"Proxy Power" and Corporate Democracy:

A bstract . Separation of corporate ownership from control has permitted the rise of a self perpetuating managerial elite , which operates businesses in its own self interest. The attempt of the corporate democracy and corporate responsibility movements to curb unbridled management power through stockholder proxy proposals has been highly publicized. Analysis of stockholder initiated resolutions contained in the proxy statements of 626 corporations indicates that relatively few companies receive even one resolution, that proposers are usually small shareholders operating independently or in loose coalitions with limited resources and divergent interests, that managements use massive resources to oppose virtually all proposals and defeat most overwhelmingly, and that the handful of management concessions to stockholder activists is actually cosmetic mollification. We conclude the proxy power is structurally weak and is not a realistic agent of corporate change, in that management structure and policy-making power remain intact.     

Learning to Build a Car: An Empirical Investigation of Organizational Learning

abstract    This study provides a longitudinal empirical examination of the basic elements of Nonaka's (1994 ) dynamic theory of organizational knowledge creation. First, the data illustrate the notion that knowledge creation in organizations proceeds through an intertwined four-phase process: (1) socialization (tacit knowledge amplification); (2) externalization (tacit knowledge is transformed into explicit knowledge); (3) combination (explicit knowledge amplification); and (4) internalization (explicit knowledge is transformed into tacit knowledge). Second, the study extends Nonaka's theory by comparing the relative amount of intra-organizational knowledge transfer occurring during periods of product redesign with the amount of knowledge transfer occurring during steady-state periods. The questionnaire data suggest that the overall level of knowledge transfer is higher during periods of product redesign than it is during the steady state, whereas the interview data indicate that there were more mentions of knowledge transfer during the steady state. Third, the data suggest that there may be benefit in adding tacit error correction as a fifth phase in the learning cycle. This phase is characterized by a dual emphasis on externalization and internalization. Implications of these findings are discussed.     

The Information Content of Productivity Measures: an International Comparison*

This study examines whether, and to what extent, productivity information is used by the market and whether it is useful as a predictive measure. To see if nationality has any bearing on these issues, we examine the information content of productivity measures in Japan, Korea and the United States. While correlations between security returns, productivity changes and unexpected earnings are not uniform across our sample countries, our findings suggest that productivity, as a performance metric, merits greater attention by financial managers and security analysts. The substitution of productivity in place of short-run earnings could very well be the key to enhanced performance in today's environment of global competition.     

The use of stakeholder analysis to understand ethical and moral issues in the primary resource sector

The mineral resources sector is critical to Australia's economic and social well-being. Minerals and energy have a value of $30 billion in export revenues, providing 50 percent of Australia's merchandise exports. The industry is characterized by substantial capital investment and very long lead times for project developments and a very competitive international market. The future direction and location of the industry is inextricably linked to long term exploration activities. The industry is faced with a far more complex set of environments than most. The paper identifies the range of complex issues and the wide variety of players using a stakeholder analysis. By monitoring such interactions, and knowing the objective set of the parties, a guide could be established to define moral and ethical frameworks for each interaction.Frederick Frost is an Associate Professor, Curtin Business School. He has the degrees of Bachelor and Master in Metallurgical Engineering, and Ph.D. in Chemical Engineering and MBA.     

MEASURING RISK AVERSION: ALLOCATION,LEVERAGE, AND ACCUMULATION

The risk-asset ratio that measures Arrow-Pratt relative risk aversion reflects a multidimensional risk behavior. The risk-asset ratio is decomposed into the product of ratios that measure portfolio allocation between riskless and risk assets, use of financial leverage, and accumulation of wealth in marketable form. The three dimensions are less sensitive to the definition of wealth than is the composite risk-asset ratio. Constant relative risk aversion can be characterized by offsetting changes in the three dimensions as wealth changes.     

The Effect of Information Systems on Honesty in Managerial Reporting: A Behavioral Perspective*

This study examines the behavioral impact of an information system, and how that impact varies with the information system's precision, in an internal reporting environment. We propose that a manager's reporting decisions are affected by his or her trade‐off of the benefits of appearing honest against the benefits of misrepresentation. The information system affects the manager's trade‐off by improving the owner's ability to make an inference regarding the manager's level of honesty. Thus, to the extent that the manager perceives benefits to appearing honest, the presence of an information system can increase managerial honesty. As the information system becomes more precise, however, the manager must forgo greater benefits of misrepresentation in order to achieve the same appearance of honesty. For managers under a precise system, this will shift the trade‐off decision toward the benefits of misrepresentation and away from the benefits of appearing honest. Notably, in our experiment, the only benefit of appearing honest is an intrinsically motivated desire for social approval. We find that, although the existence of an information system increases managerial honesty, honesty is lower under a precise than under a coarse information system. We also compare profit earned by the owners in our experiment, which relies on a behavioral role of an information system, with the maximum profit theoretically possible given a contractual use of the information system. This comparison suggests that, unless the available information system is sufficiently precise, the owner will obtain greater profits by not contracting on its output, even if that output is fully contractible.     

Prison Labor: The Local Effects of Ohio Prison Industries

Prison labor has both positive and negative effects. Keeping prisoners active, training and socializing them to be productive citizens after prison, and helping to pay for their incarceration are some of the positives. Potential crowding out of free labor and industry is the major potential negative. This paper addresses the quantitative financial and employment consequences on local free labor and industry of prison industries in Ohio using an input–output model for Ohio. Based on the analysis, prison industries employment in Ohio has negligible to positive employment consequences for the Ohio economy and partially offsets the incarceration cost of the inmates who participate – providing between 5 and 10 percent of the incarceration cost in net cash flow and induced tax revenues.Presented at the 59th International Atlantic Economic Conference, London, March 9–13, 2005.