Corporate Environmental Responsibility

This paper offers directions for the continuing dialogue between business ethicists and environmental philosophers. I argue that a theory of corporate social responsibility must be consistent with, if not derived from, a model of sustainable economics rather than the prevailing neoclassical model of market economics. I use environmental examples to critique both classical and neoclassical models of corporate social responsibility and sketch the alternative model of sustainable development. After describing some implications of this model at the level of individual firms and industries, I offer an ethical justification of the sustainability alternative that is derived from the same values that underlie traditional market economics.     

Corporate Governance,Agility, and Survival

Abstract

Most corporate research has focused on (i) dimensions of governance that are relatively easy to measure (e.g., ownership structure, boards of directors, and executive compensation) and (ii) the role that governance arrangements play in mitigating agency costs. This paper takes an evolutionary perspective to corporate governance in which the concept of corporate agility, i.e., the ease with which firms adapt to changes in their respective environments, plays a prominent role. I argue that decentralization, which is understudied in the literature, promotes agility and predict that it is directly related to corporate performance and survival during periods of rapidly changing environments. The paper also discusses how some governance features that often are viewed through the lens of either mitigating or exacerbating agency costs are cast in a different light when their effects on corporate agility are considered.     

Monitoring Costs,Managerial Ethics and Corporate Governance: A Modeling Approach

This article evaluates effectiveness and costs of external regulation, in particular the Sarbanes–Oxley Act of 2002 (SOX) in restricting managerial malfeasance and safeguarding shareholder interests. It discusses the role of managerial ethics as an alternative corporate governance mechanism to protect shareholder value. This article builds a mathematical model to illustrate shareholders’ choices of best corporate governance mechanisms, taking into account the influence of managerial ethics, effectiveness and costs of monitoring. We suggest that the best corporate governance design and the optimal monitoring expenses are influenced by managerial types, monitoring efficiency, and effectiveness of ethics education. We conclude that stringent regulation and monitoring may not always enhance shareholder value. When managerial ethics could be improved by ethics education or social norms, ethics education may be a better alternative than stringent regulation.     

Private Firms and Corporate Governance: An Integrated Economic and Management Perspective

This article provides a definition of corporate␣governance and highlights the challenges in adapting understanding of governance to the privately-held firm. We emphasize the need to develop the scope of governance in privately-held firms beyond the traditional agency theory focus in the financial economics literature relating to large publicly-listed corporations. There is a need to draw on and integrate an array of theoretical perspectives from both economics and other social science disciplines as well. We present a schematic model of corporate governance which places the contributions presented in the special issue in context and which serves as a guide to highlighting gaps in the research base. We review the principal issues relating to corporate governance in privately-held firms which relate to: governance in different organizational contexts (institutional context; the industrial sector within which the firm finds itself, the ownership context of the firm, and the stage within the firm’s life-cycle); the scope of corporate governance; and other internal governance mechanisms to be considered We identify areas for further research on corporate governance in privately-held firms with respect to processes of governance, organizational contexts, assumptions about the owners, executive remuneration, financial reporting, the nature of the dependent variable relating to the expected outcome of different approaches to governance and various methodological issues. We suggest a need to develop governance codes for privately-held firms that are flexible enough to take account of the different types of governance needs of firms at different stages in their life-cycle.      

The Freedom–Responsibility Nexus in Management Philosophy and Business Ethics

This article pursues the question whether and inasmuch theories of corporate responsibility are dependent on conceptions of managerial freedom. I argue that neglect of the idea of freedom in economic theory has led to an inadequate conceptualization of the ethical responsibilities of corporations within management theory. In a critical review of the history of economic ideas, I investigate why and how the idea of freedom was gradually removed from the canon of economics. This reconstruction aims at a deconstruction of certain axioms of neoclassical economics that hamper contemporary efforts in integrating ethics firmly into management education. I intend to show by these deconstructive endeavors that a constructive use of the idea of responsible freedom could correct and complement the current quantitative focus in business theory through qualitative orientations. I argue that with the help of qualitative success criteria, the strategic integration of the tenets of both business ethics and Corporate Social Responsibility into business practice can be advanced by further research.     

Exploring the Impact of Internal Corporate Governance on the Relation Between Disclosure Quality and Earnings Management in the UK Listed Companies

This study investigates the impact of internal corporate governance on the relation between disclosure quality and earnings management in the UK listed companies, in particular whether governance mechanisms have deterrent effect on earnings management similar to firms’ disclosure quality. Unlike prior literature, we measure a number of board and audit committee-related governance instruments, three disclosure quality proxies (i.e. Investor Relation Magazine Award, Forward-Looking Disclosure and Analyst Forecast Accuracy) and the Modified Jones Model to test the hypotheses of the study on a matched-pair sample data of Investor Relation Magazine Award winning and non-winning firms. Our findings in the OLS and sensitivity analyses using Heckman Procedure and 2SLS regressions consistently report a significant negative association between earnings management and disclosure quality for all proxies in restraining earnings management. In contrast, corporate governance variables are mostly insignificantly related to earnings management. This provides an emerging trend of the outperformance of disclosure quality over internal governance mechanisms in lessening earnings management. These findings warrant due attention of the policy makers, investors, corporate firms and other stakeholders in shaping a high-quality disclosure and governance regime in corporate settings to mitigate managerial manipulations of earnings across the countries in the world.     

Board Diversity and Managerial Control as Predictors of Corporate Social Performance

While it is widely assumed that greater diversity in corporate governance will enhance a firms corporate social performance, this study considers an alternative thesis which relates managerial control to corporate philanthropy. The study empirically evaluates both board diversity and managerial control of the board as possible predictors of corporate philanthropy. The demonstration of a positive relationship between managerial control and corporate philanthropy contributes to our understanding that corporate social performance results from a complex set of economic and social motives. Possible future research and managerial implications are discussed.     

Enough chit-chat,strike! Deliberation and agonism in corporate governance

This conceptual paper contributes to the critique of a body of literature that will be named ‘deliberative corporate governance’ by defending non-deliberative acts performed by stakeholders. It first argues that this literature introduces to the corporation a decision-making process where it does not belong, given the corporation's economic role. This leads to an ‘efficiency constraint’ on any attempt to justify deliberation – deliberative governance theorists must show that it is the most efficient and cost-effective way to address the issues that concern them. A real case example where deliberation would have been counter-productive in that regard will show that this is not the case. Building on this example, the paper uses the theory of democratic agonism to argue that non-deliberative acts should be part of governance. A sketch of managerial duties vis-à-vis such acts is attempted as well. The paper does not seek to reject deliberative corporate governance entirely, but rather to defend the importance of non-deliberative practices in addressing its theoretical concern. It makes a conceptual contribution to corporate governance theory, from which it draws practical implications for stakeholders-oriented management.     

Managerial ownership and performance: A commentary essay

Florackis, Kostakis, and Ozkan [Florackis, C., Kostakis, A., and Ozkan, A., 2008. Managerial ownership and performance, Journal of Business Research, forthcoming] empirically examine the exact nature of the relationship between managerial ownership and corporate performance in the framework of semi-parametric regression. This commentary explores the authors' contribution to the corporate governance literature in the light of recent advances in semi-parametric regression. The commentary also considers how Florackis et al.'s findings align with important, emerging work in the corporate governance literature.     

An Empirical Evaluation of the Corporate Strategies of Nigerian Companies

ABSTRACT

As a result of substantial and contemporary changes in the Nigerian business environment, a study was designed to evaluate the corporate strategies used by Nigerian organizations to cope with these changes. Using the survey research methodology of questionnaire on a sample of 1280 corporate executives working in quoted companies in Lagos state of Nigeria, it was found that some aspects of operationalised grand corporate strategies were highly emphasized by Nigerian organizations, while some were not highly emphasized. For example, market penetration strategy was the most emphasized grand corporate strategy, while planned liquidation strategy was the least emphasized strategy. Also, the research revealed that local competition had the highest impact on corporate strategy, while foreign competition posed the least impact on the corporate strategies of Nigerian companies. Nigerian organizations were most effective in achieving profitability objective through their grand corporate strategies, while corporate social responsibility was the least achieved corporate objective via corporate strategies. These findings and their managerial implications were discussed along the salient issues of the research with respect to the research problem, research questions, relevant literature, managerial actions, and Other cognate issues.     

The Virtues and Weaknesses of Insider Shareholding

Abstract

Following privatization in Russia, insider shareholders secured supremacy in their companies in most cases. The literature concerned with corporate governance in Russia frequently shows too much affection to the claim that the arrangement when control is allocated to insiders is generally sub-efficient in the long run. It is often concluded that the current pattern of control has negative impact on the progress of reforms. This paper argues in favor of a more balanced view, which takes into account the social responsibility of firms towards stakeholders and the influence the latter have over corporate performance. The question addressed is how real the insiders' threat is in privatized Russian enterprises with regard to the advancement of reforms and development of the workable corporate governance system.     

In search of corporate governance in franchising

Abstract

A firm’s governance structure and business model might explain the firm’s failure or success. Franchising is a business model that has not received much attention within the corporate governance (CG) literature even though it obviously brings several unique CG challenges. Therefore, we review articles at the interface of CG and franchising. We identify and thematize the literature in four focus areas, each with a different relationship to CG: 1) traditional CG, 2) governance challenges unique to franchising, 3) governance modes, and 4) contracts. We find that the literature largely ignores the traditional view of CG when examining many aspects of franchising. We also find that the franchising literature covers governance topics when discussing governance modes, which provides a basis for developing CG theories. Altogether, our findings open a promising avenue for future research that incorporates CG into studies of franchising.     

The corporate governance behavior and market value of Russian firms

I examine the relationship between corporate governance behavior and market value for a sample of 21 Russian firms. I use (1) fall 1999 corporate governance rankings for these firms, developed by a Russian investment bank, and (2) the ‘value ratio’ of actual market capitalization to potential Western market capitalization for these firms, determined independently by a second Russian investment bank. The correlation between ln(value ratio) and governance ranking is striking and statistically strong: Pearson r=0.90 (t=8.97). A worst (51 ranking) to best (7 ranking) governance improvement predicts a 700-fold increase in firm value. These results are tentative because of the small sample, but they suggest that corporate governance behavior has a powerful effect on market value in a country where legal and cultural constraints on corporate behavior are weak.     

Does the perception of incongruence hurt more? Customers’ responses to CSR crises affecting the main reputation dimension of a company

ABSTRACT

Corporate social responsibility (CSR) generates benefits for companies and society. However, CSR exposes a company to potential damage when a critical event, such as a crisis, disconfirms the CSR of a corporate reputation. The present article introduces to the crisis management literature the notion of consumer-perceived incongruence (CPI) between corporate reputation and crises. Our first experimental study demonstrates that a high CPI – compared to a low CPI – worsens consumer responses in terms of attitude towards the corporation (ATC), word of mouth (WOM) and purchase intention (PI). The second study shows that these effects are mediated by the perception of a state of discomfort on the part of the consumer. The third study suggests that, in cases of high CPI, the corporate crisis response strategy of apology outperforms that of compensation in reducing the negative effects of discomfort on consumer responses. Theoretical and managerial implications are discussed.     

Corporate Governance and Institutional Transparency in Emerging Markets

This paper posits that differences in corporate governance structure partly result from differences in institutional arrangements linked to business systems. We developed a new international triad of business systems: the Anglo-American, the Communitarian and the Emerging system, building on the frameworks of Choi et al. (British Academy of Management (Kynoch Birmingham) 1996, Management International Review 39, 257–279, 1999). A common factor determining the success of a corporate governance structure is the extent to which it is transparent to market forces. Such transparency is more than pure financial transparency; as it can also be based on factors such as governmental, banking and other types of institutional transparency mechanism. There may also be a choice for firms to adopt voluntary corporate disclosure in situations where mandatory disclosure is not established. The Asian financial crisis of 1997–1999 and the more recent corporate governance scandals such as Enron, Andersen and Worldcom in the United States and Ahold and Parmalat in Europe show that corporate governance and business ethics issues exist throughout the world. As an illustration we focus on Asia’s emerging¹ markets, as, both in view of the pressure of globalization and taking into account the institutional arrangements peculiar to the emerging business system, these issues are important there. Particularly for those who have to find an accommodation between the corporate governance structures and disclosure standards of the Emerging system and those of the Anglo-American and Communitarian systems.     

Unenlightened Economism: The Antecedents of Bad Corporate Governance and Ethical Decline

The paper expands on Goshal’s criticism of what management as a scientific discipline teaches and the effects on managerial and societal ethics. The main argument put forward is that the economisation of management has a detrimental effect on the practice of management and on society in large. The ideology of economism is described and analysed from an epistemological perspective. The paper argues that the economisation of management not only introduces the problems of economics (three are identified and discussed) but destroys the very essence of management because economics is focused on efficiency and management should be focused on effectiveness. What is more, the basic axioms of mainstream economics stand in stark contrast to the philosophy of the Enlightenment and therefore endanger the foundations of Western societies. Management theory (via corporate governance) is the Trojan horse carrying economism into society.     

Corporate governance,globalization and firm productivity

We examine the relationship between globalization, corporate governance and firm productivity. The results, using longitudinal data from Korea, indicate that the positive effect of liberalising equity ownership on firms’ total factor productivity (TFP) was reinforced by indirect managerial effects when a firm improved its corporate governance. Our findings also confirm that the interaction of the managerial effect with increased foreign equity ownership is more significant than interaction with exports, suggesting that liberalising foreign investment in the host market is more effective in capitalising on the potential benefits of corporate governance reform than increasing exports to overseas markets, reflected in learning by exporting.     

The Economic Inefficiency of Secrecy: Pension Fund Investors’ Corporate Transparency Concerns

In the wake of recent corporate scandals, this paper traces the growing power of pension funds to provide managerial oversight of the firms they hold in their investment portfolios. Increasingly pension funds are exercising their legitimate rights as owners to raise the corporate governance standards of the firms they invest in. Within corporate governance generally, pension funds are shifting their attention away from managerial accountability and toward measures that increase transparency in firm-level decision-making. Pension funds use transparency to ensure that shareholders are the primary interest being served by the firm. Transparency not only aligns managers and owners, it also raises issues of firm behaviour that allow other stakeholders to engage the corporation more broadly. I contend that secrecy is economically inefficient. When organizations are opaque and interests are secret, decision-making can and does distort efficiency. I examine recent pension fund corporate governance campaigns with particular reference to the California Public Employees Retirement System. Dr. Hebb is a senior research associate at the Labor and Worklife Program, Harvard University and the Oxford University Centre for the Environment. She is researching the role of US public sector pension funds and urban revitalization as lead investigator on a two-year Rockefeller and Ford Foundation grant. Her doctoral work at Oxford University examined the impact of pension fund corporate engagement on the corporate governance, social and environmental standards of firm behaviour. She was a Clarendon Scholar at Oxford University and was awarded the prestigious William E. Taylor Fellowship (2003) from the Social Sciences and Humanities Research Council, Government of Canada. Dr. Hebb is also a recipient of the York University Schulich School of Business National Research in Financial Services and Public Policy Scholarship (Canada). Dr. Hebb is also the Director of the Capital Strategies Program at the Carleton Centre for Community Innovation (3ci), Carleton University, Canada. Here her work focuses on the financial and non-financial impact of pension fund economically targeted investment in Canada as part of a three-year SSHRC Initiatives in the New Economy grant.     

False Promises? A Sociological Critique of the Behavioural Turn in Law and Economics

Economic bestsellers like Freakonomics and Nudge that mainly address outsiders of the economic discipline are also consumed by lawyers. The latter has already become an important reference in the field of consumer law and policy. In principle, this is nothing to complain about but part of law’s encounter with science, namely the social sciences. Notably, the law and economics movement proved successful in importing economic perspectives into legal discourse. However, it would seem questionable if the law followed each trend on the academic book market. While there has been an increasing emphasis on economic perspectives at the expense of sociological perspectives within the field of law, economy, and society, a major shift can now also be observed in the field of law and economics. With the behavioural turn in law and economics, homo oeconomicus seems to be transformed into Homer Economicus, and consumer law prone to be Simpsonized. In this paper, the turn from neoclassical law and economics to behavioural law and economics will be analysed from a third, namely sociological perspective: the economic sociology of law. In this framework, it is possible to compare and confront the “old” homo oeconomicus rationalis and the “new” homo oeconomicus behaviouralis with a third model—homo oeconomicus culturalis—which demonstrates the limits of the previous models, not least with regard to explaining the recent financial crisis. While governance by nudges might look, at first sight, as a tempting idea, I will question the normative side of this project and emphasize its possible effects on our legal culture and, thereby, our human condition.