen zijn, blijkt uit hun taalgebruik. Mensen van minder allooi zouden zeggen dat iets ‘niet mag’, omdat het ‘is verboden’. Mensen van nog lager allooi zullen zich misschien nog beeldender uitdrukken, en vooral bloemrijker: “daar moet je met je poten van afblijven”. Maar nette mensen zeggen dat iets “juridisch niet haalbaar” is. Toch, ze zijn niet zo netjes dat ze niets willen doen dat juridisch niet haalbaar is. Nee, dat willen ze nu juist wèl. En dat is niet zo netjes. En die toch niet zo nette mensen zijn het wel met elkaar eens. Is dat niet een beetje raar? Het verraadt veel van hun denkwijze. Zulke niet zo nette nette mensen verraden zich verder niet zo vaak. Daarom denk je tot dat moment waarop zij zich verraden dat zij nette mensen zijn.

Drs. Joost G. Groeneveld RA RV is directeur van Wingman Business Valuators B.V. te Breda en voorzitter van de Stichting WBO (register van business valuators). Hij was hoofddocent aan de Economische Faculteit van de Erasmus Universiteit te Rotterdam.

Vaak wordt zulk verraad recht gepraat met verwijzing naar een groter belang, hoewel het per deﬁnitie om onrecht gaat. Onrecht wordt zo het recht van de sterkste. Want dat is de deﬁnitie van juridische haalbaarheid. De zwakkere moet een beroep doen op het recht zoals de wet, gewoonte en de goede zeden dat voorschrijven en zoals de rechters daaraan in jurisprudentie invulling geven. “Juridisch niet haalbaar” wil zeggen dat deze bescherming naar verwachting een te zware hindernis zal blijken te zijn. “Onderdelen van het (pensioen)akkoord waarover de sociale partners het nagenoeg eens waren, blijken in te druisen tegen bestaande wetgeving” (NRC Handelsblad, voorpagina, 10 maart 2011). Die niet zo nette mensen blijken dus de sociale partners te zijn. Het woord ‘sociaal’ krijgt zo wel een heel bijzondere betekenis. Het ‘druist in tegen bestaande wetgeving’. Ja, en als je het dan toch doet, ben je in overtreding of je begaat een misdrijf. Maar dat zal voor de sociale partners misschien niet opgaan. Meer iets voor een gewone straatrover. “De oplossing staat nu op losse schroeven”. Ja, dat is het beroerde van wetgeving als je oplossing daar tegen indruist. Dan staat die oplossing niet eens op losse schroeven. Dan moet je een andere oplossing zoeken die juridisch wèl haalbaar is. Met de oplossing die geen oplossing kan zijn, waren bonden en werkgeversorganisaties VNO-NCW het eens “over een pensioenstelsel waarbij de effecten van tegenvallende rendementen voor de pensioenuitkering over tien jaren zouden worden gespreid”. Deze tekst vind ik niet zo heel duidelijk.

36 • “Juridisch niet haalbaar”

Het zullen wel andere woorden zijn voor dekkingstekort en de afwenteling daarvan. Die 10 jaar spreiding zal een zwaar bevochten compromis zijn: resultaat van niets ontziende onderhandelingen tot diep in de nacht op een zeer geheime locatie. En wat houdt die spreiding dan in?

Nette mensen zeggen dat iets “juridisch niet haalbaar” is. “Cruciaal hierbij is dat in het nieuwe pensioengebouw ook het bestaande pensioenkapitaal van circa 800 miljard euro zou worden opgenomen”. Ook dat is mooie taal. “Het nieuwe pensioengebouw”. Ja, opgetrokken op de fundamenten van 800 mrd euro die niet in eigendom zijn van de architecten. Natuurlijk, ook in mijn privésituatie doen zich regelmatig problemen voor waarbij de oplossing in handen is van de buren. Als zij mij van hun pensioen wat bijspijkeren…. Die oplossing druist dan tegen de wet in. Maar ik weet zeker dat de buren het heerlijk zouden vinden om mijn probleem op te lossen. “… Een dergelijk scenario stuit op ernstige juridische complicaties”. Ja, ik kan het gewoon bij de buren gaan halen. Maar ze zouden de politie kunnen bellen. Misschien moet ik ze daarom een beetje knevelen. Gewoon prop in de mond. Kunnen ze ook niet tegenspreken. Dat doe ik dan voor ieders bestwil. De buren hebben er heus hard voor gewerkt. Maar echt nodig hebben ze het niet, volgens mij. Dus beter als ze uit zichzelf er het zwijgen toe doen. Wat jammer van die ernstige juridische complicaties. Waarom moet iemand dat nu weer bedenken. Daar bederft hij alles mee. Nog niemand had er iets over gezegd. Gewoon spelbederf. “Het gaat met name om het ‘invaren’ van de oude pensioenrechten in het nieuwe systeem”. Wat is taal toch leuk. Onteigening heet voortaan: invaren in het nieuwe systeem. Schuitje varen, theetje drinken, zoete melk met room. Ja daar kun je het wel over eens worden. De juridische complicaties bestaan dan zeker uit de moraal van dat leuke liedje: “zoete melk met brokken; kindje mag niet jokken”. Na het zoet het zuur.

Die vermaledijde pensioenrechten zijn voor de deelnemers nominale rechten: “Het bedrag dat beloofd is, wordt na pensionering ook daadwerkelijk uitgekeerd”. Dat is toch echt uit de tijd. Gekker moeten ze het niet maken. In de politiek beloof je zo vaak wat. Maar iedereen weet toch dat het alleen maar onzin is. Hogere machten en zo. En dat is dan volgens de landsadvocaat het juridische probleem: “Zowel individuele pensioentrekkers als belangenorganisaties, bijvoorbeeld ouderenbonden, zullen dat verlies van recht waarschijnlijk met succes kunnen aanvechten bij de rechter”. Je zou ze toch iets doen. Zo’n individu! En dan ook nog eens een ouderenbond. Ja, je zult nog meemaken dat de rechter ze gelijk geeft. En dan leven we in een rechtsstaat. Maar op bladzijde 25 van hetzelfde NRC lacht het geluk weer toe: “Sociale partners praten gewoon door”. Ik was al bang dat zij het moede hoofd in de schoot hadden gelegd. Aan hen lag het niet. Maar ja, die Nederlandse regels. Als je die aan je laars kon lappen, waren ze er zo uit. “En daar komt bij dat ook Brussel meekijkt”.

In de politiek beloof je zo vaak wat.

Maar iedereen weet toch dat het alleen maar onzin is. “Veel werknemers gaan nog altijd uit van de gedachte dat zij na hun pensioengerechtigde leeftijd 70 procent van hun laatstverdiende loon krijgen. Een ﬁctie inderdaad omdat die 70 procent nu ook niet altijd wordt gehaald”. Ja, als je het zo ziet, komen die vele werknemers al bedrogen uit. “Maar toch is het lastig om nu met de boodschap te komen dat pensioenen meer onderhevig zullen worden aan de nukken van de markt”. Ja dat blijft lastig. Vervelend ook. Inderdaad zou ik ooit 70% van mijn eindloon krijgen. Dat werd middenloon. Mijn grootste troost was daarbij dat mijn salaris bij de universiteit toch nauwelijks omhoog ging. Dus wat maakte het uit? Maar de nukken van de markt gaan me toch te ver. Zou ik een plus krijgen wanneer die nukken een bokkensprongetje zouden maken? Nee toch? En wie bepaalt de markt? Wie maken de markt? Nee, die overkomt ons niet. Dat is geen noodlot. Dat is mensenwerk. Niet eens van zo heel veel mensen. Die markten zijn allerminst perfect en ook heus niet zo efﬁciënt. Of doorgronden we de ‘darkpools’ waar kolossale vermogens worden verhandeld? En maken de pensioenfondsen geen fouten? En zijn in het verleden de ondernemingswinsten niet gespekt met overschotten die we nu blijkbaar tekort komen? Nog even los van fraude en spilzucht. En heet het geen pensioenverzekering? Kopen we door onze betaalde premies niet juist zekerheid? En hebben we daarbij een keuze? Ik kan me de Brusselse zorgen wel voorstellen: “Al was het maar vanwege het mededingingsprincipe”. Ik verheug me in en op de bescherming die wetgever en rechtspraak bieden. En toch ben ik er niet gerust op. Begin jaren tachtig is voor mij en mijn soortgenoten het nominale recht op salaris met 15% gekort omdat het ministerie van onderwijs moest bezuinigen. Periodieken werden bevroren. Rangen werden afgeschaft. Dat kon toen met een pennenstreek.

“Juridisch niet haalbaar” • 37

fsrforum • volume 13 • issue #3

Word of the chairman

Luc Gerretsen

Dear members, It’s already spring and the academic year is steadily moving towards the summer. However before summer can really kick in we have some very exciting events. We will cross borders two times with the European Finance Tour and the International Research Project! Furthermore, we have two M&A events, one accounting event, a new international master class and a new women only event coming up. Looking back on the past half year I am proud of what we have organized as FSR Board. However, we couldn’t do this without the help of or active members. On the 25th of March we travelled with all the active members, the current board and the former board to Liverpool for a smashing weekend! As our board year is officially halfway we started the look for the XIVth FSR Board! If you like to challenge yourself, get in touch with numerous companies, students and professors then an FSR Board year is something for you! We are looking for 6 highly motivated students to take the lead of the FSR for a full year. If you are interested in a position you can go to www.fsrbestuur.nl for the precise information regarding positions, the way to apply and deadlines. The FSR is this year very innovative with organizing three new events. The most progressive event is the Female Business Tour (FBT) on 19th and 20th of May. The FBT is a two day event with the Boston Consulting Group, Heineken, TNT Post and AEGON. The FBT distinguishes itself as only female students can apply. In the coming years we foresee an ongoing trend in diversity policy of companies. One of the main goals for many companies is to get more women into board positions. However, it’s not only at the top where companies are seeking for talented women but also at their new hires. If you believe you are a talented female student you shouldn’t miss this event. For the Finance students we have two very interesting M&A events in May. The first one is the Corporate Finance Competition which is a three day business course in the luxurious castle Duin & Kruidberg. Students have to solve cases from RBS, BDO, Ernst & Young, Rabobank and ABN AMRO. One of the strengths of the Corporate Finance Competition is that students really experience the differences between large, mid-sized and smaller deals. As a participant you are not only cracking cases, but you also have enough time to have more informal contact with the participating companies during dinners and drinks. Furthermore, we have the Investment Banking Master Class (IBM). After the success of last year the IBM will be organized this year for the second time. On the first day students will get a very intensive training from Training The Street. TTS is hired by al large Investment Banks in London and New York to train their bankers. After completing the TTS training, students get a certificate stating that they you completed the master class with success. After this training you can be sure that you have solid knowledge of M&A deals. On the second day you bring your gained insights into practice with a real life case of Barclays Capital. Spring is also the time that two FSR groups go abroad. The European Finance Tour will this year go to Paris. A group of 20 Finance students will visit Rabobank, Nomura, the Dutch Embassy, BNP Paribas, KPMG and many more top companies in the financial world. The general theme for this year’s European Finance Tour is ‘Coping the crisis’.

38 • FSR news

The International Research Project is preparing for the trip to Kuala Lumpur and Singapore. The group consists of 10 Finance and 10 Accountancy students who will conduct research in the field of diversity. The kick off took already place because the main part of the research is done in the Netherlands. Students have already been collecting data and analyzing this besides visiting a variety of companies. On location the participants will conduct field research during company visits. Stating the above the FSR has a very full and challenging program for the coming months. The most recent event that we organized was the Rotterdam pre-round of the Multinational Battle. The Multinational Battle is a nationwide event organized by the Financial Study organization Netherlands in which the FSR takes part. In the pre-round Sophie Michielsen, Joost Alberts, Rosanne van Duijvenbode and Roel van Wegberg were selected to represent the FSR at the finals in Baarn, where team Rotterdam competed against teams from Maastricht, Groningen, Tilburg and Amsterdam. We are proud that team Rotterdam was by far the strongest as they won 4 out of 5 cases! On behalf of the FSR I would like to congratulate them with their exceptional good results. We are currently heading to the end of the academic year and I hope to see you all at one of our master classes, workshops, cycles or other events. Feel also free to come to our office on H14 if you have any question, for a coffee of just for a chat.

DO YOU GRASP WHAT WE ARE SEEKING?

NEXT IN-HOUSE DAY, 27TH OF MAY 2011!

AMSTERD AM

N EW Y OR K

S I N G A POR E

Who we are?

We are a dynamic team of traders, IT specialists, and professionals. Who are the best at what we do. We are peer - recognized as Europe’s leading ETF market maker, trading on- and off-screen all day to provide the prices on which Investors trade. We train our traders in-house and use custom-built technology, which means our successes are a joint effort from which everyone can proﬁt.

Our culture?

Work hard and play harder. We offer a performance based incentive scheme, training opportunities, luxury lifestyle perks, and an open collegial environment. In addition, we offer the opportunity to work overseas.

Interested?

For more information and in-house days at the Amsterdam headquarters contact Recruitment +31 (0)20 799 6799 or check out www.ﬂowtraders.com.

fsrforum • volume 13 • issue #3

FSR Former board member

Ricky Tan

Passport Name: Ricky Tan Age: 25 Residence: London, United Kingdom Employed at: J.P. Morgan Current position: Commodities Sales Which FSR Board: 9th board, 2006-2007 Board function: Treasurer Studies: Financial Economics (Bsc. & Msc.), Dutch Law (LLB) Year of graduation: 2009 Which car do you drive: The London Underground What do you drink on a Friday night: Cold Beer Life motto: “Never underestimate the power of human stupidity”

I thoroughly enjoyed every moment of my year in the FSR board, and proudly refle reflect ect R. on all the activities we organized and the people I’ve got to know through the FSR. nWhat definitely stood out in our year was that we attracted a record number of sponsors and continued to grow rapidly from a financial point of view. This enabled us to expand the number of companies at our events whilst improving the quality of ourr events. The successful International Research project to South Korea was just onee of many examples of how we leveraged the above mentioned to the fullest extent. On the more social side of my time at the FSR, I vividly remember the WALV that left me without a voice for a week, committee weekends in Paris/Antwerp/Cologne, Alumni boat trip, Ex Board Member Dinners/Parties and the day that I somehow managed to break the FSR web hosting after failing to put digital snow on the website (I don’t know why this was a good idea in the first place). During my year as Treasurer, I also had the pleasure of attending quarterly audit meetings with my predecessors (Kasco-meetings), during which the financial situation of the association was assessed. These meetings were useful learning moments, t but b t also l filled with banter and accompanied by the culinary phenomenon of 2006/2007, the “Kapsalon”. Maybe not because of the “Kapsalon”, but my year as board member played an important role in finding a job. As a board member, one develops a set of skills that is most useful in any career. Additionally, one establishes a network comprised of people working in the financial services industry. During the International Banking Cycle 2006, I got in touch with all the different investment banks, including J.P. Morgan. I applied for, and subsequently participated in an introductory event that J.P. Morgan organizes every year in London for students interested in Sales, Trading & Research, and who are at least 2 years away from graduation. This participation led to interviews with J.P. Morgan during the IBC in 2007, an internship in the summer of 2008 and ultimately to my current position with the company. I work at J.P. Morgan on the commodities trading floor in the Energy Sales team. Basically, our job in sales is to cover European corporate clients who want to hedge their energy exposures. Their hedging activity might involve financial (derivative) products but also physical solutions. Oil, gas, electricity and emission rights are the most common commodities we trade with our clients. Our sales teams are the point of contact for clients and they work on an on-going basis with traders who manage the risk that the bank takes on every time a trade is done with a client. On a typical day, I get into the office at around 8am, and check financial news headlines and commodity prices. Subsequently, throughout the day, clients will call, e-mail or send instant messages asking about the markets, but also with trade inquiries. The latter means that, until the market closes in the evening, I have to stay in touch with what happens in the markets whilst pricing up trades using pricing tools and talking to the traders. As the business of trading revolves around fast paced and effective communication, people on the trading floor sit just an arms length from each other. Communication between people is always very direct and open, which makes it the perfect environment to learn from others and discuss ideas. More than often, we place our new graduates next to someone who’s been in the industry for a long time so that they can learn the business effectively and have a continual dialogue. I am reminded of the FSR on an ongoing basis by colleagues and other acquaintances, who have been active at the FSR or were put into contact with their employer through one of the numerous activities organized by the association. This shows that the FSR is so much more than just a presence on the campus, and I’m proud to have been a little part of it.

FSR news • 41

Ernst-Jan Ottenhoff Position: Consultant TAS Department: Ernst & Young Transaction Advisory Services

Could Ernst & Young Have you almost completed your studies? Are you exploring the market in hope different departments and get a taste of the atmosphere during a shadow day or an Inhouseday or writing your thesis at our company. Discover if Ernst & Young is

The employees of Ernst & Young can best be described as; driven, ambitious, friendly and diverse. No person within Ernst & Young is the same which creates a very diverse working environment. I work at the Transaction Advisory Services department (TAS) and focus primarily on valuation, Mergers & Acquisitions and business modeling issues. Before joining Ernst & Young, I studied Business Administration with a master in Finance. The reason I joined Ernst & Young is because people play a central role in our organization. The opportunities and possibilities to develop yourself are endless. During my ﬁrst year

as a consultant at TAS I have been able to work on a variety of projects, participate in several training courses, and work together with people throughout the whole Ernst & Young organization. I have experienced a lot of freedom and responsibility during the projects I have done this year. This might be seen as a though method in the beginning, but this is in my opinion the best way to learn and will make you superior at the job. If you are interested and consider working in the corporate ﬁnance, Ernst & Young TAS is deﬁnitely an excellent choice. - Ernst-Jan Ottenhoff

Through an internship after my studies in Economics and Business with a master in Accounting, Auditing and Control I joined Ernst & Young. Meanwhile I have been working for 2.5 years in the Assurance service line for the Multi Industry Group (MIG). When you start working at Ernst &Young for the Assurance practice you ﬁrst attend a training of two weeks. During these courses you are trained on the Ernst & Young Audit Methodology and you are learned about the (international)

Nelleke van ‘t Hoff Position: Staff Audit Department: Ernst &Young Accountants

Jorn Stienstra Position: Staff Audit Department: Ernst & Young Accountants

be your future employer? of ﬁnding your ideal future job? Then take the time to pay a visit to Ernst & Young. Chat with staff in at an informal talk complete with a glass of wine. Ernst & Young also offers the possibility of taking part in the right employer for you!

organization of Ernst &Young. This training is very helpful and you are also introduced to all the starters of that year. My tip for students: Try to grasp the opportunity to participate in events such as the FSR offers or businesscourses and internships to enrich your knowledge and experience. It does not give any guarantees for the future, but it broadens your horizon tremendously! - Nelleke van ‘t Hoff

During my board year at the FSR I have got to know a lot of companies, thus I could make a good comparison between all the accounting ﬁrms. The work at the various companies looks very similar, so I compared the atmosphere and the colleagues. I felt most at ease with E&Y, informal inside and formal outwards. Its employees are ambitious and relatively young people, most of them are between 25 en 35 years old. I also work on the

MIG department, what I like the most of this department is the variety of customers. I have large and small clients in various industries. I serve for example small customers around the corner, but also several well known multinationals. Another beneﬁt is that E&Y invests a lot in the development of their employees and their career through studies and courses. – Jorn Stienstra

More information? Visit www.ey.nl/carriere or contact Stefanie Wigny (06-21252893)

Gezocht: ambitieuze trainees

Beheer jij de sleutel van de schatkist? De Auditdiensten en de directies Financieel Economische Zaken

Audit en Financial Traineeship: een traject vol kansen

bij het Rijk zijn op zoek naar jong talent. Ben je onlangs of bijna

Tijdens het Audit Traineeship draai je twee jaar volledig mee op

universitair afgestudeerd én geïnteresseerd in werken in een

verschillende ministeries om de nodige praktijkervaring op te doen.

financiële functie bij de rijksoverheid? Word dan Audit of Financial

Daarnaast krijg je een Post Master Accountancy en een intern opleidings-

Trainee bij het Rijk!

programma aangeboden. Als Financial Trainee werk je gedurende het tweejarige programma in verschillende financiële functies, waardoor

Als Audit of Financial Trainee opereer je in de vaak hectische

je als Financial Trainee de diverse financiële invalshoeken belicht krijgt.

context van politieke verhoudingen en maatschappelijke

Samen met de andere Financial Trainees volg je daarnaast een op maat

ontwikkelingen. Die dimensie maakt het werk veelzijdig en extra

gemaakt opleidingsprogramma.

spannend. Ook lever je een bijdrage aan een beter presterende overheid. Durf jij die financiële verantwoordelijkheid aan?

Functie-eisen Voor het Audit Traineeship zijn wij op zoek naar bijna of net afgestu-

In september gaan het Audit Traineeship en Financial Traineeship

deerde academici met als achtergrond bij voorkeur bedrijfseconomie.

van start. De trainees hebben een zeer uiteenlopende

Voor het Financial Traineeship zijn wij op zoek naar bijna of net

achtergrond; we zoeken immers potentiële accountants, maar ook

afgestudeerde academici met als studierichting algemene economie,

breed inzetbaar financieel talent. Jij kunt één van hen zijn!

bedrijfseconomie, bedrijfskunde, bestuurskunde en politicologie. Ook bijna of net afgestudeerde academici die affiniteit hebben met financieel beleid kunnen solliciteren naar het Financial Traineeship. Meer informatie Voor meer informatie over de functie, de sollicitatieprocedure en de mogelijkheden na je traineeperiode: www.werkenbijhetrijk.nl/minfin en kijk vervolgens bij traineeships. Je kunt je t/m 16 mei 2011 aanmelden voor één van beide traineeships.

Werken bij het Rijk. Als je verder denkt www.werkenbijhetrijk.nl

fsrforum • volume 13 • issue #3

FSR Activity report Accountant Firms Day

On the 27th of January BDO, Berk, Grant Thornton and Mazars welcomed 20 accountancy students at the monumental villa “The Heerenhuys” in the Park next to the Euromast. This day was organized for students to learn more about the four middle-sized accountant firms. The day started with a warm welcome of Dr. Sc. Ind. A.H. van der Boom who told us more about the opportunities at the four middle-sized accountant firms. After the introduction, students were able to ask all their questions about the work, culture, customers and specialties of the four accountancy firms during a speed date session. To get more familiar with the day-to-day work of an accountant, the students had to work out a case about a contractor. Not only were the students given the chance to apply their theoretical knowledge gained from the university, but their communication skills were also tested during the interviews they had to hold. After this hard work the day ended with drinks where the students could get to know the employees in an informal way. Looking back at the day, we can conclude that it was a successful day. I would like to thank the recruiters and accountants of BDO, Berk, Grant Thornton, Mazars and Dr. Sc. Ind. A.H. van der Boom and not to forget the students who contributed to the success of the Accountant Firms Day. I hope that this day has contributed to a next step in the career path of the students.

FSR news • 45

Wat belangrijk is, laat je niet los.

d Ik wil ruimte om te groeien. Waar zet ik

Waar je ook bent, belangrijke beslissingen zijn nooit ver weg. In je rol als accountant en bij het bepalen van je volgende carriĂ¨restap. Bij Grant Thornton begrijpen we dat je voortdurend bezig bent met je groei. Sterker nog, wij zijn er zelf ook mee bezig. Onder andere door jouw ambities alle ruimte te geven en door je talent te versterken met een goed doortimmerde opleidingsaanpak. Meer over ons op onze website.

www.carrierebijGT.nl

ol ev

e end

stap?

Grant Thornton bij jou in de buurt: Alphen aan den Rijn - Amsterdam Boskoop - Gouda - Leiden - Rijswijk Rotterdam - Woerden

Accountancy - Belastingen - Advies

fsrforum • volume 13 • issue #3

Active Members Weekend 2011 Liverpool

FSR news • 47

fsrforum • volume 13 • issue #3

FSR Activity report Financial Business Cycle

January and February were the playground for six different top level companies during the Financial Business Cycle. Two banks, two trading companies and two multinationals were visited this year.

the work atmosphere is also part of an inhouse day, therefore we got a tour on the trading ﬂoor. During a game the students had to make a bid on a stock with the information they got. After some quick thinking it was time to relax with a drink.

Optiver

Procter & Gamble

The day started with a presentation about the company, after which the students were challenged to make a math test which is obligatory if you want to work at Optiver. The program also included a tour on the trading ﬂoor where we could feel the tension, after which it was time for the students to trade. During a simulation game, the students had to trade against each other with stocks. The day ended with pizza and drinks, where the traders joined us after closing the day.

The first speaker on the program was the Financial Director of P&G, who told us more about the financial activities at Procter & Gamble. Procter & Gamble offers a lot of opportunities for employees to work abroad, they are investing a lot in their employees and they give you the opportunity the develop yourself. The day included a case about Pringles, a product of Procter & Gamble. In groups the students had to solve the business case and analyze whether the investment would be profitable and present it to a financial analyst who worked on this business case in real life. After the presentation the students could ask all their questions about the outcome of the investment in Pringles, which made a real life case for the students. The program ended with a presentation of the Benelux General Manager who came to The Netherlands especially for this day.

Kempen & Co On the top floor of the office of Kempen & Co on the “Zuidas” we were kindly welcomed with a lunch. During a presentation the departments Asset Management, Securities, Investments and Corporate Finance were explained. Kempen & Co prepared a corporate finance case for us in which team acted as the management of a construction company. Depending on the circumstances of the company, the students had to decide whether they wanted to buy another company, merge, or sell their own company. The day ended with drinks and a buffet in bar in the Kempen & Co office where more colleagues joined us to answer all questions about Kempen & Co.

Shell For a lot of students it was somewhat unclear what the career opportunities are at Shell. A manager who already works for Shell quite some time told us more about his experiences and work. From working at a headquarter to working at a plant abroad, it is all possible at Shell. The case Shell prepared for the students was really diverse, because it represents a real life problem. The exploitation of an oil ﬁeld requires a lot of analyses about the risks. After presenting the case, the case was discussed and the students got to know more about all aspects you have to consider when deciding to exploit the business. The students were all very interested and the recruiter told us more about the application process at Shell.

Flow Traders The day at Flow Traders started with a presentation by the founder and CFO of Flow Traders. It was really interesting to hear more about the progres and developments of the trading world and especially Flow Traders. But the presentation was not the only thing we came for this day, because experiencing

48 • FSR news

Rabobank The case at Rabobank was about the “Bijzonder Beheer” department of Rabobank. The students were not yet familiar with this department which made it even more interesting to solve the case and to make a presentation with the results. With the trainees and a manager the results were discussed and the trainees told a lot about their experiences of the Corporate Management Traineeship. The day ended with drinks, together with more trainees who joined us after a day of working and shared their experiences with us.

fsrforum • volume 13 • issue #3

FSR Activity report Multinational Battle 2011

The Multinational Battle is a nationwide event organized by the Financial Study association Netherlands (FAN). The FAN is a cooperating organization between the five largest financial study associations in the Netherlands. The Multinational Battle is an event where cases are solved by teams. In the pre-round, held in every city, one of the multinationals selects 4 students to represent their study organization in the grand final. During the Rotterdam pre-round, Ahold selected Sophie Michielsen, Joost Alberts, Roel van Wegberg and Rosanne van Duijvenbode. On March 9, 10 and 11 the finals took place at the luxurious castle Hooge Vuursche. For three days the city-teams battled against each other by solving cases from Unilever, Ahold, TNT Post, Heineken and KPN. Team Rotterdam won 4 out of 5 cases and proved to win the Final for the second time on a row. The FSR would like to congratulate Sophie, Joost, Roel and Rosanne with their excellent results!

Joost Alberts, winning finalist Multinational Battle 2011 A few weeks ago, the Multinational Battle was brought to my attention. As a master student Financial Economics, multinationals are very interesting potential employers to start a career. As such, I decided to apply for the qualifying round in Rotterdam, where Ahold was the participating multinational. After an intense, challenging and interesting day, Sophie, Rosanne, Roel and I were selected to play the finals. You can imagine we were quite happy and proud at the drinks afterwards! As a team, we played the finals, which were held at a very luxurious and beautiful location. For 3 days, we did our very best to come up with viable and smart solutions to the various cases we solved. During those 3 days we really grew as a team. By providing the best solution in 4 out of 5 cases, we as the Rotterdam team won the Multinational Battle. All four of us were very happy with our performance as a team. The Multinational Battle provided us with a clear picture of what working at a multinational could be like. Not only did the multinationals provide us with real-life cases based upon problems they face every day, but we were also given ample time to get to know them in a more informal setting. This happened during lunches, dinners and drinks. We look back on the Multinational Battle as an amazing experience and I can highly recommend students to participate next year!

FSR news • 49

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fsrforum • volume 13 • issue #3

Financial Traineeship bij TNT Post

Waarom TNT Post? Het einde van mijn studententijd begon te naderen en ik wilde graag de arbeidsmarkt gaan verkennen. Ik hoef niemand uit te leggen dat bedrijvendagen daar erg goed voor zijn. Hier kwam ik onder andere in aanraking met TNT Post. De eerste indruk was meteen goed. TNT Post kwam over als een gezellig mensenbedrijf met volop jonge, dynamische en ambitieuze mensen in dienst. Omdat ik nog moest beginnen met mijn scriptie, besloot ik dat bij TNT Post te gaan doen. Dit was de mogelijkheid voor mij om te kijken of het beeld dat ik van TNT Post had ook werkelijk klopte. Dat ik nu bij dit mooie postbedrijf werk, zegt denk ik genoeg.

Dat ik nu bij dit mooie postbedrijf werk, zegt denk ik genoeg. Al snel kwam ik erachter dat TNT Post twee ontwikkelingsprogramma’s aanbiedt voor de net afgestudeerden onder ons: het Financieel Traineeship en het Young Executive Programme (YEP). Wat ik niet wist, is dat je als Financial beiden kan gaan doen! Je start met het Financieel Traineeship, waarin je in 7 maanden tijd 2 ﬁnanciële opdrachten vervult. Dit zijn leuke maanden waarin je ook kennis maakt met alle bedrijfsonderdelen binnen TNT Post en je de kans krijgt je netwerk in korte tijd te vergroten. Na deze periode stroom je door in het YEP.

Financieel Traineeship Voor mijn eerste opdracht binnen het Financieel Traineeship ben ik geplaatst bij Spring Global Mail in Die men, een joint venture van TNT Post en Royal Mail. Erg leuk om op een internationaal kantoor te zitten binnen de grote post wereld. Voor Spring heb ik een tender proces opgezet om het cash management proces (in andere woorden: het cash beheer) te verbeteren. Na een paar maandjes in Diemen gezeten te hebben, ben ik doorverhuisd naar het hoofdkantoor in Den Haag. Hier ben ik bij Control Commercie terecht gekomen. TNT Post heeft de afgelopen jaren veel nieuwe shop-in-shop formules geopend. Aan mij was de taak om deze formules te analyseren en eventuele verbeteringen aan te dragen. Natuurlijk was het

daarbij ook belangrijk de winkels daadwerkelijk te bezoeken, wat de opdracht leuk en concreet maakte.

En nu… Ondertussen heb ik net mijn Financieel Traineeship afgerond en ben ik in een erg leuke YEP groep van 20 starters terecht gekomen. Ik werk momenteel weer bij Spring, waar ik de kans heb gekregen mijn eerste opdracht weer op te pakken. Als projectmanager ben ik nu verantwoordelijk voor de implementatie van een nieuw cash management systeem. Vanaf juli zal ik van job switchen en als controller bij Retail ervaring kunnen opdoen in de planning & control cyclus binnen TNT Post. Voor mij voorlopig genoeg uitdaging!

Naam: Daphne Sap Studie: International Business - Master in Accounting Universiteit: Maastricht University Start TNT: 1 juli 2010

Company presentation TNT Post • 51

fsrforum • volume 13 • issue #3

FSR Activity Report International Research Project

It has been a busy fall for the IRP Committee. With a record number of applications, it meant long days of interviewing and evaluating all applicants, but after hours of consideration and discussion, the group was formed. And what a great group it has turned out to be! The first informal get-together was on the 8th of December, where the participants had the opportunity to meet each other for the first time, share their excitement and hook up with a research partner. On the 12th of January we had our first official meeting during the Kick-off with our main sponsor Ernst & Young at restaurant Mooii. The workshop ‘First Impressions’ gave the participants the opportunity to get to know each other a bit better in a playful manner. A week later, the guest lecture by Varova Investments was already on the agenda, where two partners of this fascinating firm gave an inspiring presentation. By now, all participants have presented their research proposal to their supervising professors, Dr. Karen Maas (Accountancy) and Dr. Willem Schramade (Finance). On 26th of January, the participants gathered at Chartis, the former AIG, for an inhouseday. During this day, Chartis provided us with a broad and extensive view on the, to students relatively unknown, world of insurances. Two weeks later it was time for our inhouseday at Deloitte. With a better understanding of the opposite sex, the participants were given a few weeks off to do their exams, work on the theoretical framework of their research and catch their breath. Afterwards it was time for an inhouseday at KPMG. An inspiring talk of a partner of KPMG, with useful practical info on do’s and don’ts in Malaysia & Singapore, was followed by a training in etiquette. Mid-March we had another inhouseday with our main sponsor Ernst & Young. During this day we had a little reunion with familiar faces of E&Y employees we had already met during the Kick-off three months earlier. After various presentations (including one of the Diversity Manager), the day was ended with a pub quiz, where our knowledge on Kuala Lumpur and Singapore was tested in a competitive way. Our last inhousedag for now, of BDO, was in a special environment; soccer stadium de Kuip Rotterdam.

Hotels are booked, the company visits planned and the group is great! The only thing we have to do by now is counting down the days for an unforgettable trip to these extraordinary cities. Kuala Lumpur & Singapore, Here we come!!

The formal program on location is completely filled by now. In line with this year’s theme ‘Diversity’, we have planned visits to companies varying from large Dutch firms such as Vopak & ABN-Amro to typical Malaysian businesses such as Petronas & Malaysian Palm Oil Board. At the time of writing, the informal program is being planned; from a welcome drink on the 70th floor of a hotel, to a hop-on hop-off tour through Kuala Lumpur. Furthermore some participants planning their trips after the official program will end, from city-trips to bounty beaches and the jungle, which is creating a lot of excitement within the group.

FSR news • 53

Resultaten uit ons verleden bieden garanties voor jouw toekomst. Academisch toptalent Een academische titel is natuurlijk een geweldige investering in je carrière. Maar eigenlijk begint het nu pas. Als jij een baan bij de top van het bedrijfsleven of de overheid ambieert, is Deloitte de beste keuze. Elk jaar scoren we hoog in onderzoeken naar favoriete werkgevers, arbeidsvoorwaarden en werknemerstevredenheid. Bovendien zijn veel topfunctionarissen in Nederland hun carrière begonnen bij Deloitte. En dat is niet toevallig. Bij ons werk je namelijk al vanaf dag één aan innovatieve oplossingen voor én met toonaangevende organisaties. En ondertussen aan je eigen waardevermeerdering. Nu onze naam op jouw cv zetten, betaalt zich straks dus dubbel en dwars uit. Zoek jij de beste start van je carrière? Begin eerst hier: werkenbijdeloitte.nl.

fsrforum • volume 13 • issue #3

FSR Alumni Association On diversity and salaries

The International Women’s Day (IWD) was organised recently on the 8th of March. I must confess that I’m not a profound supporter of these type of events (mainly because I don’t get an invite to these parties), but I was surprised to learn that this IWD 2011 was also celebrated its centenary. Apparently the IWD was held for the first time back in 1911 in Austria, Germany, Denmark and Switzerland to fight for women’s rights to work, to vote and so on. Basic rights that we, in our time, do not even think about. This is a memorable achievement. But, on or around the IWD, there also seems to be an increased number of news articles in which the salaries of women are compared with those of men. According to these articles, women in the Netherlands earn approximately 15% to 20% less than their male counterparts. I find the message in these articles rather interesting, because it does not stroke with my own observations. My female peers are paid the same salary for their work. So where does this message that women earn less come from? First, I must say the choice of words in these articles is often rather poor. The message should be that women receive less salary than their male counterparts, instead of women that earn less than their male counterparts. But let’s assume the writers of these articles mean the same. Another comment on these articles is that they tend to lack a comprehensive approach. They present some very simple data mining by taking the average salary of men and women. This leaves out important causes such as differences in job functions, age, etc. Data mining is a nice tool, but the relations found should always be tested for plausibility. Fortunately, I found some articles that pay a little more attention to these causes. One of the major causes is that women have a shorter careers due to family planning. But those articles usually take the shortcut by quickly concluding that women are not paid the same salaries and that this is an unfair thing. But choice is one of the greatest freedoms we have. So far these articles have not investigated whether women really want to continue their career or if they are happier when they quit their job. Most corporate businesses have women leadership programs for several years now to increase the number of women at the top. Why is this program picking up so slowly? Are women forced in their family roles or is this a free choice made by the women? I guess that we need some articles that address this question. In the meantime let us hope that authors pay some additional attention to the quality of their articles. Arjan Latour FSR Alumni Association

FSR news • 55

fsrforum • volume 13 • issue #3

FSR Activities Agenda 2011

Activities 2011 11 April - 6 May National Investment Competition Invest and be a winner!

1 - 15 May International Research Project Kuala Lumpur & Singapore, diverse yourself.

11 May Bachelor Accountancy Day Will you choose accountancy?

10 - 11 May Investment Banking Masterclass Learn to valuate, like an investment banker.

19 - 20 May Female Business Tour It might be a men’s world but it would be nothing without a woman.

30 May - 1 June Corporate Finance Competition Five star event: hotel, companies and participants!

9 June Ernst & Young Drink Get to know the employees and the company.

56 • FSR news

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Een succesvolle carriĂ¨restart is meer dan een goede cijferlijst. Het begint met karakter en inzicht in jezelf. Ontdekken wie je bent, weten waar je naartoe wilt groeien ĂŠn hoe je dat voor elkaar krijgt staat altijd aan de basis. Ernst & Young coacht jou actief op weg naar jouw succes. We bieden je volop kansen in de wereld van assurance, tax, transaction en advisory. Ontdek ze op ey.nl/carriere