Chief executive officer compensation and tax risk

Letter From the Chief Executive Officer Dr John Cho.

Purpose Our study examines the association between pessimistic tones in earnings announcements and firm value, as well as the role of chief executive officers' (CEOs) financial experience during the COVID-19 pandemic compared to prior COVID-19 pandemic. Design/methodology/approach Chow Test was employed to analyze 2,127 firm-year observations from Indonesia Stock Exchange-listed non-financial enterprises during the pandemic and before the pandemic. Findings Employing a Chow test to examine structural changes, we find that the negative relationship between pessimistic disclosure tone and firm value strengthens significantly during the COVID-19 period, indicating heightened investor sensitivity to negative linguistic cues under conditions of elevated uncertainty. Furthermore, our results show that CEO financial expertise mitigates the adverse valuation effect of pessimistic disclosure tone, and this mitigating role becomes significantly stronger during the COVID-19 period. These findings suggest that while investors penalize pessimistic disclosures more severely during crises, they simultaneously place greater weight on credibility-related cues, such as CEOs' financial expertise, when evaluating firm value. Originality/value Our study contributes to the disclosure and capital market literature by providing formal evidence of a structural change in investors’ sensitivity to pessimistic disclosure tone using a Chow test framework. Unlike prior studies that rely on subsample comparisons, we formally examine whether the valuation effect of pessimistic tone differs structurally between the pre-pandemic and pandemic periods. Moreover, we show that CEO financial expertise mitigates the negative valuation impact of pessimistic disclosure tone and that this credibility-enhancing role becomes more pronounced during periods of heightened uncertainty, such as the COVID-19 crisis.

This paper develops a thorough AI performance evaluation framework designed specifically for Innovate Software Consulting Inc Ltd, a worldwide enterprise technology advisory organization that delivers specialized services across four distinct operational areas: Oracle Human Capital Management (HCM) Cloud consulting, business-to-business (B2B) credit risk assessment, electronic Integrated Healthcare Management Systems (e-IHMS), and enterprise analytics platforms. The framework establishes eight essential key performance indicators for gauging the effectiveness of AI deployments: prediction accuracy, cost savings, operational efficiency, regulatory compliance, client satisfaction, ethical alignment, human-AI collaboration, and financial return-on-investment (ROI). In addition to these primary KPIs, the paper introduces three supplementary measurement approaches that address value dimensions conventional metrics frequently neglect: a stakeholder trust index, human-AI collaboration outcomes evaluation, and sustainability impact scoring. Two distinct generative AI platforms, Claude from Anthropic and Gemini from Google, conducted independent assessments of the framework from four senior executive viewpoints: Chief Legal Counsel, Chief Financial Officer, Chief Operating Officer, and Chief Executive Officer. The eight resulting independent assessments were gathered, categorized by executive function, and methodically examined for patterns of convergence and divergence. A critical analysis integrates the collective feedback, pinpoints framework strengths and areas requiring enhancement, evaluates AI-simulated executive assessment as a strategic planning tool, and outlines a four-quarter deployment timeline. The framework maintains alignment with the NIST AI Risk Management Framework while extending foundational strategic documents including the organizational AI vision declaration, ethical AI governance architecture, team composition proposal, and data stewardship plan.

• CFO co-option is positively associated with the intensity of R&D investments. • CEO risk-taking incentives (Vega) partially mediate this relationship. • These results are more pronounced in the early years of co-option. This paper examines the influence of chief financial officer (CFO) co-option, defined as the appointment of a CFO by the incumbent chief executive officer (CEO), on research and development (R&D) investments. Drawing on the upper echelon (UE) theory, we argue that co-opted CFOs are more likely to internalize the strategic preferences for innovation of their appointing CEOs, reducing their monitoring role and amplifying the influence of CEOs over financial resource allocation, thereby facilitating greater R&D investments. We further argue that CEO risk-taking incentives serve as an important mechanism through which CFO co-option influences R&D investments because co-opted CFOs can reinforce CEO risk preferences by supporting compensation structures that incentivize risk-taking. Using a sample of 10,370 firm-year observations from 2011 to 2022, we find that CFO co-option is positively associated with the intensity of R&D investments and that this relationship is partially mediated by CEO risk-taking incentives, consistent with our arguments. These results extend the co-option literature by revealing that R&D investments are not only directly influenced through shared preferences but also indirectly through risk-taking mechanisms. Overall, these findings underscore the need for careful board oversight to balance innovation and risk.

Letter From the Chief Executive Officer Dr John Cho.

Purpose This study aims to examine whether the chairman's status as a former chief executive officer (ex-CEO) moderates the relationship between environmental, social and governance (ESG) performance and audit fees in UK companies. It explores how leadership legacy shapes the extent to which ESG engagement is reflected in audit pricing. Design/methodology/approach Using a panel dataset of the Financial Times Stock Exchange (FTSE) 350 firms from 2017 to 2024, the study investigates the ESG–audit fee nexus. Audit fees serve as a proxy for audit effort and perceived audit risk, while ESG performance is measured using overall and pillar scores. A moderation model assesses the effect of the chairman's ex-CEO status. Findings Results show a positive correlation between ESG performance and audit fees, indicating that greater ESG involvement increases reporting complexity and audit scrutiny. However, when the chairman is a former CEO, this relationship weakens, suggesting that leadership legacy influences auditors' risk assessments. Leadership continuity, such as the presence of an ex-CEO chairman, may reduce how auditors evaluate risk. Research limitations/implications The study focuses on FTSE 350 firms between 2017 and 2024. Future research could extend the analysis to multi-country settings and alternative audit quality measures. Practical implications For boards, the findings raise questions about balancing continuity and independence during leadership succession. For auditors and regulators, the results highlight how governance structures influence audit pricing and the credibility of ESG reporting. Originality/value This study links ESG performance, leadership legacy and audit pricing, showing that ex-CEO chairmanship weakens the ESG–audit fee relationship.

ABSTRACT The transition from Industry 4.0 to Industry 5.0 has intensified digital transformation in Architectural Consultancy Practices (ACPs), reshaping professional roles and organisational operations. While leaders adopt digital strategies to remain competitive, these strategies are often introduced without fully recognising the contradictory, yet interdependent forces involved. This study therefore examines how leaders in ACPs experience and interpret paradoxical tensions during digital transformation. Guided by an interpretive phenomenological approach, in-depth semi-structured interviews were conducted with 11 top-management architects, including managing directors, principal architects, directors, and chief executive officers within Malaysian ACPs. Drawing on the theoretical lenses of learning, performing, organising, and belonging, thematic analysis revealed five interrelated paradoxical tensions: (1) integrating expanding digital possibilities with workforce learning demands, (2) anchoring professional identity while embracing multidisciplinary collaboration, (3) balancing institutional control with project-level agility, (4) balancing organisational stability while investing in future-oriented innovation, and (5) sustaining professional performance amid digital intensification. The fifth tension introduces a novel Sustaining Paradox, capturing the ongoing effort required to manage technological intensification alongside the maintenance of professional functioning and adaptability over time. Theoretically, the study extends paradox theory into the psychosocial and professional domain of ACPs by demonstrating how digital transformation generates interconnected tensions that operate concurrently rather than sequentially. Practically, the study contributes by making these tensions conceptually visible. This conceptualisation provides leaders with a clearer language to interpret their situations, rather than prescribing specific interventions. Such clarity enables more informed leadership responses during the transition to Industry 5.0.

As the central actors in corporate strategy formulation and resource allocation, managers exert a profound influence on a company’s green development. Against the backdrop of China’s policy-driven push for corporate green transformation, this study examines the impact of managerial discretion on corporate green innovation and its underlying mechanisms. Drawing on a sample of Chinese A-share listed companies from 2014 to 2023, the analysis integrates agency theory and stewardship theory, focusing on the formal authority granted to Chief Executive Officer by their boards of directors. Empirical results indicate that managerial discretion exhibits an inverted U-shaped relationship with corporate green innovation: moderate power stimulates stewardship behavior among managers, thereby promoting green innovation, whereas excessive power induces agency problems, which in turn exerts a suppressing effect. Mechanism analysis reveals that R&D investment serves as a key transmission channel and itself exhibits an inverted U-shaped relationship with green innovation. Heterogeneity analysis reveals that this effect is more pronounced in state-owned enterprises and under conditions of high environmental uncertainty. Therefore, firms should reasonably delegate authority to management and actively establish monitoring mechanisms for green R&D investment thresholds to precisely enhance green innovation capabilities.

Behind the leadership curtain: how social networks shape CEO selection in Australian sport

The digital mental health (DMH) industry has grown drastically over the last decade; yet, many DMH products have failed to demonstrate meaningful clinical outcomes, in large part due to lack of scientific evidence. This viewpoint paper highlights an example of how early-stage DMH companies can prioritize science as a strategic advantage. We discuss Moment for Parents, an artificial intelligence-driven maternal mental health app built entirely with support from the National Institutes of Health (NIH) Small Business Innovation Research (SBIR) program. We illustrate the advantages and challenges of building a science-backed product with federal funding. Benefits include credible evidence generation, independence in product development, and enhanced market differentiation. We also discuss the challenges of navigating the SBIR ecosystem, including grant writing and administrative demands, and aligning business objectives with federal research priorities. By showcasing both the promise and complexity of SBIR funding, this viewpoint paper offers actionable insights for founders and chief executive officers who aim to prioritize science in the DMH space.

This article examines the influence of the green distribution management on competitive advantage of alcoholic beverages manufacturing companies in Kenya. This study employed a positivism research philosophy and both descriptive and explanatory research designs were adopted. The target population was 394 consisting of Chief Executive Officers and heads of supply chain, corporate relations, human resource, finance, production, sales and marketing, quality control, logistics and warehousing in 41 alcoholic beverages manufacturing companies in Kenya. Yamane's Formula was applied to determine a sample size of 198 respondents. Stratified random sampling technique was utilized for selecting the sample. The data collection process incorporated both primary and secondary data. Secondary data was gathered from the annual reports of Kenya Association of Manufacturers (KAM) and individual alcoholic beverages manufacturing companies in Kenya with the help of a data collection checklist. Primary data was obtained using questionnaires. Thematic analysis was applied to analyze the qualitative data, while quantitative data was analyzed using SPSS statistical software to generate both descriptive and inferential statistics. Descriptive statistics contained mean, standard deviation, frequencies and percentages. Inferential statistics included Pearson correlation analysis, simple linear regression analysis and step-wise regression analysis. From the findings, the R-squared (R²) results demonstrated that green distribution management explained 77.5% of the variance in competitive advantage (R² = 0.775). The regression coefficients revealed that green distribution management significantly predicted competitive advantage (β = 0.870, p < 0.05). The study suggests that the management of alcoholic beverages manufacturing companies in Kenya should integrate green distribution management practices into core operations to enhance competitive advantage. In addition, the study recommends improving resource efficiency through real-time monitoring and internal accountability.

We develop a dynamic model of chief executive officer (CEO) succession under anticipatory awareness misalignment: the divergence between the board’s and the CEO’s private beliefs about the firm’s strategic potential. The CEO chooses unobservable effort, may send costly noncontractible signals, and faces interim termination based on performance thresholds. We derive closed-form expressions for optimal CEO incentive intensity, effort, and fixed pay and show how they are influenced by belief misalignment, CEO capability, and market frictions. We present propositions that explain how belief alignment affects effort and pay, how misaligned types are separated through signaling, and how misalignment impacts firing thresholds and the matching of boards and CEO. We show that misalignment reduces incentive efficiency, increases fixed pay, and increases the probability of early dismissal. CEOs aligned with the board receive higher variable compensation; misaligned types must compensate with signals or accept weaker incentives. The model generates empirically testable predictions on compensation structure, retention, and succession outcomes. Funding: A. Camuffo and A. Gambardella acknowledge support from the H2020 European Research Council [Grant 101021061]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2025.20384 .

Purpose This study aims to examine the moderating influence of corporate governance (CG) variables, particularly board attributes, on the association between bank credit and the performance of small and medium-sized enterprises (SMEs). Design/methodology/approach Using panel data from 302 Indian manufacturing SMEs over a 10-year period, the analysis applies a two-step generalised method of moments estimator to assess the moderation effects. Findings Results indicate that board size (BS), board independence (BIND), chief executive officer duality (CEOD), and board gender diversity (BGD) significantly shape the relationship between long-term bank credit (LTBC) and firm performance (FP). In the case of short-term bank credit (STBC), BS and BGD were found to weaken the positive association with performance. Research limitations/implications By focusing on an emerging economy context, this study provides deeper insight into how governance mechanisms interact with debt financing to influence organisational outcomes. The findings contribute to theory by linking CG, financial decision-making and FP within the SME sector. Practical implications SMEs that use LTBC may benefit from leaner board structures, lower independence and more unified leadership, which can facilitate timely strategic decisions and enhance FP. In contrast, SMEs that are dependent on STBC should prioritise stronger internal controls, separation of powers and disciplined oversight to ensure prudent fund utilisation and maintain financial stability. Originality/value Based on the authors’ investigation, no prior study has explored the moderating role of CG variables in the bank credit–FP nexus, with a focus on SMEs in an emerging market. It extends the literature on debt financing and governance by offering context-specific insights from India.

Purpose This paper aims to investigate the impact of several governance mechanisms, including board meetings, board independence, board gender diversity, chief executive officer (CEO) duality, sustainability committees and environmental, social and governance (ESG)-based compensation, on corporate carbon emission performance. Design/methodology/approach This study draws a sample of 414 companies listed in the STOXX Europe 600 index, spanning the period from 2017 to 2023. The main findings were derived using the feasible generalized least squares method. Additionally, a generalized method of moments analysis was conducted to assess the robustness of these results. Findings The results show that board meetings, board gender diversity and CEO duality are associated with better carbon performance (i.e. reducing carbon emissions). However, board independence, sustainability committee and ESG-linked compensation were found to increase carbon emissions levels, contrary to expectations. Originality/value Thus, this study first provides new empirical evidence on the relationship between corporate governance mechanisms and carbon performance in the European Union market. Second, it provides useful insights for regulators, investors and corporate executives.

Purpose – The study explores the impact of Quality Management Systems (QMS) and sustainable development principles on the economic, environmental, and social aspects of hotel business performance. Methodology/Design/Approach – The research was conducted in large and medium-sized hotel companies in Croatia. Chief Executive Officers (CEO), General Managers (GM), and their assistants completed in total 154 questionnaires. Exploratory factor analysis and Ordinary Least Squares (OLS) regression were applied. Findings – The research results show that the adoption of QMS and sustainability principles significantly influences the economic, environmental, and social aspects of hotel operations. The research also identified key indicators for measuring and monitoring the effects of implementing these principles in hotels. Originality of the research – The research identifies key factors of QMS and sustainable development principles implementation in hotel companies as well as their impact on all three aspects of hotel business performance – economic, environmental, and social. By identifying these factors and indicators for monitoring their impact on performance, the research contributes to the field by linking these dimensions to measurable outcomes.

Faculty recruitment to academic health systems (AHS) is difficult even in the best of times due to the inherently complex interfaces between health sciences schools, medical centers, affiliated institutions, faculty, and administration as well as the limited availability of top talent. However, with diminishing research and healthcare funding, coupled with proliferating regulations, recruitment has become even more challenging. These factors make it more important than ever to define best practices in AHS recruitment and may prompt the recruitment of internal candidates rather than external ones, the pursuit of philanthropic support for capacity building and start-up packages, the consolidation of academic units, and the combination of leadership positions. The specific needs will vary considerably depending on the type of position sought (e.g. "rank-and-file" faculty member, department chair, dean, academic medical center chief executive officer) as well as the specific responsibilities expected of them. Leadership roles may be particularly difficult to recruit for at this time and may appear too daunting for some potential candidates to consider. These challenges may lead to a reevaluation of roles and responsibilities, reporting relationships, and, perhaps, the redefinition of the positions themselves. The authors draw on their collective experience to define best practices in recruitment to AHS during these turbulent times.

The recent issue of the journal Corporate Ownership and Control is devoted to the issues of environmental, social, and governance (ESG), board practices, chief executive officer (CEO) practices, internal control, accountability, auditing, earnings management, etc.

How do firms balance market competitiveness with internal cohesion when setting employee pay? We examine this question using confidential compensation data on 19 million U.S. employees across 479 firms varying in knowledge intensity. We construct precise pay reference groups: internal benchmarks based on skill-equivalent peers across functions and market benchmarks based on same occupation, skill level, and region at other firms. We find that in low knowledge-intensity firms, pay is equally sensitive to both internal and market benchmarks, whereas in high knowledge-intensity firms, pay becomes decoupled from market forces and aligns with internal benchmarks. Internal pay alignment also increases following chief executive officer transitions that prioritize innovation. These patterns are driven by high-skilled employees in roles requiring complex problem-solving and collaboration. Moreover, firms with greater internal pay alignment generate more patents, including breakthrough innovations. Altogether, our findings reveal that although some firms maintain close market alignment, knowledge-intensive firms appear to decouple pay from market forces. This is particularly the case for their skilled workers, consistent with firms prioritizing internal social dynamics in contexts where complex problem-solving and collaboration are important for value creation. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2024.19959 .

Background: Patients with chronic and complex care needs are at risk of fragmented care during the transition from hospital to the community. The Western Health catchment includes a culturally and linguistically diverse population with almost half speaking a language other than English at home. The catchment experiences significant socio-economic disadvantage and increased levels of chronic disease. Improving organisation of care delivery for this population has great potential for reducing health inequities. An integrated care-based intervention at Western Health, in Western Melbourne, Australia has been trialled to support patients during the transition from hospital to the community. Understanding patients’ experiences is an essential component of the intervention’s assessment. Approach: An Integrated Care Committee at Western Health, chaired by the chief executive officer, helped to develop shared values and vision by engaging with over 1000 community members including patients and carers. This, in addition to case reviews and literature review, led to multiple factors being identified that predispose to successful integrated care models. These were incorporated when designing a new organisation of care delivery, Western HealthLinks, an integrated care pilot program supported by the Victorian State Department of Health and Human Services (DHHS) and run in conjunction with community partner, Silverchain, to support patients with chronic and complex care needs at high risk of hospital readmission. Patients at high risk were identified using a digital solution, an electronic technology algorithm using electronic medical records for risk stratification, and were supported in their hospital to community transition, with an integrated care model including ongoing community-based care including tele-health follow-up. The aim of this study was to understand patients’ experiences of the intervention using a survey regarding healthcare experience, a visual analogue scale (VAS) measuring satisfaction with healthcare and the Assessment of Quality of Life Four Dimensions (AQoL4D) instrument assessing health related quality of life (HRQOL). Survey responses were coded by researchers and assessed with a thematic analysis to identify major themes. Results: At baseline, median VAS assessing healthcare satisfaction was 79/100 and median AQoL4D was 0.15 (minimum possible score -0.04, maximum 1). Although healthcare satisfaction and HRQOL were expected to decline over time given the increasing burden of disease with advancing age, there was no clinically significant change to VAS or AQoL4D over time. Important themes identified across timepoints included: Local/home-based care; hospital access; individualised, coordinated and consistent care; communication; reduced waiting; healthcare provider qualities; transport/parking. Implications: Western HealthLinks is an integrated-care model incorporating shared values and vision, with potential to reduce health disparities using a digital solution to identify patients at high risk of readmission by providing patient-centred support peri-discharge including telehealth follow-up and other community delivered care. Western HealthLinks patients maintained healthcare satisfaction and QoL over time. The themes identified from patients’ healthcare experiences highlighted that patients value integrated care. Patient survey data has been used to inform subsequent iterations of the Western HealthLinks program, seeking to ensure the program delivers people-centred care. Other future models of care may also benefit from consideration of the themes which emerged from this analysis.