Corporate Chief Executive Officer Research Articles

The impact of accounting comparability on CEO incentive plans in an emerging economy: the moderating role of board independence

PurposeThe present study investigates the impact of accounting comparability on chief executive officer (CEO) incentive plans and the moderating role of board independence for companies listed in Tehran Stock Exchange (TSE).Design/methodology/approachThe information about 177 companies in 2014–2021 was examined. In this study, equity-based compensation and cash-based compensation were used as the CEO incentive plans. The equity-based compensation was calculated through the ownership of the CEO shares.FindingsThe results suggest that the higher accounting comparability increases not only CEO equity-based compensation, but also cash-based compensation. Board independence also strengthens the relationship between accounting comparability and CEO compensation. Hypothesis testing based on robustness checks confirmed these results.Originality/valueThe paper is pioneering, to the authors' knowledge, in identifying how board independence moderates the impact of accounting comparability on CEO compensation. The findings provide insights into economic consequences to the firm related to accounting comparability and board monitoring. The results have important practical implications for international investors to evaluate accounting comparability, corporate governance mechanisms and CEO incentives.

What did they say? A typology of CEO activism

PurposeThe practice of corporate chief executive officer (CEOs) engaging in sociopolitical activism on issues both related and unrelated to their companies is gaining attention in the popular press and among management scholars. The purpose of this paper is to explore the antecedents and motivations of CEO sociopolitical activism in a typology of influences internal and external to the CEO and to the organization. This study’s typology highlights the need for greater understanding of CEOs’ sociopolitical activism for the CEO as an individual actor and for the company they represent.Design/methodology/approachThis study’s approach is to conceptually review the literature on CEO activism and to create a theoretic framework for future analysis of the antecedents and motivations and ramifications of CEOs’ sociopolitical activism for the CEO as an individual actor and for the company they represent. The author highlights four theories and seeks future application of these theories to the phenomena in a typology.FindingsThe typology highlights the application of management theories to various ramifications of CEO activism to four influences on CEO activities. Upper echelons theory helps explain the motivation of a CEO internally, whereas agency theory applies to CEO activism internal to the CEO and external to the organizational operations. External to the CEO, organizational culture theory supports responses internal to the organization, and stakeholder theory provides insight into responses external to the CEO and the organization.Originality/valueThis study provides conceptual support for the study of CEO activism and encourages future research on the topic.

Corporate social responsibility and CEO dismissals: the dynamic role of average and above-average CSR on CEO dismissals

Considering the growing importance of Corporate Social responsibility (CSR) among various stakeholders, the present study investigates the association between corporate social responsibility (CSR) and CEO (Chief Executive Officer) dismissals. Based on a sample of Chinese listed firms from 2009 to 2019, this research study used a random effect logistic model. The findings of the study indicate that total CSR is positively associated with CEO dismissals. In further analysis, we decompose CSR and show that average CSR is negatively linked with CEO dismissals, indicating that CEOs mitigate career concerns by maintaining an optimal range of CSR investment. Moreover, above-average CSR is positively linked with CEO dismissals, indicating that when CSR investments deviate from their optimal range, CEOs’ risk of dismissal increases. Finally, we have validated our findings and show a U-shaped link between CSR and CEO dismissals. This research is helpful for policymakers in making CSR-related decisions.

Corporate governance, CEO turnover and say on pay votes

Purpose The purpose of this study is to investigate how compensation committee structure or characteristic impacts say on pay (SOP) voting dissent and the impact of SOP dissent on chief executive officer (CEO) turnover. Design/methodology/approach The authors use corporate governance and SOP data to test the relationships amongst variables. Additional analysis is performed using one-to-one propensity-score matched samples. Findings The authors find that firm-years with at least a female member present on the compensation committee are associated with lower SOP dissent. The authors find mixed results of the impact of SOP dissent on CEO turnover. Practical implications This paper suggests that diversity on the compensation committee, particularly the presence of at least a female member on the committee, serves as an important determinant of SOP voting outcome in the USA. The paper provides policymakers and practitioners with insights into factors influencing SOP voting outcomes and implications of SOP dissent for firms. Originality/value The findings of this paper contribute to the corporate governance literature by enhancing the understanding of the role of the compensation committee as it relates to SOP dissent and effect of SOP dissent on CEO turnover.

CEO narcissism and corporate tax avoidance,

ABSTRACT Narcissism (NARC) in senior executives has a perceptible impact on corporate decision-making and strategies and is often associated with unethical and opportunistic behaviors, including tax avoidance (TA). In this study, we therefore evaluated the association between chief executive officer (CEO) NARC and TA in Brazilian public firms. By focusing on Brazil, an emerging economy regulated by code law, our investigation makes an important contribution to the accounting literature on TA. Most studies examining the relation between corporate TA and CEO personality profile have been conducted in common law countries. According to the literature, TA behaviors are influenced by tax system specifics. In addition, the home country’s level of economic development should be taken into account when quantifying corporate TA. These observations, and the lack of previous investigation focusing on Brazil, ratify the relevance of the study. Our study also provides tax authorities, auditors, and investors with tools to identify narcissistic behaviors predictive of corporate TA, which may demand precautionary measures on part of business partners. The sample consisted of 68 Brazilian public firms (382 observations), covering the period 2010-2017, and a robust regression model with panel data was used. TA and NARC were measured with secondary data according to the literature. Our findings show a positive correlation between CEO NARC and TA. Executives with this personality trait come across as bold or aggressive, thus more prone to adopt TA strategies, as confirmed in the present study. The study contributes to the literature by demonstrating how a personality disorder like NARC affects corporate tax policies, with potential damage to corporate reputation.

Corporate Diversification, Institutional Ownership, and Chief Executive Officer Replacement to Earning Management

This study aims to determine the effect of corporate diversification, institutional ownership, and the change of chief executive officer (CEO) to earnings management. The population in this study is the consumer goods industry sector companies listed on the Indonesia Stock Exchange. Sampling used in this study is the census of the entire population being the study sample, and the number of samples of this study was 35 companies. The research data is secondary data obtained from the Indonesia Stock Exchange website from 2013 to 2018. The research hypothesis testing uses multiple linear regression analysis techniques, with SPSS application tools. The results showed that: (1) Corporate diversification has a positive effect on earnings management. (2) Institutional ownership has a positive and significant effect on earnings management. (3) CEO replacement has a negative and significant effect on earnings management. (4) corporate diversification, CEO replacement, and institutional leadership simultaneously have a significant effect on earnings management.

Multi-CEOs: Toward a Theory of Executives Leading Multiple Firms

The Chief Executive Officer (CEO) is critical to a firm’s success and the position is commonly considered to be extremely demanding. It is thus surprising that some individuals are “multi-CEOs,” i.e., they simultaneously hold the CEO position in multiple firms. I study four such multi-CEOs using a case-study approach to understand why and how multi-CEOs are appointed and how they conduct themselves while in office. My findings suggest that multi-CEO appointments require special circumstances regarding corporate control or CEOs’ legitimacy. Boards seem reluctant to appoint multi-CEOs and may initially opt to create such arrangements only ad interim. Interestingly, making these ad interim arrangements permanent appears to not be contingent on firm performance, and helped by CEOs’ prior public commitments to their first CEO positions. Further, multi-CEOs publicly bill their appointments as undesirable yet inevitable and not detrimental to firm performance. They avoid conflicts of interest by running firms that are not in competition or by following specific decision rules. Compensation schemes vary but are all highly symbolic. In their daily work, multi-CEOs respond to physical presence requirements through headquarter co-location or travel and exhibit specific patterns in their time allocation. Finally, multi-CEOs utilize Chief Operating Officers (COOs), or tend to face public pressure to do so.

LEADING WITH PURPOSE: THE LEADER OF LEADERS ON CHANGING THE RACE NARRATIVE

AbstractThe article discusses the author’s experience as chief executive officer (CEO) of The Executive Leadership Council (The ELC), with 1,000 members, powerful black corporate executives and top‐tier entrepreneurs, all either current or former CEOs or executives within one or two reports of their CEOs at Fortune 1,000 companies. It notes that The ELC has a responsibility to leverage its collective power and influence in business to the story of being black in America. The purpose of the organization is described as to increase the number of blacks on the top 500 corporations’ boards and CEO offices, while keeping the pipeline behind them full of the next generation of leaders; and to open channels of opportunity for the development of black executives and black entrepreneurs to make positive impacts on business and our communities overall. Also discussed are unique, black‐focused leadership development programs, stretching from the classroom to the boardroom, that draw almost 2,000 aspiring business leaders every year, such as awarding more than $500,000 annually in student scholarships; and consulting directly with corporate CEOs, their executive committees, business schools, politicians, and policy makers at the federal, state, and local levels about how to achieve meaningful inclusion.

Impact of family involvement on strategy and CEO compensation

PurposeAs widely known and well established, strategic decision-making at family firms is an interface between business interests and family considerations. The purpose of this paper is to understand the underlying basis of decision-making in setting corporate strategy and designing chief executive officer (CEO) compensation at founder- vis-à-vis descendant-led family firms in the Indian pharmaceutical sector.Design/methodology/approachA sample of 106 BSE-listed pharmaceutical companies have been studied over the period 2012–2017 resulting in a total of 636 firm-year observations. Impact of family involvement in business (FIB) on corporate strategy and CEO compensation has been analysed by constructing multivariate panel data regression models. To deal with the problem of endogeneity, Arellano-Bond (1991) dynamic panel data estimation procedure has moreover been conducted.FindingsSupporting stewardship theory, founder-owned and governed firms have been found to favour “growth” strategy and distribute “conservative” executive pay, thereby exerting a positive moderating impact on the strategy-compensation linkage. On the contrary, descendants/second-generation entrepreneurs have put forth a “conservative” stance for growth and innovation, and have rather been observed to favour a “liberal” compensation policy, thereby showcasing the application of behavioural agency theory.Originality/valueThe research is a novel attempt to unravel the interaction between corporate strategy and CEO compensation in a family firm backdrop carried out in the context of an emerging economy. The study, moreover, adopted an all-encompassing definition of FIB (ownership, management and governance).

The relative usefulness of cash flows versus accrual earnings for CEO turnover decisions across countries: The role of investor protection

This study investigates the role of investor protection in determining the relative usefulness of cash flows versus accrual earnings for assessing Chief Executive Officer (CEO) performance and replacing poorly performing CEOs. Using a large sample of listed firms from 41 countries, we find that as the strength of investor protection decreases, the likelihood of CEO turnover becomes more sensitive to cash flow performance but less sensitive to accrual earnings. Further analysis shows that the availability of analysts’ cash flow forecasts enhances the sensitivity of CEO turnover to cash flows, and this sensitivity is more pronounced in countries with weaker investor protection. Collectively, our results suggest that cash flow information plays a more vital role than accrual earnings in facilitating efficient contracting between corporate boards and CEOs in an environment with poor protection of investor rights.

Female CEOs and Core Earnings Quality: New Evidence on the Ethics Versus Risk-Aversion Puzzle

The question of whether females tend to act more ethically or risk-averse compared to males is an interesting ethical puzzle. Using a large sample of US firms over the 1992–2014 period, we investigate the effect that the gender of a chief executive officer (CEO) has on earnings management using classification shifting. We find that the pre-Sarbanes–Oxley (SOX) Act period was characterized by high levels of classification shifting by both female and male CEOs, but the magnitude of such practices is, surprisingly, significantly higher in firms with female CEOs than in those with male CEOs. By contrast, our results suggest that following the passage of the punitive SOX Act, classification shifting by female CEOs declined significantly, whilst it remained pervasive in firms with male CEOs. This suggests that the observable differences in financial reporting behavior between male and female CEOs seem to be because female CEOs are more risk-averse, but not necessarily more ethically sensitive than their male counterparts are. The central tenets of our findings remain unchanged after several additional checks, including controlling for alternative earnings management techniques, corporate governance mechanisms, CEO and chief financial officer characteristics and propensity score-matching.

Corporate Governance and CEO Innovation

A fundamental concern emerging from the corporate literature is the agency problem of innovation. While innovation is considered as a major driver of corporate growth and profitability, the Chief Executive Officer (CEO) has an intrinsic reluctance to pursue innovation projects. The thrust of this paper is to identify the mechanisms of corporate governance which help attenuate this problem, thereby encouraging the CEO to have the propensity to innovate. The empirical results suggest that firms with a widespread dispersion of shares among shareholders are less likely to encourage the CEO to innovate. The likelihood of innovation appears to increase, however, in the presence of a large shareholder. Contrary to prevailing beliefs, there appears to be no association between innovation and board independence. The same result holds for board size. Also, a diverse board appears to negate CEO predisposition to innovate. On the other hand, innovation increases when the CEO is not the Board Chair but has equity ownership, although the incentive effect is economically small. The paper uses a sample of domestically-owned, publicly-listed Australian firms over the period 1994–2003.

To be philanthropic when being international: Evidence from Chinese family firms

AbstractThis study examines the influence of internationalization on corporate philanthropy, and further investigates the moderating effect of political participation of CEO (Chief Executive Officer). Using a sample of Chinese family firms and hand-collected data on corporate philanthropy, internationalization, and CEO’s political participation, our findings show that internationalization is significantly positively associated with corporate philanthropy, suggesting that internationalization plays an important role in promoting corporate philanthropy because of the mounting interaction of corporate philanthropic consciousness among multinational companies. In addition, CEO’s political participation reinforces the positive association between internationalization and corporate philanthropy. Above findings are robust to a variety of sensitivity tests and further our conclusions are still valid after controlling for the endogeneity between internationalization and corporate philanthropy.

Corporate social responsibility engagement, corporate financial performance and CEO characteristics

The current study examines the effect of corporate social responsibility (CSR) engagement on corporate financial performance (CFP). Prior studies document a positive CSR-CFP association without considering the moderating effects of chief executive officer (CEO) characteristics such as compensation incentives and tenure. Our results show evidence of a positive association between CSR and CFP only in the firms managed by short-tenured, high-cash paid CEOs and particularly during an industry's cooling-off period. The results imply that the incentives embedded in the current CEO pay are not effective and CEOs use CSR as a compensation management tool to increase their share-based pay. To encourage a CEO to implement CSR engagement, particularly during an industry's boom period, the board of directors should decrease common-share payments and increase the CEO's option payments. In addition, the proportion of cash compensation in the CEO's total compensation should not be reduced.

The Effects of Corporate Board and CEO Characteristics on Firm Value: Empirical Evidence from Listed Companies on the Bucharest Stock Exchange

ABSTRACTThis article investigates the influence of characteristics of the corporate board and chief executive officer (CEO) on firm value, using a sample of companies listed on the Bucharest Stock Exchange from 2007 to 2011. We consider board independence, committees, size, and diversity as board characteristics, as well as CEO characteristics such as CEO age, tenure, dual roles of CEO and chairman, country of residence, and gender. We employ the Tobin’s Q ratio as a proxy for firm value. We find evidence that board size negatively influences firm value, whereas curvilinear relationships are found among board independence, diversity, and firm value. Also, CEO tenure positively influences firm value, whereas the other governance variables are not statistically significant.

Change of company ownership, CEO turnover and the origin of CEO: case from Indonesia

This study aims to provide empirical evidence that the action on the Chief Executive Officer (CEO) turnover is in line with the change in ownership structure. Data of CEO is collected originally from all companies in Indonesia during 1999−2007. The CEO substitution of selected companies was only taken until the turnover to the year 2003, and during the four years after the turn was never replaced. The result from our study cannot find the relationship between corporate ownership changes and CEO turnover in Indonesia. However, the study finds a statistically significant result on the relationship between CEO turnover and accounting performance. Furthermore, the result of study also showed that the companies with poor performance over several years before turnover tended to choose a new CEO from external, rather than the corporate with relatively good financial performance. The owners expect the CEO successor from external parties can bring changes to the company through new policies.

Corporate cash holdings and CEO compensation incentives

We examine the effect of chief executive officer (CEO) compensation incentives on corporate cash holdings and the value of cash to better understand how compensation incentives designed to enhance the alignment of manager and shareholder interests could influence stockholder-bondholder conflicts. We find a positive relation between CEO risk-taking (vega) incentives and cash holdings, and we find a negative relation between vega and the value of cash to shareholders. The negative effect of vega on the value of cash is robust after controlling for corporate governance, is stronger in firms with high leverage, is reversed for unlevered firms, and is not present in financially constrained firms. We also find that the likelihood of liquidity covenants in new bank loans is increasing in CEO vega incentives. Our evidence primarily supports the costly contracting hypothesis, which asserts that bondholders anticipate greater risk-taking in high vega firms and, therefore, require greater liquidity.

Crisis leadership: when should the CEO step up?

PurposeOne explicit leadership role the chief executive officer (CEO) can play during crisis is to assume the role of being the organization's spokesperson. What remains unclear is at what point of the crisis should the CEO step up and how does that impact crisis communication? The purpose of this paper is to examine this question.Design/methodology/approachThe meta‐analysis method is used to combine different data in various studies of one topic into one comprehensive study. More than 30 crises are meta‐analyzed.FindingsThe CEO needs to step up to revise earlier statements or when the integrity of the organization is questioned. Additionally, the CEO should step up at the beginning of the crisis if the crisis pertains to organizational transgression or when the crisis becomes unbearable to organizational reputation. As counter‐intuitive as it may, CEOs should refrain from stepping up at the height of the crisis.Research limitations/implicationsIt is an exploratory study. Some cases have lesser information to analyze than others.Practical implicationsInstructive for both corporate communications practitioners and CEOs as they have a framework to guide them on when the CEOs should step up, and when the presence of corporate communications would suffice.Originality/valueLittle has been studied to clarify the exact nature, role, and impact of the CEO as organization spokesperson in crises. This paper provides the initial template.

Corporate governance and chief executive officer dismissal following poor performance: Australian evidence

AbstractThis paper investigates the association between corporate performance and the probability of chief executive officer (CEO) dismissal for large corporations in Australia. Consistent with prior US and UK studies, corporate performance is negatively related to the probability of CEO dismissal, using both accounting and market‐based performance measures. This paper also investigates whether key corporate governance characteristics affect the likelihood of CEO dismissal, by examining their effect on the strength of the negative association between corporate performance and CEO dismissal. The only significant variable is size of the board. Although its effect is opposite to that hypothesized, this paper provides a plausible explanation. Overall, the results are consistent with shareholder wealth considerations dominating board behaviour in Australia.

Corporate Restructuring Quality and CEO Compensation

We examine the effect of restructuring quality on chief executive officer (CEO) compensation. Extending prior research, we examine not only cash compensation, but also other components of the compensation package, as well as the mix of compensation. Incorporating both cash and non-cash compensation in our analysis provides a more complete analysis, as it allows us to examine if decreases in one form of compensation are offset by increases elsewhere in the compensation package. Indeed we find this exact result. That is, while our primary results suggest that total CEO compensation is unaffected by the restructuring, we find, especially for lower quality restructurings, that there is a decrease in bonus compensation offset by an increase in equity compensation. Sensitivity analysis shows that our results are robust to alternate variable definitions and model specifications. In particular, we find that our results are similar whether we use an ex-ante measure of restructuring quality, i.e., cumulative abnormal returns measured at first public disclosure of restructuring, or an ex-post measure of restructuring quality, i.e., unexpected cash flow from operations three years after the restructuring.