Board changes and CEO turnover: The unanticipated effects of the Sarbanes–Oxley Act

The board independence requirements enacted in conjunction with the Sarbanes Oxley Act of 2002 (SOX) provided motivation for firms that were already compliant with the regulations to alter their board structure. We consider actual board changes made by compliant firms and how such changes affect the monitoring efficiency of the boards. We find that the majority of compliant firms (approximately 56%) add independent directors following SOX. However, we find a nontrivial number of firms (approximately 26%) actually decrease the number of independent directors to move closer to the stated 50% requirement. For firms that decrease independence, the CEO turnover performance sensitivity significantly decreases following SOX. We also find that large board independence changes seem to be most detrimental to the monitoring function of the board. Our results highlight that SOX may have had unintended consequences.     

A THEORY OF GOVERNING THE PUBLIC'S BUSINESS: Redesigning the jobs of boards,councils, and commissions

The job of the board of directors is the least developed element in enterprise, whether public, business, or nonprofit. Incorporating insights from Mill, Hume, and the social contract philosophy of Rousseau, as well as the servant-leadership concept of Greenleaf, the author's Policy Governance® model constitutes a theory of governance applicable to any governing body. The model enables public boards to govern by making public values explicit, crafting the expression of those values for practical managerial effect. The new governance model compels radical change in the way boards conduct their business. One effect is more authoritative boards and more empowered management simultaneously; another is greater integrity in the relationship between the public and its boards.     

Acquisition experience, board characteristics, and acquisition behavior

Literature on acquisition places more concern on the consequence of an acquisition event and pays less attention to what factors influence the motive for initiating the acquisition strategy of a firm. Through the lenses of organizational learning and corporate governance theories, the study examine whether the prior acquisition experience and board characteristics affect firms' acquisition behavior. Hypotheses are tested on a sample of 92 acquisition events of Taiwanese electronics firms during the period from 1997 to 2007 by employing the survival function model. Empirical results indicate that business acquisition experience positively influence the inclination of the acquirer adopting a subsequent acquisition, while board characteristics do not relate to the likelihood of the acquirer making a subsequent acquisition. These findings provide theoretical and managerial implications for organizational learning and corporate governance theories in general and acquisition management in particular.     

The timeliness of performance information in determining executive compensation

We study whether boards of directors concentrate on performance near compensation decision times rather than providing consistent incentives for chief executive officers (CEO) throughout the fiscal year. We show empirically that managers can profit by moving sales revenue among fiscal quarters. Though this may suggest that boards use short-term trends when determining rewards, we find evidence consistent with boards tying pay to recent sales growth so as to use the best information about future performance. We also find that the timing of profits throughout the year does not affect CEO pay, which may suggest that smoothing firm income is important to CEOs.     

Audit committee performance: ownership vs.independence – Did SOX get it wrong?

This study documents a positive relationship between audit committee stock ownership and firm performance in large US firms from 1998 to 2008. This study also finds a positive relationship between changes in ownership and performance. These results persist throughout the sample period, do not weaken after Sarbanes–Oxley and are robust to controlling for endogeneity between ownership and performance. After testing shows that there is no relationship between audit committee independence and firm performance, these findings suggest that audit committee stock ownership is an important corporate governance mechanism and potentially a more relevant variable than audit committee independence from a policy perspective.     

Effects of agency risks and procedural justice on board processes in venture capital-backed firms

This paper builds a model of the effects of agency risk and procedural justice in the boards of directors of venture capital-backed firms. Such boards are unique in that they consist of managers and outside owners with significant power and incentive to be highly involved in venture governance. The authors integrate agency theory and procedural justice perspectives to develop propositions regarding the effects of agency risk and board processes on the responses to poor performance and conflicts of interest. This integrated perspective suggests that factors that increase perceived agency risks will increase outsiders' tendency to focus efforts on monitoring and controlling board decisions and their propensity to resort to formal means to resolve conflicts. However, the authors suggest that through their effects on trust and positive attributions, fair procedures and interactions will reduce these tendencies. A discussion of the practical and theoretical implications of the proposed model concludes the paper.     

The Board of Directors and The Adoption of Quality Management Tools

Abstract

The article examines the role of the board of directors in Local Public Utilities (LPUs). It aims at verifying empirically if a correlation exists between specific characteristics of the board of directors and the adoption of innovative arrangements addressing emerging needs of users and citizens (i.e. quality). By means of applying multivariate statistical methods to a random sample of sixty Italian LPUs, this study finds the relational capital of the boards affecting the take up of quality-oriented actions by LPUs. These results support the resource-dependence theory, neglected by mainstream literature.     

Heterogeneity and peer effects in mutual fund proxy voting

This paper studies voting in corporate director elections. We construct a comprehensive data set of 2,058,788 mutual fund votes over a two-year period. We find systematic heterogeneity in voting: some funds are consistently more management-friendly than others. We also establish the presence of peer effects: a fund is more likely to oppose management when other funds are more likely to oppose it, all else being equal. We estimate a voting model whose supermodular structure allows us to compute social multipliers due to peer effects. Heterogeneity and peer effects are as important in shaping voting outcomes as firm and director characteristics.     

The Editorial Boards of Italian Economics Journals: Women,Gender, and Social Networking

In Italy, women's advancement in economics has been curtailed by the structure of editorial boards of Italian economics journals. In this paper, we examine the presence of men and women economists on the editorial boards of thirty-six Italian economics journals published since 1970 and analyze the gender distribution across different kinds of boards, roles, and fields. Because boards are hierarchically ordered, women work mostly in the lower positions, and the increase in women's participation has led only to more "editorial secretaries." Since men and women tend to have different scientific interests and men's standards of academic value prevail, women economists cannot build publication records as strong as those of their male colleagues, which, in turn, affects women's hiring, promotion, and wages, as well as the shape of the discipline.     

On dollarization and currency boards: Error and deception

A diagnosis of the laws and balance sheets of the monetary authorities in Argentina, Bosnia, Bulgaria, Estonia, Hong Kong and Lithuania is presented. With the exception of Bosnia, all employ active monetary policies and engage in sterilization. Accordingly, they are not currency boards. The methods used to dismantle the Argentine system in 2001, prior to its eventual abandonment, are presented. An evaluation of the Hong Kong system (1997-1998) suggests that its so-called currency board was not a party to counter-speculation in the stock market. Evidence is presented to show how deception was employed by the US and the IMF during the Indonesian currency board debate (1998) as a means to engineer a political regime change.