Showing papers on "Corporate governance published in 2012"
TL;DR: In this article, the authors review the corporate social responsibility literature based on 588 journal articles and 102 books and book chapters and offer a multilevel and multidisciplinary theoretical framework that synthesizes and integrates the literature at the institutional, organizational, and individual levels of analysis.
2,592 citations
TL;DR: In this article, the authors use a well-developed dynamic panel generalized method of moments estimator to alleviate endogeneity concerns in two aspects of corporate governance research: the effect of board structure on firm performance and the determinants of board structures.
1,580 citations
TL;DR: In this paper, the influence of corporate governance on financial firms' performance during the 2007-2008 financial crisis was investigated using a unique dataset of 296 financial firms from 30 countries that were at the center of the crisis.
1,100 citations
TL;DR: In this paper, the authors investigate the impact of nation-level institutions on firms' corporate social performance (CSP) using a sample of firms from 42 countries spanning seven years, and construct an annual composite CSP index for each firm, based on social and environmental metrics.
Abstract: Based on Whitley's “national business systems” (NBS) institutional framework, we theorize about and empirically investigate the impact of nation-level institutions on firms’ corporate social performance (CSP). Using a sample of firms from 42 countries spanning seven years, we construct an annual composite CSP index for each firm, based on social and environmental metrics. We find that the political system, followed by the labor and education system, and the cultural system are the most important NBS categories of institutions that impact CSP. Interestingly, the financial system appears to have a relatively less significant impact. We discuss implications for research, practice and policymaking.
956 citations
TL;DR: The authors synthesize the expanding corporate social responsibility (CSR) literature from an economic perspective and develop a CSR taxonomy that connects disparate approaches to the subject and explore whether CSR should exist and investigate conditions when CSR may produce higher welfare than other public good provision channels.
Abstract: *This paper synthesizes the expanding corporate social responsibility (CSR) literature. We define CSR from an economic perspective and develop a CSR taxonomy that connects disparate approaches to the subject. We explore whether CSR should exist and investigate conditions when CSR may produce higher welfare than other public good provision channels. We also explore why CSR does exist. Here, we integrate theoretical predictions with empirical findings from economic and noneconomic sources. We find limited systematic empirical evidence in favor of CSR mechanisms related to induced innovation, moral hazard, shareholder preferences, or labor markets. In contrast, we uncover consistent empirical evidence in favor of CSR mechanisms related to consumer markets, private politics, and public politics. (JEL D21, L21, M14)
842 citations
TL;DR: An overall view about the use of Web 2.0 and social media tools in EU local governments is provided in order to determine whether local governments are using these technologies to increase transparency and e-participation, opening a real corporate dialog.
779 citations
TL;DR: The authors used panel data on S&P 1500 companies to identify external network connections between directors and CEOs and found that firms with more powerful CEOs are more likely to appoint directors with ties to the CEO.
Abstract: We use panel data on S&P 1500 companies to identify external network connections between directors and CEOs. We find that firms with more powerful CEOs are more likely to appoint directors with ties to the CEO. Using changes in board composition due to director death and retirement for identification, we find that CEO-director ties reduce firm value, particularly in the absence of other governance mechanisms to substitute for board oversight. Moreover, firms with more CEO-director ties engage in more value-destroying acquisitions. Overall, our results suggest that network ties with the CEO weaken the intensity of board monitoring.
772 citations
TL;DR: Corporate governance failures are surely not the cause of the financial crisis, but they did not prevent and may have even facilitated some of the risky and misguided corporate practices that had such severe effects once the downturn started.
Abstract: The turmoil that struck financial institutions in 2007 has, by the end of 2011, significantly deteriorated the fundamentals of the global economy, eroding trust in sustainability of the markets, solvency of banks and even the credibility of sovereign states and monetary unions. Whether this is the most serious financial crisis since the Great Depression only history will tell, but it is clear by now that the damage to the global economy has been extraordinary. This chapter looks into some of the corporate governance lessons that could prevent this from happening again and presents the main findings and conclusions of the OECD Corporate Governance Committee as reflected in several OECD publications as well as in G.Kirkpatrick (2010).Corporate governance rules and practices of many of the financial institutions that collapsed have often been blamed to be partly responsible for the crisis. The failures of risk management systems and incentive schemes that encouraged and rewarded high levels of risk taking are key factors in this context. Since reviewing and guiding risk policy is a key function of the board, these deficiencies point to ineffective board oversight. And since boards are accountable to shareholders, they also have been put under the spotlight, as many of them seemed to have no interest in expressing their views on the functioning of companies as long as returns were within targets.Corporate governance failures are surely not the cause of the crisis, but they did not prevent and may have even facilitated some of the risky and misguided corporate practices that had such severe effects once the downturn started. Importantly, much of what we have learnt from the demise of some of these financial institutions can serve as an important lesson for non-financial corporations in general. Some of the key lessons from the corporate governance perspective are described in this article.This paper is structured as follows. In the first section we describe the macro-economic as well as the corporate governance dimension of the financial crisis, particularly the way remuneration practices, risk management procedures, limited board oversight as well as shareholder passivism contributed to the poor performance of some major banks. The second section explains how existing corporate governance principles and national corporate governance codes have been re-evaluated against this background, and some of the recent developments are presented. We finish offering some general conclusions.
759 citations
TL;DR: In this article, the authors examine the relationship between corporate governance and the extent of corporate social responsibility (CSR) disclosures in the annual reports of Bangladeshi companies and find that corporate governance attributes play a vital role in ensuring organisational legitimacy through CSR disclosures.
Abstract: We examine the relationship between corporate governance and the extent of corporate social responsibility (CSR) disclosures in the annual reports of Bangladeshi companies. A legitimacy theory framework is adopted to understand the extent to which corporate governance characteristics, such as managerial ownership, public ownership, foreign ownership, board independence, CEO duality and presence of audit committee influence organisational response to various stakeholder groups. Our results suggest that although CSR disclosures generally have a negative association with managerial ownership, such relationship becomes significant and positive for export oriented industries. We also find public ownership, foreign ownership, board independence and presence of audit committee to have positive significant impacts on CSR disclosures. However, we fail to find any significant impact of CEO duality. Thus, our results suggest that pressures exerted by external stakeholder groups and corporate governance mechanisms involving independent outsiders may allay some concerns relating to family influence on CSR disclosure practices. Overall, our study implies that corporate governance attributes play a vital role in ensuring organisational legitimacy through CSR disclosures. The findings of our study should be of interest to regulators and policy makers in countries which share similar corporate ownership and regulatory structures.
738 citations
Posted Content•
TL;DR: Corporate Social Responsibility (CSR) has become a pervasive topic in the business literature, but has largely neglected the role of institutions as discussed by the authors, which suggests going beyond grounding CSR in the voluntary behaviour of companies, and understanding the larger historical and political determinants of whether and in what forms corporations take on social responsibilities.
Abstract: Corporate Social Responsibility (CSR) has become a pervasive topic in the business literature, but has largely neglected the role of institutions. This introductory article to the Special Issue of Socio-Economic Review examines the potential contributions of institutional theory to understanding CSR as a mode of governance. This perspective suggests going beyond grounding CSR in the voluntary behaviour of companies, and understanding the larger historical and political determinants of whether and in what forms corporations take on social responsibilities. Historically, the prevailing notion of CSR emerged through the defeat of more institutionalized forms of social solidarity in liberal market economies. Meanwhile, CSR is more tightly linked to formal institutions of stakeholder participation or state intervention in other advanced economies. The tensions between business-driven and multi-stakeholder forms of CSR extend to the transnational level, where the form and meaning of CSR remain highly contested. CSR research and practice thus rest on a basic paradox between a liberal notion of voluntary engagement and a contrary implication of socially binding responsibilities. Institutional theory seems to be a promising avenue to explore how the boundaries between business and society are constructed in different ways, and improve our understanding of the effectiveness of CSR within the wider institutional field of economic governance.
717 citations
TL;DR: In this article, the empirical association between corporate governance and corporate social responsibility (CSR) engagement by investigating their causal effects was examined by employing a large and extensive US sample and finding that while the lag of CSR does not affect CG variables, the lag effect positively affects firms' CSR engagement, after controlling for various firm characteristics.
Abstract: In this article, we examine the empirical association between corporate governance (CG) and corporate social responsibility (CSR) engagement by investigating their causal effects. Employing a large and extensive US sample, we first find that while the lag of CSR does not affect CG variables, the lag of CG variables positively affects firms’ CSR engagement, after controlling for various firm characteristics. In addition, to examine the relative importance of stakeholder theory and agency theory regarding the associations among CSR, CG, and corporate financial performance (CFP), we also examine the relation between CSR and CFP. After correcting for endogeneity bias, our results show that CSR engagement positively influences CFP, supporting the conflict-resolution hypothesis based on stakeholder theory, but not the CSR overinvestment argument based on agency theory. Furthermore, firms’ CSR engagement with the community, environment, diversity, and employees plays a significantly positive role in enhancing CFP.
TL;DR: In this paper, a fact-based research approach was adopted to comprehensively explore the link between corporate governance and environmental performance, and to understand how the relationships between and among the firms' owners, managers, and boards of directors influence environmental performance.
Abstract: Corporate governance scholars are increasingly interested in firms' social and environmental performance. Empirical research in this area, however, has moved forward in an uncoordinated fashion, producing fragmented and contradictory results. Our paper seeks to address this situation by adopting a fact-based research approach that comprehensively explores the link between corporate governance and environmental performance. Specifically, we aim to understand how the relationships between and among the firms' owners, managers, and boards of directors influence environmental performance. We are particularly interested in understanding the interactions among these three key sets of actors. In the end, we offer some observations about governance practices and discuss the implications for theory. Copyright © 2012 John Wiley & Sons, Ltd.
TL;DR: In this paper, the authors use governance and sustainability theories to conceptualize the origins of social license to operate (SLO) in the mining sector and describe some of the associated implications, but only a limited body of scholarship has developed around SLO.
TL;DR: In this article, the potential contributions of institutional theory to understand corporate social responsibility as a mode of governance are examined. But the focus is on the voluntary behavior of companies and not on the larger historical and political determinants of whether and in what forms corporations take on social responsibilities.
Abstract: *Corporate Social Responsibility (CSR) has become a pervasive topic in the business literature, but has largely neglected the role of institutions. This introductory article to the Special Issue of Socio-Economic Review examines the potential contributions of institutional theory to understanding CSR as a mode of governance. This perspective suggests going beyond grounding CSR in the voluntary behaviour of companies, and understanding the larger historical and political determinants of whether and in what forms corporations take on social responsibilities. Historically, the prevailing notion of CSR emerged through the defeat of more institutionalized forms of social solidarity in liberal market economies. Meanwhile, CSR is more tightly linked to formal institutions of stakeholder participation or state intervention in other advanced economies. The tensions between business-driven and multi-stakeholder forms of CSR extend to the transnational level, where the form and meaning of CSR remain highly contested. CSR research and practice thus rest on a basic paradox between a liberal notion of voluntary engagement and a contrary implication of socially binding responsibilities. Institutional theory seems to be a promising avenue to explore how the boundaries between business and society are constructed in different ways, and improve our understanding of the effectiveness of CSR within the wider institutional field of economic governance.
TL;DR: In this paper, the authors examine the relationship of board composition, leadership and structure on sustainability disclosure and show that good corporate governance and sustainability disclosure can be seen as complementary mechanisms of legitimacy that companies may use to dialogue with stakeholders.
Abstract: Drawing on stakeholder theory, this paper examines the relationship of board composition, leadership and structure on sustainability disclosure. We discuss that good corporate governance and sustainability disclosure can be seen as complementary mechanisms of legitimacy that companies may use to dialogue with stakeholders. Specifically we claim that, as disclosure policies emanate from the board of directors, sustainability disclosure may be a function of the board attributes: we investigate the relationship between different characteristics of the board and sustainability disclosures among US and European companies. Our results show that in order to explain the effect of board composition on sustainability disclosure we need to go beyond the narrow and traditional distinction between insider and independent directors, focusing on the specific characteristics of each director.
TL;DR: This article investigated whether risk management-related corporate governance mechanisms, such as the presence of a chief risk officer (CRO) in a bank's executive board and whether the CRO reports to the CEO or directly to the board of directors, are associated with a better bank performance during the financial crisis of 2007/2008.
Abstract: The recent financial crisis has raised several questions with respect to the corporate governance of financial institutions. This paper investigates whether risk management-related corporate governance mechanisms, such as for example the presence of a chief risk officer (CRO) in a bank’s executive board and whether the CRO reports to the CEO or directly to the board of directors, are associated with a better bank performance during the financial crisis of 2007/2008. We measure bank performance by buy-and-hold returns and ROE and we control for standard corporate governance variables such as CEO ownership, board size, and board independence. Most importantly, our results indicate that banks, in which the CRO directly reports to the board of directors and not to the CEO (or other corporate entities), exhibit significantly higher (i.e., less negative) stock returns and ROE during the crisis. In contrast, standard corporate governance variables are mostly insignificantly or even negatively related to the banks’ performance during the crisis.
TL;DR: In this paper, the authors provide a systematic literature review on the governance structures used to extend sustainability to suppliers, and identify enablers of these practices, which have a positive impact on environmental performance and corporate social responsibility.
Abstract: Purpose – To make their supply chains more socially responsible, many companies are implementing supplier assessment tools and collaborative practices. The aim of this paper is to provide a systematic literature review on the governance structures used to extend sustainability to suppliers. More specifically, the authors aim to answer two questions: “What is the impact of these mechanisms or governance structures on sustainable performance?” and “What are the enablers of these mechanisms?”.Design/methodology/approach – A structured literature review is carried out that analyses published studies, evaluates contributions, summarises knowledge and identifies managerial implications and lines for further research.Findings – Both assessment and collaboration have a positive impact on environmental performance and corporate social responsibility, although the most recent collaborative paradigm stresses that assessment alone is not enough. Some enablers of these practices are identified.Research limitations/imp...
TL;DR: In this paper, the authors examine equity risk incentives as one determinant of corporate tax aggressiveness and find that larger equity risk incentive is associated with higher tax risk and the magnitude of this effect is economically significant.
Abstract: This study examines equity risk incentives as one determinant of corporate tax aggressiveness. Prior research finds that equity risk incentives motivate managers to make risky investment and financing decisions, since risky activities increase stock return volatility and the value of stock option portfolios. Aggressive tax strategies involve significant uncertainty and can impose costs on both firms and managers. As a result, managers must be incentivized to engage in risky tax avoidance that is expected to generate net benefits for the firm and its shareholders. We predict that equity risk incentives motivate managers to undertake risky tax strategies. Consistent with this prediction, we find that larger equity risk incentives are associated with greater tax risk and the magnitude of this effect is economically significant. Our results are robust across four measures of tax risk, but do not vary across several proxies for strength of corporate governance. We conclude that equity risk incentives are a significant determinant of corporate tax aggressiveness.
TL;DR: In this paper, the authors analyzed whether political connections of the boards of directors of publicly traded companies in the United States affect the allocation of government procurement contracts and found that companies with boards connected to the winning (losing) party experienced a significant and large increase (decrease) in procurement contracts after the election.
Abstract: This paper analyzes whether political connections of the boards of directors of publicly traded companies in the United States affect the allocation of government procurement contracts. It focuses on the change in control of both House and Senate following the 1994 election and finds that companies with boards connected to the winning (losing) party experience a significant and large increase (decrease) in procurement contracts after the election. The results remain significant after controlling for industry classifications as well as for several other company characteristics. The findings highlight one of the main avenues through which corporate political connections add value to U.S. companies.
TL;DR: This article examined the benefits and costs associated with foreign independent directors (FIDs) at U.S. corporations and found that firms with FIDs make better cross-border acquisitions when the targets are from the home regions of FIDs.
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21 Mar 2012TL;DR: In this article, the authors discuss power and politics in Interactive Governance and assess and improve the democratic quality of interactive Governance, including the role of role and role dilemma in interactive governance.
Abstract: Introduction 1. The Governance Debate and the Rise of Interactive Governance 2. Governance in other Disciplines: One Approach or Many? 3. Power and Politics In Interactive Governance 4. Measuring Governance 5. Horizontal, Vertical, and Diagonal Governance 6. Institutionalizing Interactive Governance 7. Metagovernance: The Art of Governing Interactive Governance 8. New Roles and Role Dilemmas in Interactive Governance 9. Assessing and Improving Effective Interactive Governance 10. Assessing And Improving The Democratic Quality of Interactive Governance 11. Transparency and Governance 12. Conclusions References
TL;DR: In this paper, the authors identify four distinct paths through which corporate social responsibility may affect employees' relationship with their company that correspond to four universal psychological needs: security, self-esteem, belongingness, and a meaningful existence.
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23 May 2012
TL;DR: The New Schools Network Network Networks: ARK, Teach First and the New Schools network networks as mentioned in this paper have been proposed as the new policy lions of the state education system, and the beginning of the end of state education.
Abstract: Policy networks and new governance Education, network governance and public sector reform 'New' philanthropy, social enterprise and public policy Policy influence, boundary spanners and policy discourses New policy lions: ARK, Teach First and the New Schools Network Networks, heterarchies and governance - and the beginning of the end of state education?
TL;DR: This study studies how different social movement and industry-driven standards organizations compete as well as collaborate over governance in transnational arenas and explains the dynamics of competing and collaborating non-state actors in constituting a standards market.
Abstract: The growing number of voluntary standards for governing transnational arenas is presenting standards organizations with a problem. While claiming that they are pursuing shared, overarching objectives, at the same time they are promoting their own respective standards that are increasingly similar. By developing the notion of ‘standards markets’, this paper examines this tension and studies how different social movement and industry-driven standards organizations compete as well as collaborate over governance in transnational arenas. Based on an in-depth case study of sustainability standards in the global coffee industry, we find that the ongoing co-existence of multiple standards is being promoted by the interplay between two countervailing mechanisms: convergence and differentiation. In conjunction, these mechanisms are enabling the emergence and persistence of a market for standards through what we describe as meta-standardization of sustainable practices. Meta-standardization leads to convergence at t...
TL;DR: In this paper, the authors examine the key elements of board diversity (or heterogeneity) amongst listed companies operating in an emerging economy (Mauritius) and the extent to which these influence financial performance.
Abstract: We examine the key elements of board diversity (or heterogeneity) amongst listed companies operating in an emerging economy (Mauritius) and the extent to which these influence financial performance. Specifically, we ask whether there is evidence of tangible benefits in pursuing a strategy of board diversity in terms of gender-, age-, educational background and independence in a corporate context which has long been dominated by family-led and ‘closed’ boardrooms. In light of recent corporate governance developments which appear to foster greater diversity, we examine data from the 2007 annual reports of all 42 companies listed on the Stock Exchange of Mauritius. We find that (i) women remain poorly represented on boards (ii) there is a relatively satisfactory level of heterogeneity in terms of educational background, age and independence in relation to developed countries. We also find significant regression coefficients for all four variables in terms of their impact on short-term performance. However, these relationships are characterised by both negative and positive impacts thereby leading to discussions on the validity of a strict heterogeneous or homogeneous board composition in the context of a developing economy.
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29 Mar 2012
TL;DR: In this paper, the authors discuss the role of actors, strategies, and styles of actors in the development of the state and its role in the reformation of state government and the state's role in economic development.
Abstract: PART I: INTRODUCTION PART II: THEORETICAL LENSES PART III: GOVERNANCE AND THE REFORM OF THE STATE PART IV: ACTORS, STRATEGIES AND GOVERNANCE STYLES PART V: ECONOMIC GOVERNANCE PART VI: GOVERNANCE OF RISKS PART VII: DEMOCRATIC GOVERNANCE PART VIII: EUROPEAN GOVERNANCE PART IX: GLOBAL GOVERNANCE
TL;DR: This article examined the relationship between SG&A cost asymmetry and the agency problem and found that strong corporate governance mitigated any positive association between the agency problems and SG&As cost asymmetric.
Abstract: Selling, general, and administrative (SGA Anderson and Lanen 2007; Balakrishnan and Soderstrom 2009; Banker, Byzalov, and Plehn-Dujowich 2010). Prior studies have predominantly explained cost stickiness with economic factors such as asset intensity and uncertainty of future demand and have largely ignored the impact of managerial incentives on cost behavior. Although Anderson et al. (2003: 49) conjecture that part of SG&A cost asymmetry may be attributable to agency costs, there is no largescale empirical evidence on their conjecture. Drawing on the empire building and the downsizing literatures, we fill the gap in the cost stickiness literature by examining the following two research questions: (i) Is SG&A cost asymmetry positively associated with the agency problem, after controlling for known economic determinants of this asymmetry? (ii) Does strong corporate governance mitigate any positive association between the agency problem and SG&A cost asymmetry? Agency theory predicts that the misalignment of interests between shareholders and managers could lead to agency problems, that is, managers engage in activities for their own benefits rather than the benefits of the firm’s shareholders (Jensen and Meckling 1976). A well-documented agency problem is managerial ‘‘empire building’’, which refers to managers’ tendencies to grow the firm beyond its optimal size or to maintain unutilized
TL;DR: In this paper, the authors use the technique of panel data in a sample of 320 American listed companies from 2003 to 2007 to estimate a model of corporate reputation, measured by the Fortune index.
Abstract: We use the technique of panel data in a sample of 320 American listed companies from 2003 to 2007 to estimate a model of corporate reputation, measured by the Fortune index. We propose that corporate social responsibility (CSR) is a key driver of corporate reputation given its potential to foster hard-to-duplicate competitive advantage. Our model embodies the multidimensional concept of CSR, presenting a five dimensional construct – employee relations, diversity issues, product issues, community relations, and environmental issues – and interact those with industrial effects. Our results indicate that the five dimensions of CSR have a significant impact on corporate reputation and this impact is moderated by the industry of the firm. The most salient dimensions were diversity of the work force – was positively relevant to eight of the nine industries; and product issues with a positive impact in five industries and negative in three. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment.
TL;DR: In this paper, a large sample of covenant violations reported by U.S. public firms is used to show that violations are followed immediately with an increase in CEO turnover, an increased in the incidence of corporate restructurings and hiring of turnaround specialists, a decline in acquisitions and capital expenditures, and a sharp reduction in leverage and shareholder payouts.
Abstract: We provide evidence that creditors play an active role in the governance of corporations well outside of payment default states. Using a large sample of covenant violations reported by U.S. public firms, we show that violations are followed immediately with an increase in CEO turnover, an increase in the incidence of corporate restructurings and hiring of turnaround specialists, a decline in acquisitions and capital expenditures, and a sharp reduction in leverage and shareholder payouts. The changes in the investment and financing behavior of violating firms coincide with amended credit agreements that contain stronger restrictions on firm decision-making. In addition, changes in the management of violating firms suggest that creditors exert considerable behind-the-scenes influence on governance in addition to contractual control. We also show that firm operating and stock price performance improve following a violation, suggesting that actions taken by creditors benefit shareholders.