What makes an effective executive

An effective executive does not need to be a leader in the typical sense of the word. Peter Drucker, the author of more than two dozen HBR articles, says some of the best business and nonprofit CEOs he has worked with over his 65-year consulting career were not stereotypical leaders. They ranged from extroverted to nearly reclusive, from easygoing to controlling, from generous to parsimonious. What made them all effective is that they followed the same eight practices: They asked, "What needs to be done?" They also asked, "What is right for the enterprise?" They developed action plans. They took responsibility for decisions. They took responsibility for communicating. They were focused on opportunities rather than problems. They ran productive meetings. And they thought and said "we" rather than "I." The first two practices provided them with the knowledge they needed. The next four helped them convert this knowledge into effective action, for knowledge is useless to executives until it has been translated into deeds. The last two ensured that the whole organization felt responsible and accountable. Effective executives know that they have authority only because they have the trust of the organization. This means they must think of the needs and opportunities of the organization before they think of their own needs and opportunities. The author also suggests a ninth practice that's so important, he elevates it to the level of a rule: Listen first, speak last. The demand for effective executives is much too great to be satisfied by those few people who are simply born to lead. Effectiveness is a discipline. And, like every discipline, it can be learned and must be earned.     

Surviving an executive MBA 'riot'

UK higher education institutes (HEIs) have widened participation of students from non-traditional backgrounds. These include students who are aged over 21, students in paid employment, and those with non-traditional qualifications, perhaps from other countries or access courses. This has led to a need to explore factors that might impact upon the learning of such students. A greater understanding of such factors might better enable HEIs to provide all students with opportunities to study accounting. The participants in this study are first year students studying accounting at a post-1992 UK university, which has a high proportion of students from non-traditional backgrounds. A series of interviews with such students and the lecturers who teach them explores what engages and what detaches them from learning when studying accounting. The study suggests factors, such as employment and other commitments away from university and the student's relationship with the university, which might impact on how students engage in learning. The Note discusses the findings with reference to Lucas's (2003, A National Teaching Fellowship Project: Introductory accounting: Achieving relevance interest and understanding, available at: http://www.uwe.ac.uk/bbs/research/research/ntfs/Jan03.pdf accessed 21 August 2004) call for research in the area to be more qualitative and Reay et al's. (2001) Sociological Research Online, 5(4), consideration of Bourdieu's concept of institutional habitus and its influence on HEIs.     

When failure isn't an option

Some teams, by the very nature of their work, must consistently perform at the highest levels. How do you--as a team leader, a supervisor, a trainer, or an outside coach--ensure that this happens? To answer this question, Harvard Business Review asked six people who work with high-performance teams to comment on developing and managing these teams. The result is a collection of commentaries from Michael Hillmann, deputy chief of the Los Angeles Police Department and commander of its Special Operations Bureau, which includes the SWAT team; Philippe Dongier, who headed up a joint United Nations/World Bank/Asian Development Bank reconstruction team in Afghanistan after the fall of the Taliban; the National Fire Academy's Robert Murgallis, who trains firefighting teams; Mary Khosh, former career coach for players with the Cleveland Browns; Elizabeth Allen, a planner of society weddings, charity galas, and corporate events; and Ray Evernham, who, as a stock-car-racing crew chief, helped driver Jeff Gordon win three NASCAR championships. The types of teams represented in these commentaries are very different. Some are ad hoc, formed for a specific task, while others are ongoing, typically improving their performance with each task they undertake. For all of them, the stakes are high. Despite their differences, some similarities emerge in the ways they achieve top performance. For example, selection of team members is crucial-as is a willingness to get rid of members who don't consistently deliver. A leader who supports and builds confidence in members is also key, and high-performance teams without such a leader will often informally create one. Finally, the stress that defines the work of these teams helps generate peak short-term performance--and poses the constant risk of members burning out.     

Bank ownership and executive perquisites: New evidence from an emerging market

Direct bank ownership is a common practice in emerging markets. The current paper studies how bank ownership affects firm performance through corporate executive perquisites (perks) in China, a leading emerging economy. In addition to common factors known to influence the level of executive perks, we find a significantly positive link between bank ownership of company shares and executive perquisites. Further analyses suggest that higher level of executive perquisites hurt firm operating efficiency. Specifically, perks are positively associated with interest rate paid by the firms. We find some evidence consistent with the notion that the conflict of interests that banks face as both lenders and shareholders in the emerging markets induces banks to play less effective monitoring if they are concerned with the security of their loans or aim to obtain better arrangement for their loans. Our results reveal a particular mechanism through which bank ownership influences firm decisions and performance.     

When are thrift institutions closed? an agency-theoretic model

This article examines the determinants of both book-value insolvency and regulatory closure in the thrift industry. Agency theory suggests that the determinants of insolvency and closure are a function of conflicts between shareholders and creditors, shareholders and managers, and regulators and taxpayers. Certain thrift attributes may have differing effects upon insolvency and closure because regulators' best interests may not be served by promptly closing insolvent institutions. In this study, both thrift insolvency and thrift closure are modeled as functions of two broad risk factors: operating risk and agency risk. Using a bivariate probit model to jointly examine determinants of insolvency and closure, the analysis reveals that measures of both operating risk and agency risk generally are statistically significant with the expected signs, providing evidence consistent with the existence both of moral hazard by thrift oweners and of expense-preferent behavior by thrift managers. The results also show that agency conflicts between regulators and taxpayers are important in explaining why some thrifts were closed while others were not.Theviews reflected in this article are soiely those of the author and do not represent theviews or policies of the Board of Governors of the Federal Reserve System. Helpful comments were received from Robert Eisenbeis, Edward Kane, George Kaufman, Joseph McKenzie, Eugenie Short, and two anonymous referees. An earlier version of this article was presented at the 1990 Annual Meeting of the American Finance Association. Any remaining errors are solely the responsibility of the author.     

独立董事说"不"有信息增量吗

从2001年8月16日中国证监会发布《关于在上市公司建立独立董事制度的指导意见》算起,独立董事在我国证券市场的正式建立已将近四年。2004年12月7日,中国证监会发布的《关于加强社会公众股股东合法权益保护的若干规定》进一步明确了独立董事的职能、权利、义务以及保护其发表独立意见的若干措施。然而,在我国公司治理结构存在先天缺陷(如一股独大、监事会监督乏力)的情况下,独立董事在大部分情况下都难以有效履行证券监管部门赋予的职责和义务,亦被戏称为“花瓶”、“缄默一族”。但值得欣慰的是,我们的确观察到少数独立董事在年度报告中说“…     

Nonprofit executive incentive pay

We utilize information only recently disclosed on Form 990 to examine the use, and consequences of, incentive pay at nonprofit organizations. Bonuses are common in nonprofits, as we observe that approximately 45% of the 44,000 organization-year observations in our sample reported paying CEO bonuses. We find that the bonuses are positively associated with profitability, competition from other nonprofits, firm size, available cash, and use of compensation consultants and committees, while negatively related to board oversight, donations, and grants. Our results also suggest that donors look unfavorably at the payment of bonuses; that is, bonuses are associated with lower future donations. Nonetheless, we find evidence consistent with the payment of bonuses incentivizing nonprofit executives, as despite reduced fundraising, future profitability and program services are positively associated with current bonus compensation.     

Chief executive officer remuneration disclosure quality: corporate responses to an evolving disclosure environment

We examine chief executive officer remuneration disclosure in Australia from 1998 to 2004. Disclosure was first required by the Company Law Review Act 1998 (CLRA98). Despite CLRA98's clear intentions, firms generally failed to comply until the requirements were formalized by Director and Executive Disclosures by Disclosing Entities (AASB1046), issued in 2004. For a sample of 124 firms, we find significant improvements in disclosure concurrent both with CLRA98 and AASB1046. We also find firm size, corporate governance, auditor quality, cross‐listing status and public scrutiny to be significant explanations of disclosure. Our results indicate that high quality disclosures will only come about through detailed, black letter requirements and that principle‐based legislation involving interpretative discretion is unlikely to produce the desired level of disclosure.     

Impact of heterogeneous managerial productivity on executive hedge markets in an asymmetric information environment

Using the standard principal-agent framework, we show that the existence of executives with different levels of productivity introduces a so-far-unexplored channel through which managerial effort incentives are sustained in a setting in which executives are allowed to trade away their stock-based compensation. Due to the presence of asymmetric information, high-productivity executives end up diversifying away a smaller fraction of their performance-based compensation than they would under perfect information or if they were the only type of executive in the market. As a result, they exert a higher effort level in equilibrium and thereby increase the value of the firm relative to the uniform productivity case, thus bringing the results closer to the outcome observed in a model with no hedging.     

高管控制下的财务重述与高管薪酬关系研究

本文在西方学者的管理层权力论基础上,结合中国垄断企业的特点,进一步提出了高管控制论,以2000～2008年曾发生过财务重述的我国代表性垄断行业上市公司共148个重述样本作为研究对象,深入分析高管控制与高管薪酬的相关性,考察了高管以财务重述为路径,影响企业财务业绩进而提高薪酬的可能性。研究发现:高管控制与高管薪酬显著正相关;虽然我国绝大部分国有垄断企业的高管不拥有或较少拥有股票和期权,财务重述仍然会影响公司高管的薪酬。     

Taxes and executive stock options

In the Sixties, the qualified stock option was the predominant form of long-term incentive compensation contract for major industrial firms in the U.S. In the early Seventies these same firms replaced their tax-qualified stock option plans with non-qualified sttock options and later modified these plans to include a variety of new contingent compensation arrangements, some of which were based on accounting numbers instead of stock prices. This paper develops the hypothesis that tax considerations play an important role in explaining the form of compensation contracts. The pattern and timing of changes in the compensation plans of the top 100 industrial firms provides evidence consistent with the tax hypothesis.     

Repricing of executive stock options

The main purpose of this paper is to extend the model of Acharya et al. (J Financ Econ 57:65–101, 2000) to examine the ex-ante optimality of repricing of executive stock options while considering dilution effects and the tax effects of new accounting rules associated with repricing. Although there has been a body of empirical literature on repricing, the optimality of repricing after considering the economic impact of changing accounting rules has not been addressed in an ex-ante contracting setting. We find that traditional repricing loses its ex-ante dominance over the do-nothing strategy after we incorporate the tax effects of new accounting rules. The theoretical predictions of our paper shed light on this controversial practice and lay a foundation for evaluating repricing alternatives.     

以研究为主导的价值投资时代的来临

2001年下半年以来，深沪两市大盘持续下跌，而正是在这一轮深幅调整之后，中国证券市场迎来以研究为主导、价值投资、政策博弈的时代。因为当大部分机构都被迫放弃了做庄行为之后，原来股价和指数上涨的动力就不复存在，新的动力必然要靠真正的价值回归来引导，而价值回归则又是以研究为主导的。     

Economic policy uncertainty and executive turnover

This paper examines whether economic uncertainty increases executive turnover. The negative perception perspective and business change theory suggest that executives are more likely to leave their jobs during periods of corporate distress. However, the additive effects of internal and external risk are thought to prompt firms to carefully consider executive turnover, thereby reducing the likelihood of executive changes. Based on the literature, we propose a check-and-balance hypothesis for the relationship between external uncertainty and executive change, according to which the optimal superposition of the internal and external risks stemming from increased external uncertainty would be to avoid a wave of executive departures. Using a sample of Chinese A-share listed companies from 2010 to 2019 and the China economic policy uncertainty index of Baker et al. (2013), we examine the impact of economic policy uncertainty on executive turnover and our results support the check-and-balance hypothesis. Our findings enhance our understanding of how economic policy uncertainty affects executive turnover, and enrich the literature on corporate risk management and strategic management.     

Optimal exercise of executive stock options

Valuing executive stock options is a challenging problem, because the standard risk-neutral valuation of those options is not appropriate; the executive is not allowed to trade the stock of the firm, so is not operating in a complete market. As this paper shows, an executive holding many American-style call options on his firm’s stock will optimally exercise the options bit by bit, whereas a risk-neutral valuation of the options would assume that all are exercised at the same time. Comparative statics of the optimal exercise policy show many surprising features.      

A letter to the chief executive

Beyond the recent accounting scandals, something is wrong with the way most companies are managed today. That's the message of this fictional letter from a board member to a CEO, written by Joseph Fuller, CEO of strategy consulting firm the Monitor Group. The letter highlights the challenges and complexities of running a business in today's uncertain environment. And while it avoids the facile bashing of U.S. executives so common these days, the missive nonetheless casts a harsh light on the flaws that have recently been exposed in the American management model. The letter addresses a single CEO and company, yet it is intended to speak to executives and boards everywhere: "It wasn't the recession that caused us to make three acquisitions in two years at very, very high prices; the need to fuel [unreasonable] growth did. Nor was it the recession that caused us to expand our capacity in anticipation of gaining market share; rather, it was our own overly optimistic sales forecasts that led us to that decision. Where did those forecasts originate? From line managers trying to fulfill profit goals that we created after meeting with the analysts. "The root cause of many of the problems that became apparent in the last 24 months lies not with the economy, not with September 11, and not with the dot-com bubble. Rather, it lies with that willingness to be led by outside forces-indeed, our own lack of conviction about setting a course." Restoring sound, strategic decision making--thinking that looks beyond tomorrow's analyst reports--will go a long way toward keeping those outside forces at bay, according to Fuller.     

The Wild West of executive coaching

Annual spending on executive coaching in the United States is estimated at 1 billion dollars. Yet information about coaching's effectiveness is scarce and unreliable. No one has yet demonstrated conclusively what qualifies an executive coach or what makes one approach to executive coaching better than another. Barriers to entry are nonexistent--many executive coaches know little about business, and some know little about coaching. The coaching certifications offered by various self-appointed bodies are difficult to assess, and methods of measuring return on investment are questionable. But strategic coaching can provide critical help both to individuals and to organizations. In this article, Stratford Sherman, a senior vice president of Executive Coaching Network, and Alyssa Freas, the founder and CEO, explore the popularity of executive coaching and investigate ways to make the most of the experience. They argue that coaching is inevitably a triangular relationship between the client, the "coachee," and the coach. Its purpose is to produce behavioral change and growth in the coachee for the economic benefit of the client. The best way to maximize the likelihood of good results is to qualify all the people involved. Even so, many triangular relationships continue to generate conflict among all three parties. At the most basic level, coaches serve as suppliers of candor, providing leaders with the objective feedback they need to nourish their growth. Coaching gets executives to slow down, gain awareness, and notice the effects of their words and actions. On a larger scale, the best coaching fosters cultural change for the benefit of the entire organization. It provides a disciplined way for businesses to deepen relationships with their most valued employees while also increasing their effectiveness.     

Cost behavior and executive bonus compensation

Prior literature provides compelling evidence of an asymmetric relation between executive bonus compensation and earnings performance. In particular, this literature reports that compensation committees assign greater weight to good (positive) earnings performance than poor (negative) earnings performance. Taken together, the prior literature provides strong support for critics who claim that compensation committees blindly protect executives from earnings underperformance. We further examine this issue by investigating whether a firm's cost behavior (i.e., the relation between expenses and sales) provides an explanation for the apparent inefficiency in executive compensation contracts. Our evidence suggests that executives are rewarded more for increases in ROA that arise from normal cost behavior than other increases in ROA consistent with these increases being perceived as more persistent. In contrast, we do not find such a relationship for decreases in ROA which suggests that executives are largely shielded from decreases in ROA that follow normal cost behavior. We examine two factors suggested by the prior literature, expected future sales and the extent of capacity utilization, which may provide an explanation for why executives are shielded from normal cost behavior decreases in ROA. When these additional factors are included in our empirical models, our evidence suggests that the asymmetric relation between changes in CEO bonus compensation and increases and decreases in earnings performance documented in prior literature goes away. That is, our results suggest that compensation committees do not blindly protect executives for earnings underperformance. On the contrary, our evidence suggests that these committees take into account other non-earnings information when deciding how much weight to give to a decrease in earnings and that executive compensation may not be as inefficient as suggested by prior research.     

The determinants of director remuneration,executive tenure and individual executive disclosure in North African IPO firms

This paper examines the impact of board governance mechanisms, namely board size, independence ratio, opacity of earnings disclosure, and ratio of genuinely independent nonexecutive directors to total board size on director remuneration, executive tenure and likelihood of individual executive salary disclosure in a unique and comprehensive sample of 69 North African IPO firms. I find evidence of the enhanced governance role of true independent nonexecutives in family as opposed to non-family firms in improving disclosure of individual salaries and moderating lengths of executive tenure. However while their role is only significant in the context of family firms the evidence suggests that their presence is associated with higher levels of remuneration. The evidence also ascribes a greater role for business angel as opposed to more formal private equity financing which is more applicable within the highly social networked economy of the Maghreb region.     

Parent-subsidiary dispersion and executive excess perks consumption

We investigate the impact of parent-subsidiary dispersion on the corporate executives' excess perks consumption using comprehensive data of 1784 Chinese listed firms over the 2003–2017 period (i.e., total firm-year observations of 24,976). We argue that firms with greater geographic and institutional environment dispersion are subject to an acute information asymmetry problem, which makes it difficult and costly for shareholders and the public to monitor managerial actions and hence, facilitates managers to consume perks excessively. Consistent with this assertion, we find a positive relationship between parent-subsidiary company dispersion and executives' excess perks consumption. These patterns are not likely to be driven by the firms' endogenous choice and remain robust to various proxies for parent-subsidiary dispersion and executives' excess perks consumption. In addition, our results also show that firms with a greater dispersion between parent and subsidiary companies have higher investor recognition. However, investor recognition does not appear to negatively impact the rate of executives' excess perks consumption, which may explain why executives' excess perks consumption is not mitigated in firms with greater parent-subsidiary dispersion.