Outside the United States and the United Kingdom, large corporations usually have controlling owners, who are usually very wealthy families. Pyramidal control structures, cross shareholding, and super-voting rights let such families control corporations without making a commensurate capital investment. In many countries, a few such families end up controlling considerable proportions of their countries’ economies. Three points emerge. First, at the firm level, these ownership structures, because they vest dominant control rights with families who often have little real capital invested, permit a range of agency problems and hence resource misallocation. If a few families control large swaths of an economy, such corporate governance problems can attain macroeconomic importance—affecting rates of innovation, economywide resource allocation, and economic growth. If political influence depends on what one controls, rather than what one owns, the controlling owners of pyramids have greatly amplified political influence relative to their actual wealth. This influence can distort public policy regarding property rights protection, capital markets, and other institutions. We denote this phenomenon economic entrenchment, and posit a relationship between the distribution of corporate control and institutional development that generates and preserves economic entrenchment as one possible equilibrium. The literature suggests key determinants of economic entrenchment, but has many gaps where further work exploring the political economy importance of the distribution of corporate control is needed.

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Corporate Governance, Economic Entrenchment, and Growth

We gathered information on the cost-effectiveness of life-saving interventions in the United States from publicly available economic analyses. "Life-saving interventions" were defined as any behavioral and/or technological strategy that reduces the probability of premature death among a specified target population. We defined cost-effectiveness as the net resource costs of an intervention per year of life saved. To improve the comparability of cost-effectiveness ratios arrived at with diverse methods, we established fixed definitional goals and revised published estimates, when necessary and feasible, to meet these goals. The 587 interventions identified ranged from those that save more resources than they cost, to those costing more than 10 billion dollars per year of life saved. Overall, the median intervention costs $42,000 per life-year saved. The median medical intervention cost $19,000/life-year; injury reduction $48,000/life-year; and toxin control $2,800,000/life-year. Cost/life-year ratios and bibliographic references for more than 500 life-saving interventions are provided.

Five-hundred life-saving interventions and their cost-effectiveness.

Greater managerial ownership in family firms need not mitigate agency problems, especially when each family controls a group of publicly traded and private firms, as is the case in most countries. Such structures give rise to their own set of agency problems, as managers act for the controlling family, but not for shareholders in general. For example, to avoid what we call “creative self-destruction,” a family might quash innovation in one firm to protect its obsolete investment in another. At present, we do not know whether these agency problems are more or less serious impediments to general prosperity than those afflicting widely held firms.

http://people.stern.nyu.edu/byeung/agency.pdf

Agency Problems in Large Family Business Groups

Public–private partnerships are enjoying a global resurgence in popularity, but there is still much confusion around notions of partnership, what can be learned from our history with partnerships, and what is new about the partnership forms that are in vogue today. Looking at one particular family of public–private partnerships, the long-term infrastructure contract, this article argues that evaluations thus far point to contradictory results regarding their effectiveness. Despite their continuing popularity with governments, greater care is needed to strengthen future evaluations and conduct such assessments away from the policy cheerleaders.

Public-Private Partnerships: An International Performance Review

This paper examines the relationship between board characteristics and external audit fees for Fortune 1000 companies. Competing arguments exist regarding the possible relationship between board characteristics and fees. One view is that a more independent, diligent, and expert board would be more concerned with effectively discharging its monitoring role and would be more supportive of the external audit function. Such a board would be likely to insist on enhanced audit scope, thus increasing the audit fee. An alternative view is that a more independent, diligent, and expert board would reduce the auditor's assessment of control risk and would substitute some of its own monitoring for the monitoring of the auditor. This would reduce audit effort, thus decreasing the audit fee. Consistent with the first view, we find significant positive relationships between board independence, diligence, and expertise and audit fees. A more independent, diligent, and expert board does not appear to substitute for audit effort; rather, such a board may complement auditor oversight. These results add to the growing body of literature documenting a relationship between corporate governance mechanisms and various facets of the financial reporting and audit processes. In addition, the results add to our understanding of the determinants of audit fees.

https://papers.ssrn.com/sol3/Delivery.cfm/000706501.pdf?abstractid=231582

Board Characteristics and Audit Fees

Foreword -Amy Gutmann Introduction -Ronald J. Daniels, Donald F. Kettl, and Howard Kunreuther PART ONE: THE CHALLENGE OF THE GULF On Their Own in Battered New Orleans -Peter G. Gosselin Using Risk and Decision Analysis to Protect New Orleans against Future Hurricanes -Detlof von Winterfeldt Planning for a City on the Brink -Kenneth R. Foster and Robert Giegengack JARring Actions that Fuel the Floods -Carolyn Kousky and Richard Zeckhauser PART TWO: THINKING ABOUT RISK Behaviorally Realistic Risk Management -Baruch Fischhoff Rationales and Instruments for Government Intervention in Natural Disasters -Michael J. Trebilcock, and Ronald J. Daniels Social Inequality, Hazards, and Disasters -Kathleen Tierney Equity Analysis and Natural Hazards Policy -Matthew D. Adler PART THREE: PRIVATE SECTOR STRATEGIES FOR MANAGING RISK Why We Under-Prepare for Hazards -Robert J. Meyer Has the Time Come for Comprehensive Natural Disaster Insurance? -Howard Kunreuther Rethinking Disaster Policy After Hurricane Katrina -Scott E. Harrington Providing Economic Incentives to Build Disaster-Resistant Structures -Harvey Ryland PART FOUR: THE GOVERNMENT'S ROLE IN DISASTER PREPAREDNESS AND RESPONSE Role of Public Health and Clinical Medicine in Preparing for Disasters -Brian Strom Hurricane Katrina as a Bureaucratic Nightmare -Vicki Bier The Katrina Breakdown -Jonathan Walters and Donald F. Kettl Acknowledgments Contributors

On Risk and Disaster: Lessons from Hurricane Katrina

A number of distressing trends, including a decline in the share of key research grants going to younger scientists, as well as a steady rise in the age at which investigators receive their first funding, are now a decades-long feature of the US biomedical research workforce. Working committees have proposed recommendations, policy makers have implemented reforms, and yet the trajectory of our funding regime away from young scientists has only worsened. An investigation of some of the major factors and their geneses at play in explaining the increasing average age to first RO1 is presented. Recommendations related to funding, peer review, career paths, and the university–government partnership are provided.

https://www.pnas.org/content/pnas/112/2/313.full.pdf

A generation at risk: Young investigators and the future of the biomedical workforce

Most of the corporate governance literature rests on a premise that the interests of various stakeholder groups conflict and that managerial loyalty is more likely to be captured by shareholders than any other constituency Yet, stakeholder interests do converge in the objective of controlling managerial slack and non-equity constituents have substantial influence over firm decisions Although the study of governance has taken early steps to abandon its preoccupation with equity-centered solutions and identify interdependencies existing among a broader range of stakeholders, governance scholars have missed an important element of interactivity A stakeholder reacts to the actions of others and thereby contributes to the collective interest in controlling slack Each stakeholder has a window on the firm through which it can acquire some type of information at lower cost than other stakeholders When a stakeholder detects an unsatisfactory state of affairs, it reacts by choosing to exit or exercise voice The exercise of either the voice or exit option may pressure management to correct the unsatisfactory state of slack More to the point, however, a stakeholder's exit bears important information for other stakeholders, at least some of whom may be better placed to take action that corrects the slack This Article describes an interactive system of corporate governance and provides a stylized theory of the role of lenders within this system The divergence in the interests of these lenders and other stakeholders does not preclude interactive governance, but it does threaten to reduce the net benefits from the process Therefore, the authors identify a number of legal and institutional mechanisms that help to channel the efforts of the lender toward the common goal of containing and correcting managerial slack The interactive perspective thus permits new explanations for phenomena such as debt covenants, bankruptcy preference rules and lender liability laws For example, the definition of debt covenants and events of default in lending agreements raise the likelihood that the lender exit is prompted by slack rather than lender opportunism and thereby enhances the informational value of the exit Bankruptcy preference rules encourage early exit before the firm becomes insolvent, thereby enabling remaining stakeholders to take action before the firm's condition becomes irreparable Thus, debt covenants and preference rules provide a window that increases the value of lender exit in prompting the correction of managerial slack

/pdf/the-role-of-debt-in-interactive-corporate-governance-1nsk2qkmpa.pdf

The Role of Debt in Interactive Corporate Governance

Contents: 1. The Relationship of the Rule of Law to Development 2. The Judiciary 3. Police 4. Prosecution 5. Correctional Institutions 6. Tax Administration 7. Access to Justice 8. Legal Education 9. Professional Regulation 10. Rethinking Rule of Law Reform Strategies Index

Rule of Law Reform and Development: Charting the Fragile Path of Progress

This important book addresses a number of key issues regarding the relationship between the rule of law and development. It presents a deep and insightful inquiry into the current orthodoxy that the rule of law is the panacea for the world’s problems. The authors chart the precarious progress of law reforms both in overall terms and in specific policy areas such as the judiciary, the police, tax administration and access to justice, among others. They accept that the rule of law is necessarily tied to the success of development, although they propose a set of procedural values to enlighten this institutional approach. The authors also recognize that states face difficulties in implementing this institutional structures and identify the probable impediments, before proposing a rethink of law reform strategies and offering some conclusions about the role of the international community in the rule of law reform.

Ronald J. Daniels

Papers

On Risk and Disaster: Lessons from Hurricane Katrina

A generation at risk: Young investigators and the future of the biomedical workforce

The Role of Debt in Interactive Corporate Governance

Rule of Law Reform and Development: Charting the Fragile Path of Progress

Rule of Law Reform and Development