Showing papers on "Corporate governance published in 2013"

The Corporate Social Performance and Corporate Financial Performance Debate: Twenty-Five Years of Incomparable Research

Abstract: This article extend earlier research concerning the relationship between corporate social performance and corporate financial performance, with particular emphasis on methodological inconsistencies. Research in this area is extended in three critical areas. First, it focuses on a particular industry, the chemical industry. Second, it use multiple sources of data -- two that are perceptually based (KLD Index and Fortune reputation survey), and two that are performance based (TRI database and corporate philanthropy) in order to triangulate toward assessing corporate social performance. Third, it use the five most commonly applied accounting measures in the corporate social performance and corporate financial performance (CSP/CFP) to assess corporate financial performance. The results indicate that the a priori use of measures may actually predetermine the CSP/CFP relationship outcome. Surprisingly, Fortune and KLD Indices very closely track one another, whereas TRI and corporate philanthropy differentiate between high and low social performers and do not correlate to the firm's financial performance.

Determinants of Sustainability Reporting: A Review of Results, Trends, Theory, and Opportunities in an Expanding Field of Research

Abstract: Since the end of the 1990s, sustainability reporting has become an increasingly relevant topic in business and academia. However, literature is still limited in quantity and no major reviews of the latest developments have thus far been presented. This paper provides a review of 178 articles dating from 1999 to 2011 from journals related to business, management, and accounting. Our aim is to identify what determinants of sustainability reporting are examined in the literature and to identify (in)consistencies, gaps, and opportunities for future research. We specifically illuminate factors influencing the adoption, the extent, and the quality of reporting. Based on our findings we provide an otherwise often missing link to theory (especially legitimacy, stakeholder, signaling, and institutional theory). Finally, possible future research themes are discussed by illuminating gaps and underexposed themes in the area of regulation and governance as well as reporting quality and stakeholder perception.

The Relationship Between Corporate Social Performance, and Organizational Size, Financial Performance, and Environmental Performance: An Empirical Examination

Abstract: The purpose of this study is to examine the relationship between the corporate social performance of an organization and three variables: the size of the organization, the financial performance of the organization, and the environmental performance of the organization. By empirically testing data from 1987 to 1992, the results of the study show that a firm’s corporate social performance is indeed impacted by the size of the firm, the level of profitability of the firm, and the amount of pollution emissions released by the firm.

Corporate governance and corporate social responsibility disclosures : evidence from an emerging economy

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.

Planetary Boundaries: Ecological Foundations for Corporate Sustainability

Abstract: Management studies on corporate sustainability practices have grown considerably. The field now has significant knowledge of sustainability issues that are firm and industry focused. However, complex ecological problems are increasing, not decreasing. In this paper, we argue that it is time for corporate sustainability scholars to reconsider the ecological and systemic foundations for sustainability, and to integrate our work more closely with the natural sciences. To address this, our paper introduces a new development in the natural sciences � the delineation of nine �Planetary Boundaries� which govern life as we know it. We call for more systemic research that measures the impact of companies on boundary processes that are at, or possibly beyond, three threshold points � climate change, the global nitrogen cycle, and rate of biodiversity loss � and closing in on others. We also discuss practical implications of the Planetary Boundaries framework for corporate sustainability, including governance and institutional challenges.

Executive Compensation: Where We Are, and How We Got There

Abstract: In this study, I summarize the current state of executive compensation, discuss measurement and incentive issues, document recent trends in executive pay in both U.S. and international firms, and analyze the evolution of executive pay over the past century. Most recent analyses of executive compensation have focused on efficient-contracting or managerial-power rationales for pay, while ignoring or downplaying the causes and consequences of disclosure requirements, tax policies, accounting rules, legislation, and the general political climate. A major theme of this study is that government intervention has been both a response to and a major driver of time trends in executive compensation over the past century, and that any explanation for pay that ignores political factors is critically incomplete.

Corporate boards, audit committees and voluntary disclosure: evidence from Italian Listed Companies

Abstract: This paper investigates the interplay between governance and disclosure in an agency setting, featured by concentrated ownership and high insider shareholders representation in the board. In this context, agency conflicts happen between large controlling shareholders and minority outside investors, with risks of private benefits exploitation. We regressed a voluntary disclosure index on seven governance variables related either to the board structure and functioning. The empirical evidence is provided by the Italian stock market. Our results suggest the presence of a complementary relationship between governance and disclosure. Diligent monitoring activity is associated with greater transparency to the outside. The findings are consistent with the view that internal and external control tend to be present at the same time, since the presence of one of them reduces the incentive for the controlling shareholders to limit the other. The empirical evidence also show that larger boards are not detrimental to outside shareholders, with regard to voluntary disclosure. The study can contribute to the understanding of the relationship between governance and disclosure in a particular agency setting. They might be of interest to practitioners and regulators, insofar as they are consistent with calls for more disclosure requirements in this agency setting.

The Role of the Board in the Dissemination of Integrated Corporate Social Reporting

Abstract: The stakeholder theory recognizes that, besides shareholders and creditors, there exists a broad range of agents who are interested in companies' attitudes towards sustainability. Through corporate social reporting, the social and environmental effects of companies' economic actions are communicated to interest groups. However, the information contained in financial and social reports tends to be presented quite separately from that in the others, and this may lead to confusion among users. Therefore, several major companies have introduced an integrated reporting system, which coherently summarizes the information available, thus making stakeholders participants in business management. Corporate governance mechanisms such as the Board of Directors play an important role in good practices of corporate social responsibility, implementing policies of stakeholder engagement, including processes to achieve holistic transparency. The aim of this paper is to demonstrate the influence played by certain features of the Board of Directors in the degree of information integration presented by leading non-financial multinational firms. Specifically, we examined 568 companies from 15 countries, for the period 2008–2010. The results obtained show that growth opportunities, the size of a company and its management bodies, together with gender diversity, are the most important factors in the integrated dissemination of information. This effect has been confirmed for the Anglo-Saxon, Germanic and Latin models of corporate governance. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment

Revisiting the urban politics of climate change

Abstract: In our 2005 paper, Rethinking Sustainable Cities, we made a case for the increasing significance of climate change in the urban politics of sustainability. Taking a multilevel governance perspective, we argued that the ‘urban’ governance of climate protection was not confined to a local arena or to the actions of the state, but rather was orchestrated through the interrelations between global, national and local actors across state/non-state boundaries. We revisit these arguments and examine their validity in the light of the rapidly changing landscape of urban responses to climate change and the growing academic literature in this field. We consider in turn: the ways in which climate change is shaping urban agendas; the utility of multilevel governance perspectives for understanding this phenomenon; and the extent to which we can identify a ‘new’ politics of urban climate change governance and its consequent implications for the development of theory and practice in this field.

Is Corporate Social Responsibility (CSR) Associated with Tax Avoidance? Evidence from Irresponsible CSR Activities

Abstract: We examine the empirical association between corporate social responsibility (CSR) and tax avoidance. Our findings suggest that firms with excessive irresponsible CSR activities have a higher likelihood of engaging in tax-sheltering activities and greater discretionary/permanent book-tax differences. Moreover, at the onset of FASB Interpretation No. 48, these firms have more uncertain tax positions; also, these firms' initial tax positions are likely supported by weaker facts and circumstances as indicated by their larger post-FIN 48 settlements with tax authorities and their higher likelihood of a net decrease in the overall level of uncertain tax positions after FIN 48. Collectively, these results suggest that firms with excessive irresponsible CSR activities are more aggressive in avoiding taxes, lending credence to the idea that corporate culture affects tax avoidance. Data Availability: Data are available from public sources identified in the study.

Determinants of Corporate Cash Policy: Insights from Private Firms

Abstract: We provide one of the first large sample comparisons of cash policies in public and private U.S. firms. We first show that despite higher financing frictions, private firms hold, on average, about half as much cash as public firms do. By examining the drivers of cash policies for each group, we are able to attribute the difference to the much higher agency costs in public firms. By combining evidence from across public and private firms as well as within public firms across different qualities of governance, we are able to reconcile existing mixed evidence on the effects of agency problems on cash policies. Specifically, agency problems affect not only the target level of cash, but also how managers react to cash in excess of the target.

Women on boards and firm performance

Abstract: This study investigates the financial performance of Dutch companies both with and without women on their boards. The analysis extends earlier methods used in research by Catalyst (The bottom line: corporate performance and women’s representation on boards, 2007) and McKinsey (Women matter. Gender diversity, a corporate performance driver. McKinsey & Company, USA, 2007), two studies that are often cited in the literature, although, each has a number of methodological shortcomings. This article adds to the international debate, which is often normative, through examining 99 listed companies in the Dutch Female Board Index. Our results show that firms with women directors perform better than those without women on their boards.

The Value of Corporate Culture

Abstract: We study which dimensions of corporate culture are related to a firm’s performance and why. We find that proclaimed values appear irrelevant. Yet, when employees perceive top managers as trustworthy and ethical, firm’s performance is stronger. We then study how different governance structures impact the ability to sustain integrity as a corporate value. We find that publicly traded firms are less able to sustain it. Traditional measures of corporate governance do not seem to have much of an impact.

The performance frontier: innovating for a sustainable strategy.

Abstract: A mishmash of sustainability tactics does not add up to a sustainable strategy. Too often, companies launch sustainability programs with the hope that they'll be financially rewarded for doing good, even when those programs aren't relevant to their strategy and operations. They fail to understand the trade-offs between financial performance and performance on environmental, social, and governance (ESG) issues. Improving one typically comes at a cost to the other. But it doesn't have to be this way. It's possible to simultaneously boost both financial and ESG performance-if you focus strategically on issues that are the most "material" to shareholder value, and you develop major innovations in products, processes, and business models that prioritize those concerns. Maps being developed by the Sustainability Accounting Standards Board, which rank the materiality of 43 issues for 88 industries, can provide valuable guidance. And broad initiatives undertaken by three companies-Natura, Dow Chemical, and CLP Group-demonstrate the kind of innovations that will push performance into new territory. Communicating the benefits to stakeholders is also critical, which is why integrated reports, which combine financial and ESG reporting, are now gaining in popularity.

Managing for the Future

Abstract: Preface Acknowledgements Interview: Notes on the post-business society Economics - The futures already around us The poverty of economic theory The transnational economy From World trade to World investment The lessons of the U.S. export boom Low wages: no longer a competitive edge Europe in the 1990s: strategies for survival U.S.-Japan trade needs a reality check Japan's great postwar weapon Misinterpreting Japan and the Japanese Help Latin America and help ourselves Mexico's ace in the hole: The Maquiladora People - The new productivity challenge The mystique of the business leader Leadership: more doing than dash People, work, and the future of the city The rise and fall of the blue-collar worker On ending work rules and job descriptions Making managers of communist bureaucrats China's nightmare: No jobs for the millions Management - Tomorrow's managers: the major trends How to manage the boss What really ails the U.S. auto industry Manage by walking around - outside! Corporate culture: use it, don't lose it Permanent cost cutting: permanent policy What the nonprofits are teaching business Nonprofit governance: lessons for success The nonprofits' outreach revolution The organization - The governance of corporations Four marketing lessons for the future Tomorrow's company: dressed for success Company performance: five telltale tests R&D: the best is business-driven Sell the mailroom: unbundling in the '90s The ten rules of effective research The trend toward alliances for progress A crisis of capitalism: who's in charge? The emerging theory of manufacturing Afterword: The 1990s and beyond - The changing world economy The knowledge society Innovation and entrepreneurship Personal effectiveness Index.

Corporate Governance and Performance in Socially Responsible Corporations: New Empirical Insights from a Neo‐Institutional Framework

Abstract: Research Question/Issue: This paper investigates the relationship between corporate governance (CG) and corporate social responsibility (CSR), and consequently, examines whether CG can positively moderate the association between corporate financial performance (CFP) and CSR. Research Findings/Insights: Using a sample of large listed corporations from 2002 to 2009, we find that, on average, better-governed corporations tend to pursue a more socially responsible agenda through increased CSR practices. We also find that a combination of CSR and CG practices has a stronger positive effect on CFP than CSR alone, implying that CG positively influences the CFP-CSR relationship. Our results are robust to controlling for different types of endogeneities, as well as alternative CFP, CG and CSR proxies. Theoretical/Academic Implications: The paper generally contributes to the literature on CG, CSR and CFP. Specifically, we make two main new contributions to the extant literature by drawing on new insights from an overarching neo-institutional framework. First, we show why and how better-governed corporations are more likely to pursue a more socially responsible agenda. Second, we provide evidence on why and how CG might strengthen the link between CFP and CSR. Practical/Policy Implications: Our findings have important implications for corporate regulators and policy-makers. Since our evidence suggests that better-governed corporations are more likely to be more socially responsible with a consequential positive effect on CFP, it provides corporate regulators, managers and policy-makers with a new impetus to develop a more explicit agenda of jointly pursuing CG and CSR reforms, instead of merely considering CSR as a peripheral component of CG or as an independent corporate activity. Keywords: Corporate Governance, Corporate Social Responsibility, Corporate Financial Performance, Neo-Institutional Theory

Legislating a Woman's Seat on the Board: Institutional Factors Driving Gender Quotas for Boards of Directors

Abstract: Ten countries have established quotas for female representation on publicly traded corporate and/or state-owned enterprise boards of directors, ranging from 33-50%, with various sanctions. Fifteen other countries have introduced non-binding gender quotas in their corporate governance codes enforcing a "comply or explain" principle. Countless other countries’ leaders and policy groups are in the process of debating, developing, and approving legislation around gender quotas in boards. Taken together, gender quota legislation significantly impacts the composition of boards of directors and thus the strategic direction of these publicly traded and state-owned enterprises. This article outlines an integrated model of three institutional factors that explain the establishment of board of directors gender quota legislation based on the premise that the country’s institutional environment co-evolves with gender corporate policies. We argue that these three key institutional factors are female labor market and gendered welfare state provisions, left-leaning political government coalitions, and path dependent policy initiatives for gender equality, both in the public realm as well as in the corporate domain. We discuss implications of our conceptual model and empirical findings for theory, practice, policy, and future research. These include the adoption and penalty design of board diversity practices into corporate practices, bottom-up approaches from firm to country-level gender board initiatives, hard versus soft regulation, the leading role of Norway and its isomorphic effects, the likelihood of engaging in decoupling, the role of business leaders, and the transnational and international reaction to board diversity initiatives.

Modeling the adoption and use of social media by nonprofit organizations

Abstract: This study examines what drives organizational adoption and use of social media through a model built around four key factors – strategy, capacity, governance and environment. Using Twitter, Facebook, and other data on 100 large US nonprofit organizations, the model is employed to examine the determinants of three key facets of social media utilization: (1) adoption, (2) frequency of use and (3) dialogue. We find that organizational strategies, capacities, governance features and external pressures all play a part in these social media adoption and utilization outcomes. Through its integrated, multi-disciplinary theoretical perspective, this study thus helps foster understanding of which types of organizations are able and willing to adopt and juggle multiple social media accounts, to use those accounts to communicate more frequently with their external publics, and to build relationships with those publics through the sending of dialogic messages.

Coordinating and competing in ecosystems: How organizational forms shape new technology investments

Abstract: We consider firms in the context of their business ecosystems and explore how governance choices with respect to complementors and distributors shape their competitive behavior—i.e., investments in new technologies. We argue that, in addition to creating differences in incentives, governance choices play an important role in the firm’s ability to coordinate accompanying changes in interdependent activities so as to create value from the new technology. We test our predictions in the U.S. healthcare industry from 1995-2006. We examine how hospitals’ decisions to invest in new imaging technologies are shaped by their governance modes with physicians—key complementors to hospitals, and with managed care organizations (MCOs)— primary distributors of hospital and physician services. We find that hospitals pursuing alliances with physicians are more likely to invest in new technologies than hospitals pursuing arm’slength or integrated modes, and the likelihood of investment is increasing in the scope of alliance. Finally, hospitals pursuing tapered integration with downstream MCOs are more likely to invest in new technologies than hospitals pursuing arm’s-length relationships. Overall, the study argues for extending research on organizational forms to explore the link between coordination mechanisms and competitive behavior, and to consider such choices in the context of business ecosystems.

Do Hostile Takeovers Stifle Innovation? Evidence from Antitakeover Legislation and Corporate Patenting

Abstract: I examine how strong corporate governance proxied by the threat of hostile takeovers affects innovation and firm value. I find a significant decline in the number of patents and citations per patent for firms incorporated in states that pass antitakeover laws relative to firms incorporated in states that do not. Most of the impact of antitakeover laws on innovation occurs 2 or more years after they are passed, indicating a causal effect. The negative effect of antitakeover laws is mitigated by the presence of alternative governance mechanisms such as large shareholders, pension fund ownership, leverage, and product market competition.

Blockholders and Corporate Governance

Abstract: This paper reviews the theoretical and empirical literature on the different channels through which blockholders (large shareholders) engage in corporate governance. In classical models, blockholders exert governance through direct intervention in a firm’s operations, otherwise known as “voice.” These theories have motivated empirical research on the determinants and consequences of activism. More recent models show that blockholders can govern through the alternative mechanism of “exit” – selling their shares if the manager underperforms. These theories give rise to new empirical studies on the two-way relationship between blockholders and financial markets, linking corporate finance with asset pricing. Blockholders may also worsen governance by extracting private benefits of control or pursuing objectives other than firm value maximization. I highlight the empirical challenges in identifying causal effects of and on blockholders, and the typical strategies attempted to achieve identification. I close with directions for future research.

Instrumental and Integrative Logics in Business Sustainability

Abstract: Prior research on sustainability in business often assumes that decisions on social and environmental investments are made for instrumental reasons, which points to causal relationships between corporate financial performance and corporate social and environmental commitment. In other words, social or environmental commitment should predict higher financial performance. The theoretical premise of sustainability, however, is based on a systems perspective, which implies a tighter integration between corporate financial performance and corporate commitment to social and environmental issues. In this paper, we describe the important theoretical differences between an instrumental and integrative logic in managing business sustainability. We test the presence of each logic using data from 738 firms over 13 years and find evidence of integrative logic applied in business.

A Behavioral Theory of Corporate Governance: Explicating the Mechanisms of Socially Situated and Socially Constituted Agency

Abstract: We propose a behavioral theory of corporate governance based on an ontological foundation of socially situated and socially constituted agency. More specifically, we advance a multi-level, mechanism-based, theory of governance that is socially informed yet actor-centric, and thus offers a distinct alternative to under-socialized governance theories, such as agency theory. We highlight the contributions of recent governance research in providing the foundation for such a behavioral theory, with particular emphasis on our prior work that demonstrated the relevance of social structural relationships, institutional processes, and social cognition. We conclude with a discussion of the central themes that emerge from our perspective.