Corporate Governance Board Research Articles

Toward a Strategic Role for Employees in Corporate Governance

As the economies are becoming knowledge intensive and industries are encountering hypercompetitive technology environments, and the markets undergoing large scale globalization with firms experiencing wild fluctuations in financial performance, firm governance structure and the functioning of corporate boards in particular are under serious scrutiny. Given the economic crisis, the spate of scandals and corporate failures due to irregularities, systemic corruption, and complaints on managerial whims in recent years, there is a renewed emphasis on reforming the corporate boards to protect the interests of all stakeholders in addition to shareholders. This article accentuates the significance of employee representation in the corporate boards, as the employees’ knowledge has become a major competitive resource and the employees also have become the primary stakeholders. In this context, what role the employees are supposed to play in the corporate governance, and what responsibilities they need to assume for firm performance and shareholders’ wealth are becoming paramount to modern management and economics. We argue how codetermination, i.e., employee participation in corporate governance board, augments the organizational performance and productivity, how it limits the corporate excesses, and further highlight the significance of codetermination in the context of knowledge work and economy.

Leading corporate citizenship: governance, structure, systems

AbstractPurpose – Thepurposeofthispaperistobenchmarkhow25companiesinfiveindustriesareaddressingcorporate citizenship through their governance, structures and systems. The paper aims to look atpatterns of leadership practice developing in firms in this regard and what might be shaping them. It alsoseeks to consider current practices in light of movement toward next-generation corporate citizenship.Design/methodology/approach – The study surveyed a representative sample of Fortune 500companies. To benchmark how companies are embedding citizenship into their governance, structure,and systems, two scorecards were devised measuring practices pertaining to: Corporate BoardGovernance; and Operational Management of Corporate Citizenship. Criteria chosen represent Boardand management policies, behaviors, and/or public commitments.Findings – It was found that, while corporate Boards are assuming more responsibility for oversight ofconduct and taking account of specific social and environmental issues, citizenship is not yet fullyembedded into Boards or the operating structures and systems of most firms.Research limitations/implications – Companies appear to be moving through developmental stagesas they integrate citizenship into their governance and operations, with several developmental patternsemerging.Whilethereseemtobespecificpatternsofdevelopmentthatlinktotheindustry,issuesfaced,and culture of firms, it is difficult to generalize specific influences within industry from the relatively smallsample. Further benchmarking is needed to better understand these issues and which ideas representbest practices going forward.Practical implications – A next generation approach to corporate citizenship requires more than topdown advocacy – this needs to be backed up by Board oversight and engagement and by layeredmanagement structures, systems, processes, and policies that make citizenship part of everyemployee’s remit, across the company’s value chain.Originality/value – The paper provides a unique set of frameworks to assess company performance inrelation to governing and managing corporate citizenship. It provides much needed data fromcompanies across a number of industries to prompt further discussion on next generation corporatecitizenship, where responsible business practices are woven into the corporate DNA.Keywords Organizational behaviour, Boards, LeadershipPaper type Research paper

Corporate Board Governance and Voluntary Disclosure of Executive Compensation Practices*

Contemporary Accounting ResearchVolume 25, Issue 4 p. 1147-1182 Corporate Board Governance and Voluntary Disclosure of Executive Compensation Practices* Indrarini Laksmana, Indrarini Laksmana Kent State UniversitySearch for more papers by this author Indrarini Laksmana, Indrarini Laksmana Kent State UniversitySearch for more papers by this author First published: 15 January 2010 https://doi.org/10.1506/car.25.4.8Citations: 186 * Accepted by Laureen Maines. This study is based on my dissertation at Georgia State University. I would like to thank my dissertation committee members, Lawrence D. Brown, Jennifer R. Joe, Omesh Kini, and especially Ram S. Sriram (chair), for their guidance and support. I am grateful to Laureen Maines (associate editor) and two anonymous referees for their constructive comments and suggestions. An earlier version of this paper benefited from comments made by participants at the 2005 Annual Meeting of the American Accounting Association and the 2005 Ohio Region Meeting of the American Accounting Association. AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume25, Issue4Winter 2008Pages 1147-1182 RelatedInformation

Corporate Board Governance and Voluntary Disclosure of Executive Compensation Practices

This study examines how corporate boards respond to investor demands for information on executive compensation practices and whether certain board and compensation committee characteristics, as proxies for board governance quality, are associated with the extent of board disclosure of compensation practices. A unique feature of this study is the development of a comprehensive checklist of 23 compensation-related items. I validate this index by showing that the disclosure scores are inversely related to two measures of information asymmetry: bid-ask spread and return volatility. This provides evidence that greater compensation disclosure reduces information asymmetry. The study presents some evidence that boards with the power to act independently from management provide more details about executive compensation practices. Moreover, it contributes to the literature on corporate governance and disclosure by showing that greater commitment of directors to perform their duties results in greater transparency.

Transparency & Disclosure in the Istanbul Stock Exchange: Did IFRS Adoption and Corporate Governance Principles Make a Difference?

The purpose of this study is to investigate if the transparency and disclosure level of a sample of Istanbul Stock Exchange firms is enhanced by the promulgation of a set of local Corporate Governance (CG) Principles and by the voluntary adoption of the International Financial Reporting Standards (IFRS), an international best-practice. The Capital Market Board's CG principles are promulgated on a comply or explain basis and have been effective since the fiscal year 2004. First, the year 2003 Transparency & Disclosure (TD) index previously created in collaboration with Standard and Poor's is replicated for the fiscal year 2004. Using this short panel data of transparency and disclosure scores for our sample of 52 large and liquid Istanbul Stock Exchange firms, the improvement in the scores over the two years is measured. Second, with appropriate control variables in the model, we analyze the determinants of the significant improvement. We use the voluntary adoption of IFRS as an indicator of and commitment to TD, and find that the scores and their relationship with performance are higher in early adaptors. We then create a parsimonious 3-attribute Commitment-to-Better-Disclosure Index and observe a high correlation between the two indices. Finally, using a matched pairs design and controlling for IFRS adoption, we are able to attribute the improvement in the TD scores to the CG principles. The study should be of interest to researchers, managers, analysts, boards, policy makers and regulators at a time when debate on convergence to IFRS and the impact of local CG guidelines has become intense.

Performance Measurement in Corporate Governance: Do Mergers Improve Managerial Performance in the Post‐Merger Period?

Corporate finance studies of mergers and acquisitions have relied mostly on stock price reactions to evaluate the impact of these events. In this paper, we analyze the performance of a sample of merged firms over a ten year period using a managerially controlled efficiency measure, data envelopment analysis (DEA). Our individual firm‐level year‐by‐year analyses indicate that the managerial performance of the merged firms generally improved in the post‐merger period as documented in the earlier studies of mergers and acquisitions. However, there were also a significant number of cases where we could not observe improved managerial efficiency using this less aggregated approach. We conclude that DEA based disaggregated approaches are useful tools in the hands of corporate governance boards with an interest in yearly or even quarterly managerial performance at the individual firm level.

Enhancing Share Price With Superior Investor Protection

This paper considers techniques of providing shareholders with superior investor protection in start up firms to reduce the cost of raising equity and/or for maximising the share price after an IPO. Various approaches are considered for embedding into corporate constitutions the separation of powers introduced by a shareholders agreement with a venture capitalist or the Associates of a LBO. Shareholder agreements typically limit changes in ownership, composition, and the application of cash that also limits strategic direction in a way similar to the conditions found in negative pledge loan covenants that were responsible for the development of audit committees. Audit committees were created to protect directors not shareholders and changing banking practices exacerbate the false comfort that they provide investors. The paper identifies how superior investor protection can be achieved with appropriate changes in the constitution of firms to create a watchdog elected in parallel with the operating board. Supervisory boards can also act as watchdogs but they have a vertical relationship to the shareholders, as it is they who appoint the operating board. Described and compared are parallel watchdog boards used by the author for two start-ups, a Corporate Governance Board (CGB) proposed in the Australian Parliament for IPOs and a Conflict board described by a US legal scholar. The Corporate Senate established by the author for one start up company provided the role model for the CGB elected on a democratic basis of one vote per shareholder in parallel with the plutocratic election of directors by one vote per share and/or director. Corporate Senates do not need any changes to be made in corporate law or stock exchange listing rules. An active dominant shareholder acts in effect as a supervisory as found in Europe. As the majority of publicly traded companies around the world have an active dominant shareholder, publicly traded firms governed by more than one are a common phenomena however it is a neglected topic of research. Multiple boards can introduce operating advantages in a similar way as achieved by unitary controlled firms decomposing decision making labour by adopting a multi-divisional form. The paper concludes that the requirement by stock exchanges that audit committees be a condition for a company to be publicly traded be replaced by the establishment of a democratically elected watchdog along the lines of a Corporate Senate.