Scenario projects in Japanese government: Strategic approaches for overcoming psychological and institutional barriers

Scenario planning in the public sector has significant differences from scenario planning in the corporate world. Scenario planning in the government not only tends to be focused on issues of higher complexity and significance to public policy, but also in comparison to people in the private business, public officials have fundamental psychological and institutional constraints in their scenario thinking. These constraints make it difficult for them to contemplate multiple ‘untidy’ futures and imagine the possibility of policy failure: skills which are essential for successful scenario projects. Based on specific characteristics of scenario planning in the Japanese government, this paper contributes on better understanding the challenges and strategic solutions in providing more successful scenario planning in the public sector. Specifically, this paper argues that possible solutions in overcoming these constraints may be to shake public bureaucrats out of their thinking by providing free and open venues of conversation and more importantly through ‘derailment’ exercises.     

A Fireside Chat with Raj Gupta: What It Takes to Create Long‐Term Value

The chairman of two public companies (and former chair and CEO of Rohm and Haas) draws on his experience as a director of five private and 15 public companies in discussing the challenges and opportunities facing today's corporate boards. Perhaps the most formidable challenge is the pace of technological change, which is making business models ‘in all industries and countries’ obsolete and forcing companies to adapt much more quickly than in the past. Along with the risk of obsolescence is the increase in ‘reputational risk’ associated with an ‘information age’ in which companies are forced to monitor the nearly continuous flow of fact, hearsay, and outright fabrication. The author recommends that public company boards adopt a new ‘partnership’ model. Besides ensuring an ‘ethical tone at the top,’ corporate directors should aim to become partners with the senior management team by playing more active roles in strategic planning, risk management, and the design of performance evaluation and incentive pay systems. In the most striking departure from current practice, the author urges directors to seize the opportunity created by the ‘reconcentration’ of ownership of U.S. public companies by actively engaging large institutional investors in a strategic dialogue about the companies' strengths and vulnerabilities. In so doing, proactive directors can help their management teams preempt shareholder activists and create long‐run value by creating a more effective two‐way channel of communication, one with the potential to give management more confidence when undertaking large strategic investments with longer‐run payoffs.     

Organizing strategic foresight: A contextual practice of ‘way finding’

Strategic foresight as a derived outcome of corporate foresight exercises has led to the dominant discourse on strategic foresight as an episodic intervention encompassing a proliferation of organizational foresight methodologies. We argue that such an approach is flawed, consigning strategic foresight to a narrow function in a planning perspective. To move the field into more fertile pastures for research, we draw on the practice theoretical lens to provide an alternative viewpoint on strategic foresight as a bundle of everyday organizing practices. In keeping with the practice approach to strategic foresight, we delineate strategic foresight as a continuous and contextual practice of ‘wayfinding’, that manifest in everyday situated organizing. We offer an integrating framework that contributes to the ongoing discussions about alternative approaches to theorizing strategic foresight.     

The effect of government industrial policies on corporate accounting conservatism

This study examines whether and how firms adjust their accounting conservatism in response to government support through industrial policies, which reduce firms’ dependence on external financing from the capital market. Based on China’s unique economic programme called ‘Five-Year Plan’ from 1991 to 2015, we observe a decline in accounting conservatism among firms covered by government industrial policies. The decline is more pronounced in covered firms, which face higher ex-ante financial constraints, and in the subsample of firms which receive higher government support. These findings are robust to alternative specifications of accounting conservatism and policy timing. Our evidence implies that government industrial policies can have unintended consequences for corporate financial reporting.     

Food scenarios 2025: Drivers of change between global and regional

This article presents the results of a future study of the food sector. Two scenarios have been developed using a combination of: 1) a summary of the relevant scientific knowledge, 2) systematic scenario writing, 3) an expert-based Delphi technique, and 4) an expert seminar assessment. The two scenarios present possible futures at global, national (Denmark) and regional (Zealand, Denmark) levels. The main scenario is called ‘Food for ordinary days and celebrations’ (a combination of ‘High-technological food production − The functional society’ and ‘High-gastronomic food − The experience society’). A less likely scenario is called ‘The reappearence of the sea − The aquarial society’. The purpose of the scenario writing has been to provide strategic tools for societal actors who to create economic growth and jobs, particularly regional governments and firms. Suggestions concerning regional industrial policy and firm actions are included in the article.     

Corporate pension funding policy

What policy should a corporation adopt concerning the funding of a defined-benefit pension plan and the investment of the assets held in trust for the plan? Until recently, pension plans did not have to be insured, and some risk could be borne by intended beneficiaries. Federal legislation has now mandated such coverage. This paper analyzes corporate policy under three conditions which correspond, roughly, to the earlier situation (‘uninsure’ loans), the current situation (‘partially insured’ loans), and the situation required by law to be implemented in the future (‘completely insured’ plans). We show that if insurance premiums are set correctly, corporate policy in this area may not matter; otherwise the optimal policy may simply be that which maximizes the difference between the value of the insurance and its cost.     

An Investor Perspective on the Black Box of Corporate Social Responsibility

In summarizing the findings of their recent study, the authors report findings that suggest that not all socially responsible corporate policies are likely to have the same effect on a company's ownership and value. Using environmental policy as their proxy for CSR activities, the authors classify corporate environmental practices into two categories: (1) actions that reduce the likelihood of harmful outcomes by reducing the corporate exposure to environmental risk; and (2) actions that enhance companies' perceived ‘greenness’ through investments that go beyond both legal requirements and any conceivable risk management rationale. Although both groups of environmental practices are likely to be viewed as socially beneficial, corporate expenditures that reduce a firm's environmental risk exposure are more likely to benefit shareholders by limiting the risk of losses arising from environmental accidents, lawsuits, and fines—and possibly thereby reducing the firm's cost of capital. By contrast, corporate expenditures that enhance the firm's perceived greenness by going beyond legal requirements and risk management rationales could actually reduce shareholder value. Consistent with this hypothesis, the authors find that institutional investors tend to own smaller than average percentages of both companies the authors identify as ‘toxic’ and make limited efforts to manage their environmental risk, and companies they label ‘green’ with low environmental risk exposure but relatively high CSR spending on the environment. At the same time, such investors hold larger‐than‐average positions in ‘neutral’ companies with relatively low, or effectively managed, environmental risk exposures and limited investment in ‘greenness’ programs. The authors also find that both toxic and green companies have lower (Tobin's Q) valuations than neutral companies, and that otherwise toxic companies that effectively manage their environmental risk exposures have higher valuations.     

Japan as number one?: Social problems of the next decades

Japan's post-war economic success should be seen as situationally as well as culturally determined. As the conditions that prompted the ‘Japanese miracle’ change, a number of problems will emerge in Japanese society; the ageing of the population and the effects of modernization on the attitudes of workers towards their corporate employers will inhibit further economic growth. Western management, searching for the key to the miracle, should take note.     

同行业间避税与企业的战略反应——来自我国A股上市公司的经验证据

本文运用2007-2016年中国A股上市公司数据,引入同行业竞争者的股票异常回报作为工具变量,研究同行业竞争者避税行为对企业战略反应的影响。研究发现,相比国有企业,民营企业的同行业竞争者避税行为与企业避税存在战略互补效应,即同行业竞争者的避税行为越激进,企业会选择更加激进的避税策略。探究可能影响这种战略互补效应的机制,结果显示民营企业很可能会模仿同行业领导者等被认为避税行为更有效合理的竞争对手制定避税策略。进一步发现地理距离衰减有利于降低同行业信息收集成本,导致同行业间战略互补反应更显著,即同行业避税政策模仿具有“本土偏好”。本文提供了同行业竞争对企业避税影响的因果关系证据,揭示了同行业竞争者避税行为是企业避税行为的重要影响因素。     

Contents of PMM,Volume 29 (2009)

This article appraises the recent UK quantitative easing (QE) monetary experiment. From March 2009 to February 2010, the Bank of England spent £200 billion on gilts and corporate bonds. This experiment represents, as a proportion of GDP, the most ambitious monetary policy ‘mission’ in history. Using several indicators to examine the impact of QE, our analysis leads to a conclusion which, metaphorically, is akin to that ascribed to the 1970 Apollo 13 Moon mission: a ‘successful failure’.     

Testing the fire-sale FDI hypothesis for the European financial crisis

Using a panel of corporate transactions in 27 EU countries from 1999 to 2012, we investigate the impact of the financial crisis on the market for corporate assets. In particular, we test the ‘fire-sale FDI’ hypothesis by analyzing the number of cross-border transactions, the price of corporate assets and the impact of credit and macroeconomic conditions. According to the fire-sale FDI hypothesis, countries affected by a crisis attract foreign buyers selling assets at a discount. We find a dampening effect of the crisis on cross-border transactions in all EU countries. Although countries with higher sovereign default risk and lower economic demand attracted more foreign buyers in the crisis, lower domestic credit is associated with less cross-border transactions. Corporate assets in crisis countries are cheaper, particularly if domestic credit is low; however, these findings are not limited to the crisis period. This pattern is strikingly different from the East Asian and Latin American financial crises. Overall, we find little evidence for ‘fire-sale FDI’ suggesting an integrated European market without significant frictions.     

Crafting Compromises in a Strategising Process: A Case Study of an International Development Organisation

This paper focuses on how organisational members in non‐governmental organisations (NGO) can develop credible and legitimate strategic plans and positions out of diverse and conflicting perspectives. Using empirical data drawn from a strategic planning episode in an international development NGO, the study examines the process of ‘crafting compromises’ whereby organisational members make mutual adjustments and concessions to reach consensus on new strategic plans and positions. The analysis shows that two processes facilitate crafting compromises in strategising; being adaptive and responsive to critique as strategic positions are developed, and an ability to forge relevant connections between new strategic proposals and past strategic positions.     

Exploring long-term business climates and strategies with interax

A major objective of corporate strategic planning is to minimize the surprises the future may bring, and INTERAX (developed at the Center for Futures Research with industrial sponsorship) draws on cross-impact matrices and scenario generation to allow alternative futures to be explored. This paper outlines the method, and summarizes part of the present database—a Delphi study of possible social, economic, and political developments, internationally and within the USA.     

Re-theorizing the configuration of organizational fields: the IIRC and the pursuit of ‘Enlightened’ corporate reporting

This paper studies the emergence of the International Integrated Reporting Council (IIRC) and its attempts to institutionalize integrated reporting as a practice that is critical to the relevance and value of corporate reporting. Informed by Suddaby and Viale’s [(2011). Professionals and field-level change: institutional work and the professional project. Current Sociology, 59, 423–442] theorization of how professionals reconfigure organizational fields, the paper delineates the strategies and mechanisms through which the IIRC has sought to enroll the support of a wide range of stakeholder groups for the idea of integrated reporting in order to deliver a fundamental reconfiguration of the corporate reporting field. The paper’s analysis reinforces the significance to any such field reconfiguration of the reciprocal and mutual arrangements between influential professionals and other powerful actors but does so in a way that (a) refines Suddaby and Viale’s theorization of processes of field-level change and (b) pinpoints the fundamental policy challenges facing the IIRC. Gieryn’s [(1983). Boundary work and the demarcation of science from non-science: strains and interests in professional ideologies of scientists. American Sociological Review, 48 (6), 781–795] notion of boundary work is operationalized to capture some of the complexity and dynamism of the change process that is not sufficiently represented by Suddaby and Viale’s more sequentialist theorization. From a policy perspective, the paper demonstrates just how much the IIRC’s prospects for success in reconfiguring the corporate reporting field depend on its ability to reconfigure the mainstream investment field. Ultimately, this serves to question whether the IIRC’s conceptualization of ‘enlightened’ corporate reporting is sufficiently powerful and persuasive to stimulate ‘enlightened’ investment behavior focused on the medium and long term – and, more generally stresses the theoretical significance of considering connections across related organizational fields in institutional analyses of field reconfiguration efforts.     

The effect of corporate sustainability performance on leverage adjustments

We examine the impact of corporate sustainability performance (CSP) on the speed at which firms adjust their leverage ratios to the target levels for a large sample of 31 countries from 2002 to 2018. Using two proxies of CSP, we find that firms with superior CSP tend to adjust faster toward their target leverage ratios. In exploring the potential underlying economic mechanisms through which CSP affects leverage adjustments, we find that better CSP helps firms to ease information asymmetry, enhance stakeholder engagement, push up stock prices in the stock market, and improve competitive advantage in the product market. In the cross section, the positive association between CSP and leverage adjustment speed is less pronounced in countries with high-quality institutions. The results remain unchanged in robustness tests. Overall, this paper highlights the important role of CSP in shaping corporate capital structure dynamics and suggests implications for corporate strategic planning on the privately optimal levels of CSP activities.     

New development: Procurement and policy outcomes—a bridge too far?

This article furthers the discussion in the March 2015 (Vol. 35, No. 2) issue of Public Money &; Management on ‘Public procurement policy and practice— international lessons and debates’. In particular, it illustrates some of the major difficulties in achieving the required policy outcomes through the procurement processes. The numerous ‘failures’, particularly in the defence acquisitions area, are of ongoing concern both in terms of ‘blow-outs’ in costs and, more unfortunately, in achieving strategic defence capability and overall policy outcomes in required timeframes. Can current public sector reforms and observed better practice provide any encouragement for, discipline on, participants to achieve the required results or is it all just too difficult?     

Corporate governance and risk reporting in South Africa: A study of corporate risk disclosures in the pre- and post-2007/2008 global financial crisis periods

The 2007/2008 global financial crisis has reignited the debate regarding the need for effective corporate governance (CG) through sound risk management and reporting practices. This paper, therefore, examines the crucial policy question of whether the quality of firm-level CG has any effect on the quality and extent of corporate risk disclosures (CRD) in South Africa (SA) with particular focus on the pre- and post-2007/2008 global financial crisis periods. Using one of the largest datasets to-date on CG and CRD, from 2002 to 2011, and distinctively drawing on a multiple theoretical perspective, we find that CRD are largely ‘non-financial’, ‘historical’, ‘good news’ and ‘qualitative’ in nature over the ten-year period investigated. We also find that block ownership and institutional ownership are negatively associated with the extent of CRD, whilst board diversity, board size and independent non-executive directors are positively related to the extent of CRD. By contrast, dual board leadership structure has no significant connection with the extent of CRD. Our results are robust across a raft of econometric models that adequately address different types of endogeneity problems, as well as alternative CG and CRD proxies. Our findings are largely consistent with the predictions of our multi-theoretical framework that incorporates insights from agency, legitimacy, institutional, resource-dependence, and stakeholder theories.     

Where to donate: The geographical distribution of corporate philanthropy in China

An emerging body of literature has demonstrated that corporate philanthropy can be an important part of a company’s business strategy. However, we know relatively little about how companies allocate philanthropic resources to achieve their strategic targets. Using geographical distribution data on corporate philanthropy in China from 2009 to 2016, we provide robust evidence of companies’ revenue-driven regional favoritism. Specifically, companies donate more to regions where they obtain revenue than to other regions. Further evidence suggests that this revenue-driven regional favoritism may have both reputational and political motivations. Further analysis suggests that China’s targeted poverty alleviation policy has compromised revenue-driven regional favoritism while increasing the amount of money donated to poor regions. Overall, we enrich understanding of decision-making on corporate philanthropy. We also demonstrate that companies can use the geographical distribution of corporate philanthropy strategically to obtain consumer and government favor in regions where they operate. The results also provide evidence at the micro company level of the effect of China’s implementation of a targeted poverty alleviation policy.     

On the Consequences of Pro‐Cyclical Fiscal Policy

There is widespread evidence that pro‐cyclical fiscal policies have been prevalent in developing countries and often in some industrial nations. It is therefore surprising that, in contrast to the wealth of studies on the sources of pro‐cyclical policy, potential consequences of such seemingly suboptimal policies have been largely ignored in the existing literature. By utilising a comprehensive set of indicators from 114 countries for 1950–2010, we aim to address the following important question: does it matter whether a country adopts a pro‐cyclical fiscal policy stance rather than a counter‐cyclical one? Our results produce a resounding ‘yes’ to this question. We find that fiscally pro‐cyclical countries have lower rates of economic growth, higher rates of output volatility and higher rates of inflation.     

Parenting styles and value creation: a management control approach

At the end of the 1980s, Goold and Campbell (1987) helped to generate new interest in the subject of management's ability to create value. According to Goold et al. (1994) this ability is manifested in different so-called parenting styles in which the corporate strategic planning and follow-up processes play an important part. While strategic planning and follow-up are emphasized, other parts of the corporate management control system are treated in less detail. Nor do Goold et al. discuss in any detail how management needs, in regard to the systems of control, may be different at the business-unit level than at the corporate level. These divergent requirements can make co-ordinated planning and follow-up more difficult for the corporate group as a whole and thus limit the chances of establishing a distinct parenting style. To improve our knowledge and understanding of the relationships between parenting style, the design and use of management control systems, and value creation, four Swedish corporate groups have been studied. These case studies show that a successful parenting style is characterized by established principles for balancing corporate management's need for co-ordinated control systems against the needs of the business units for situation-specific control systems. The study shows that these principles vary with the type of parenting style.