Corporate Governance Paradigm Research Articles

How does digital transformation affect corporate governance paradigms? A synthesis of the literature

At present, digital transformation has become a vital way for companies to achieve sustainable growth. This paper reviews the literature on the correlation between digital transformation and corporate governance paradigm, analyzes the specific impact mechanism of AI technology and big data technology in the field of corporate governance, and explores the influence effect of the most popular ChatGPT technology on corporate governance from the perspective of business practice. It is found that digital transformation has an important impact on stakeholder management, information disclosure, green governance and other aspects of corporate governance. The purpose of the study is to provide a new reference for the construction of corporate governance paradigm and help companies achieve long-term development in the digital wave.

Poslovno pravo i pravo održivog razvoja – između profitabilnosti i etičnosti

As for applying the knowledge from EU law, the author points out two tendencies affecting company law in the context of sustainability. The first one is the legal duty of the companies to incorporate the statement of purpose, which is no longer limited to profit. The second one is the corporate duty of care in line with ESG standards as well as the corporate purpose. It is an integral part of a company’s business and culture. Having in mind French, German or Dutch law, directors are expected to promote long-term business success, to take care of the open list of stakeholders’ interests and to apply corporate due diligence standards. Thought leaders, however, generally describe ESG as a business strategy that creates long-term stakeholder value by addressing social, economic, and environmental opportunities and risks that are material to a company. Preservation as well as environmental protection is one of the biggest challenges that modern generations will have to face. The term green transition has been coined as an expression of the efforts to ensure the transition to a sustainable business model in order to preserve the ecosystem and the planet as such. Non-financial reporting plays a very important role in the green transition process. Integral part of the EU agenda remains the discussion about corporate directors’ duties in the context of human rights as well as environmental risks. There is no doubt that the key word of the new corporate governance paradigm is risk.

Current paradigm of corporate governance and determinants of share issuance by Mexican companies

This research analyzed the issuance of shares by all Mexican companies that were listed on the Mexican Stock Exchange (MSE) during the 2012–2022 period to determine if they continue to maintain the paradigm of corporate control through ownership of the highest percentage of shares among family members and their close circles. Additionally, the extent to which the variables of company age, sales level, and business sector are determinants of using the issuance of shares as a source of financing was evaluated. The methodology applied included a comprehensive analysis of the percentage of issuance of new shares, a Pearson’s correlational analysis, a simple linear regression, a linear binomial analysis, and the ANOVA model. The results showed that although a few MSE companies have begun to issue shares, the level of issuance is still lower and does not constitute evidence of a paradigm change. Concerning the variables of age, sales, and business sector, it was found that there is insufficient evidence that these variables are determinants of MSE companies that issue shares as a financing method.

Beyond Expectations: Corporate Governance's Insufficiency in Fraud Prevention

Objective –The specific objectives to be achieved in this research are to (1) test the Beneish model (1999) as a predictor of reliable manipulation or indicator to reveal signals or symptoms of financial reporting fraud. (2) Test whether corporate governance effectiveness reduces financial statement fraud.Design/Methodology –The research analyzed publicly listed non-financial firms listed in Indonesia's stock exchange (IDX) from 2017 to 2022. Simple random sampling was used to select 86 companies per year, resulting in 617 year-firm observations. Data analysis was carried out by logistic regression multiple with panel data. The test was carried out by adopting the Beneish benchmark index (Z-score) model which is effective for predicting indications of fraudulent financial statements. Results –The test results show that there is 99.8% of incidents indicated financial statement fraud and the other 0.2% did not indicate financial statement fraud. Corporate governance mechanisms consisting of institutional ownership, audit committees, and audit quality does not mitigate fraud. It is anticipated that the research's contribution will serve as a practical guide and reference for the examination of indicators of fraud in corporate finances. The findings of this study are expected to provide valuable insights for policymakers and regulators seeking to improve corporate governance practices.Research limitations/implications –This research does not incorporate the competency and capability specifications of governance structures such as the board of commissioners, audit committees, and external auditors. Future investigations are anticipated to delve more profoundly into the internal and external corporate governance capabilities and specifications.Novelty/Originality –This study reveals that, on the whole, a significant proportion of companies are implicated in fraudulent activities, while corporate governance mechanisms are deemed inadequate in overseeing management activities conducive to fraud. The outcomes of this research challenge the prevailing paradigm of corporate governance as an effective deterrent against fraudulent behavior.

The evolutionary journey of the American corporation and its governance over two centuries

PurposeThis study aims to explore the evolutionary trajectory of American corporations and their governance over the past few centuries, using a multidisciplinary investigative approach. The research focuses on the American business landscape because it has played a pivotal role in shaping the field of corporate governance theory and practice.Design/methodology/approachThe author thoroughly investigates archival records, legal documents, academic publications, reputable databases and pertinent literature to unearth valuable insights into the key events that have influenced the evolutionary path of American corporations and their governance throughout history.FindingsDelving into the evolutionary journey of American corporations and their governance reveals a multifaceted narrative, enhancing our comprehension of the impact of the external socio-economic environment, and the effectiveness and limitations of established corporate governance paradigms in addressing such transformations. This introspection establishes the groundwork for ongoing discussions concerning how corporate governance should adapt to meet the evolving needs and expectations of stakeholders and society as a whole, with a specific focus on the pivotal role that boardrooms could play in this regard.Practical implicationsThe insights gained from this analysis offer practitioners a foundational resource to understand corporate governance in a complex business landscape. Armed with this understanding, practitioners can better align governance strategies with both historical context and contemporary requirements.Social implicationsThe research has significant social implications in the sense that history highlights the importance of the society in influencing corporate governance practices. It specifically emphasizes the need for the board of directors to consider both shareholder value and social responsibility, while also fostering public trust and confidence.Originality/valueMany corporate governance concepts are often used with limited understanding of their initial intent, resulting in their unquestioned adoption. In this paper, the author offers a contextual exploration of historical events that have contributed to the development of these diverse corporate perspectives. To the best of the author’s knowledge, there are exceedingly few, if any, papers that present comparably insightful and multidisciplinary insights into the evolutionary path of corporations and their governance, especially within a dynamic and influential market like that of the USA.

Corporate governance paradigm: Private healthcare providers of Dubai

In this study, it is found that healthcare providers in the UAE want to maintain upright corporate governance practices to achieve their organization’s goals and objectives. These findings support the agency, stakeholder and stewardship theories. There has been very little research on the Corporate Governance Paradigm, particularly in the healthcare sector, which is why this study was conducted. Moreover, it is also found from this study that the UAE government has already announced corporate governance in the various departments to enhance their performance. This study is based on quantitative analysis, which completely evaluates the corporate governance of the private healthcare workers in Dubai. In this study, the data was collected through survey questionnaires. The survey form was distributed among UAE healthcare providers and it was discovered that these workers want to maintain corporate governance in the health sector for better sector performance.

Do political connections shape the nexus between board attributes and corporate cash holdings?

PurposeMotivated by the agency theory, this paper primarily intends to empirically investigate the impact of board attributes on corporate cash holdings and how the mentioned nexus is moderated by the level of corporate political connections in a developing country, namely, Palestine during the period of 2011–2018.Design/methodology/approachMultiple regression analysis on a panel data was employed. Moreover, the authors applied three different approaches of static panel data “pooled OLS, fixed effect and random effect”. Fixed-effects estimator was selected as the optimal and most appropriate model. In addition, to control for the potential endogeneity problem and to profoundly analyze the study data, the authors perform the one-step system generalized method of moment estimator.FindingsThe results of this study provide support for the agency theory ideology, which considers that sturdy and well-established corporate governance (CG) paradigms minify the magnitude of cash held by companies. Furthermore, the findings distinctly unveil that the impact of board attributes is more positive under a high level of political connections.Research limitations/implicationsThis study was solely restricted to one institutional context “Palestine”; therefore, the results reflect the attributes of the Palestinian business environment. In this vein, it is possible to generate different findings in other countries, particularly in developed markets.Practical implicationsThe findings of this study can draw responsible parties, top management and policymakers' attention in developing countries to introduce and contextualize new mechanisms that can lead to better managing of corporate cash holdings.Originality/valueEmpirical evidence on the moderating role of political connection on the effect of board attributes on corporate cash holdings something that was predominantly neglected by the earlier research and has not yet examined by ancestors. Hence, to protrude nuanced understanding of this novel idea, this study minutely bridges this research gap and contributes practically and theoretically to the existing CG–cash holdings literature.

The “Good Corporate Citizen” Beyond BCE

In its landmark corporate law decision of BCE Inc. v. 1976 Debentureholders, the Supreme Court of Canada expressly referenced the “good corporate citizen” when commenting on the best interests of the corporation. The Supreme Court’s reference to good corporate citizenship is often viewed as salient yet ambiguous. As the Supreme Court did not provide any substantive legal analysis of the term, legal scholars and practitioners can only speculate on its intended meaning. This article provides an empirical study on the historical development and usage of good corporate citizenship when referenced in judicial cases. The empirical findings show that Canadian courts have invoked the notion for decades and in a variety of contexts. The meaning of good corporate citizenship varies from context to context and does not necessarily dovetail with corporate social responsibility as commonly perceived. Good corporate citizenship as a legal concept carries some practical yet controversial consequences in the environmental sentencing context. Importantly, the oft-acclaimed corporate governance paradigm shift since BCE seems more symbolic than substantive in judicial practices. The Canadian experience also provides insights into the global emergence of explicit corporate social responsibility legislation and stakeholder-oriented corporate governance.

The Greek paradigm of corporate governance and board of directors

Corporate governance encompasses a multidisciplinary approach, which includes the internal and external factors that affect the interests of a company’s stakeholders. The Greek corporate governance framework of listed companies has initially been established in accordance with EU regulation and soft law recommendations, in order to enhance board accountability and transparency, empower shareholders’ activism and promote financial disclosure. In that regard, it has recently been reformed by the provisions of Law 4706/2020, aiming mainly: to empower the strategic and supervisory role of the board of directors, by introducing a clear description of the obligations of non-executive and independent non-executive directors and by including the establishment of an “adequacy (internal fit-and-proper) policy” for the appointment of board members. Accordingly, two new compulsory committees are added, the nomination and the remuneration committee, which should entirely be composed by non-executive members and are invested with an advisory role in determining the remuneration policy and proposing board candidates. Furthermore, the adoption of a Corporate Governance Code is rendered substantial for all listed companies. These provisions illustrate specifically the reform of the internal corporate governance structures, which should be implemented having regard to the general principles of transparency and proportionality

Corporate governance paradigms of hazardous industries: Enduring challenges of Britain’s civil nuclear industry

This article discusses risk management processes in Britain’s civil nuclear industry from a corporate governance perspective. As an example of a hazardous industry that can inflict catastrophic environmental damage and fatalities, effective governance of Britain’s nuclear industry is a critical issue. Yet the industry’s history of corporate governance suggests that processes of corporate governance have regularly failed to meet core requirements of its stakeholders. A core requirement is for governance designs that recognize the interests of public owner–stakeholders. In meeting this requirement, the article offers a framework for a relationship-driven form of corporate governance that enables meaningful stakeholder engagement in decision-making.

Smart Companies: Company & board members liability in the age of AI

Artificial Intelligence, although at its infancy, is progressing at a fast pace. Its potential applications within the business structure, have led economists and industry analysts to conclude that in the next years, it will become an integral part of the boardroom. This paper examines how AI can be used to augment the decision-making process of the board of directors and the possible legal implications regarding its deployment in the field of company law and corporate governance. After examining the three possible stages of AI use in the boardroom, based on a multidisciplinary approach, the advantages and pitfalls of using AI in the decision-making process are scrutinised. Moreover, AI might be able to autonomously manage a company in the future, whether the legal appointment of the AI as a director is possible and the enforceability of its action is tested. Concomitantly, a change in the corporate governance paradigm is proposed for Smart Companies. Finally, following a comparative analysis on company and securities law, possible adaptations to the current directors’ liability scheme when AI is used to augment the decisions of the board is investigated and future legal solutions are proposed for the legislator.

Minority Shareholders’ Rights, Powers and Duties: The Market for Corporate Influence

Conventional corporate law scholarship attributes a high degree of homogeneity to minority shareholders. For example, the agency problems approach identifies conflicts between shareholders and managers in the case of companies with dispersed shareholding, and conflicts between minority shareholders and controlling shareholders for companies with concentrated shareholding. However, recent trends establish that minority shareholders come in different hues. Large institutional investors have mostly crowded out retail shareholders from the stock markets. Even within the institutional variety, differences abound. The current corporate governance paradigm fails to account for the diversity among minority shareholders and their interests. In this chapter, I seek to establish that the assumptions regarding the homogeneity of minority shareholders are no longer valid due to market developments that have radically altered minority shareholder demographics in companies the world over. I argue that the expanding schism between the identity, outlook, actions and interests of varieties of minority shareholders creates agency problems among types of minority shareholders. This calls for a paradigm shift in corporate law’s treatment of minority shareholders. The ability of one type of minority shareholders to affect the interests of others would call for the imposition of restraints on minority shareholder behaviour.

КОНЦЕПТУАЛЬНІ ЗАСАДИ ФІНАНСОВОЇ ДІАГНОСТИКИ В СИСТЕМІ ВАРТІСНО-ОРІЄНТОВАНОГО УПРАВЛІННЯ КОРПОРАЦІЯМИ

Formulation of the problem. globalization processes taking place in the world economy, uncertainty of the market environment, changing business conditions and the paradigm of corporate governance – all this sets before the economic science and practice the task of finding new approaches to financial diagnostics as a tool for information support of value-oriented management. Object of the research: financial diagnostics in the system of cost-oriented management of corporations. Methods used of the research: logical content, scientific knowledge, induction and deduction, analysis and synthesis, economic and mathematical modeling. Hypothesis of the research: the existence of a relationship between the value of the corporation, its financial stability, financial performance and net cash flow. Summary of the material: the results of the study substantiate the conceptual foundations of the development of financial diagnostics in the system of value-oriented management of corporate enterprises, the purpose of which is to ensure the sustainable development of business entities on the basis of increasing value and achieving high quality corporate governance. Originality and practical importance: are determined by the generalization of the practice of value-oriented management of corporate enterprises in the part: financial diagnostics of the external environment, value indicators based on financial reporting indicators, stock indicators of corporate enterprise value and the state of corporate governance. The practical significance of the results is to formalize the value drivers of individual confectionery corporations based on correlation-regression models that can be used for forecasting. Conclusions: methodological approaches to: providing information needs of stakeholders on the basis of mechanisms of financial control of corporate enterprises are substantiated; improving the quality of corporate governance models and rating the internal financial and value potential of enterprises; financial diagnostics of the investment attractiveness of corporate securities in the stock market based on expectations-based management.

Konsep Islamic corporate governance sebagai tata kelola perusahaan Bakpiapia Djogja

Purpose — This study tries to build a paradigm and implementation of Islamic corporate governance in a company.Research method — This research uses qualitative research methods and descriptive data. The sample in this study is Bakpiapia Djogja company. The data used is a report on the implementation of Islamic corporate governance.Result — The study found that Bakpiapia Djogja company has implemented a small part of the principles contained in the concept of Islamic Corporate Governance.

In Search for the Existence of the 'Holy-Grail, One Size Fits All' Theory: An Examination of Corporate Governance from Robber-Barons to Unicorns

In Search for the Existence of the 'Holy-Grail, One Size Fits All' Theory: An Examination of Corporate Governance from Robber-Barons to Unicorns

Shareholder Value(s): Index Fund Activism and the New Millennial Corporate Governance

Major index fund operators have been criticized as ineffective stewards of the firms in which they are now the largest shareholders. While scholars debate whether this passivity is a serious problem, index funds’ generally docile approach to ownership is broadly acknowledged. However, this Article argues that the notion that index funds are passive owners overlooks an important dimension in which index funds have demonstrated outspoken, confrontational, and effective stewardship. Specifically, we document that index funds have taken a leading role in challenging management and voting against directors in order to advance board diversity and corporate sustainability. We show that index funds have engaged in a pattern of competitive escalation in their policies on environmental, social, and governance (“ESG”) issues. Index funds’ confrontational and competitive activism on ESG issues is hard to square with their passive approach to more conventional corporate governance questions. To explain this dichotomy in approaches, we argue that index funds are locked in a fierce contest to win the soon-to-accumulate assets of the millennial generation, who place a significant premium on social issues in their economic lives. With fee competition exhausted and returns irrelevant for index investors, signaling a commitment to social issues is one of the few dimensions on which index funds can differentiate themselves and avoid commoditization. For index funds, the threat of millennial migration to another fund is more significant than the threat of management retaliation. Furthermore, managers themselves, we argue, face intense pressure from their millennial employees and customers to respond to their social preferences. This three-dimensional millennial effect—as investors, customers, and employees—we argue, is an important development with the potential to provide a counterweight to the wealth-maximization paradigm of corporate governance. We marshal evidence for this new dynamic, situate it within the existing literature, and consider the implications for the debate over index funds as shareholders and corporate law generally.

A Review on Satyam Computer Failure Lessons for Corporate Governance and World

Satyam scam has been the greatest scam in the history of corporate world of the India. Satyam is the fourth largest IT Company in India. The CEO of the company has made a scam of around $2 billion; it appears that corporate accounting fraud is a major problem that is increasing both in its frequency and severity. The Satyam scam shockwaves also impacted the entire auditing structure of Indian Corporate world. The scam has added to a notorious list of companies involved in fraudulent financial activities, one that includes such names as Enron, WorldCom, Societe General, Parmalat, The increasing rate of white-collar crimes demands stiff penalties, exemplary punishments, and effective enforcement of law with the right spirit. The fraud committed by the founders of Satyam in 2009, is a testament to the fact ― the science of conduct is swayed in large by human greed, ambition, and hunger for power, money, fame and glory. In the aftermath of the Satyam scandal, that has tested the efficacy of corporate governance norms in India; the existing framework fails to satisfactorily address the shortcomings in the prevailing regime. The Satyam scandal highlights the importance of securities laws and corporate legislation in emerging markets. Indeed, Satyam fraud spurred the government of India to tighten the corporate legislation norms to prevent recurrence of similar frauds in future. Satyam scandal has had a deep impact on how we construe “Corporate Governance”. Though it is well recognized that corporate governance is about “transparency”, “efficacy” and “accountability” but now the concerns are about the changing paradigm of corporate governance. Thus, major financial reporting frauds need to be studied for “lessons-learned” and “strategies-to-follow” to reduce the incidents of such frauds in the future.

Audit Within the Corporate Governance Paradigm: A Cornerstone Built on Shifting Sand?

AbstractThis paper is a case study‐based investigation of aspects of the current paradigmatic approach to ‘good’ corporate governance, with its focus on the interlinked roles of internal control and risk management procedures, internal audit and external audit, overseen and coordinated by a formal structure of board committees, in particular the audit committee. The evidence that we adduce from the study of four high‐profile cases of perceived accounting and governance failure provides limited assurance that this approach will in fact be cost‐effective or efficient in preventing further such cases of accounting and governance failure. Specifically, issues as to remuneration and fee dependence, lack of relevant knowledge and expertise, social and psychological dependence upon executive management appear to have significantly and negatively affected the quality of decision‐making of governance gatekeepers. This suggests that further consideration of relevant economic, institutional and cognitive/behavioural factors beyond the rational choice model of traditional economics should underpin future developments in required modes and structures of governance.

The new paradigm of Islamic corporate governance

PurposeThe purpose of this paper is to examine the new paradigm of Islamic corporate governance (ICG) in an emerging area of Islamic finance.Design/methodology/approachThe paper adopts an analytical approach to investigate the new executive and managerial roles that ICG is expected to play in the process of corporate financial decision making.FindingsThe authors argue that ICG is no longer expected to play the traditional supervisory and regulatory role within Islamic financial institutions. Indeed, the acuteness of competition, the observed failures of the Islamic finance industry, the unprecedented challenges, and the required ethical considerations levy as a new approach that improve the growth of the Islamic finance industry sustain its survival in the global financial world, and enhance the welfare of 25 percent of the world population who survived beyond all level of poverties.Originality/valueThe authors claim that ICG must be endowed with a multi-faceted, new paradigm for the purpose of improving the stakeholders’ interests and reaching the best business practices of the Islamic finance industry to cater investors’ need and the social well-being of the homeless and disadvantaged communities.

Law & Economics of Banks Corporate Governance in the Bail-In Era

The paper aims at introducing an in-depth analysis of Banks Corporate Governance in the after-crisis regulatory environment, going through theoretical and methodological specifications for starting an economic analysis of the post-crisis stream of reforms in the financial system, especially in the Eurozone. In a nutshell, this research has two main purposes: on the one hand, assess whether departures from standard corporate governance paradigms in banks are desirable; on the other hand, shed light on the impact of the rules on the resolution of distressed institutions on governance mechanisms. To achieve those goals, the paper carries out a survey the literature about Bank Governance and Bail-in Regulation in a functional manner to introduce the unexplored link between the new resolution regime and Corporate Governance, focusing the governance role of bail-inable creditors, as “potential residual claimers”. The literature review is supplemented and enriched by the necessary theoretical tools to properly set a Law & Economic analysis, both for what concerns specific agency relationships between corporate constituencies and the nature of financial regulation and bank insolvency. The paper concludes that the after-crisis reforms, and the bail-in regulation, in particular, represent the cornerstone for a new understanding of the relationship between corporate constituencies of banks. Moreover, the links between governance-related issues and the effectiveness of resolution mechanisms constitute a solid argument in favor of a positive role of Corporate Governance in addressing individual as well as systemic stability issues.