tag:blogger.com,1999:blog-2276824405989781372024-03-19T12:24:40.677+01:00PROF. MARC GOERGEN ON CORPORATE GOVERNANCEI am a full professor at IE Business School in Madrid. In this blog, I discuss my research on corporate governance as well as topical issues on corporate governance and related issues.Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.comBlogger52125tag:blogger.com,1999:blog-227682440598978137.post-9671585422342736592023-11-12T12:08:00.000+01:002023-11-12T12:08:09.665+01:00Measuring the Ownership and Control of UK Listed Firms: Some Methodological ChallengesThe ownership and control of listed UK firms is often thought to be much simpler than the ownership and control of listed firms from most of the rest of the world, including Continental Europe. However, a study I coauthored with Svetlana Mira shows that this is not always the case.
For example, the distinction between beneficial and non-beneficial holdings can introduce duplication in the holdings of insiders, which may be difficult to resolve. In a study forthcoming in The British Accounting Review, we highlight a number of challenges that researchers face when determining the ownership and control of listed UK firms. We propose ways of tackling these challenges.
We expect these challenges to become more pronounced over the next years due to the recent changes to the UK listing rules following the Hill review.
The study is available free of charge from <a href="https://www.sciencedirect.com/science/article/pii/S0890838923001294" target="_blank">here</a>.
Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-51615108360845645402023-06-17T13:18:00.002+02:002023-12-31T16:11:22.083+01:00The European Corporation: Ownership and Control after 25 Years of Corporate Governance ReformsI have just received my copy of "The European Corporation: Ownership and Control after 25 Years of Corporate Governance Reforms". The book studies changes in corporate ownership and control from the 1990s to 2018/19.
<div class="separator" style="clear: both;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjri6SlatP_OONHy7FOr9BgvXNv-bBvkE2J7OLwuVIDJXY-Laymw18mPNSvKl2iIBE9R3cJoXCplSAEIOhqmRRuI283wWdGVMVzbbWTWQbC9ydcC6Aex-_BbE0N4s5muAwXFdbNTRYueDaKPLiW0gnvWe_3xsAAc6WO-IMy2lTU6eRnXx9ELLcFdgowbv9z/s264/Gugler%20and%20Peev.jpg" style="display: block; padding: 1em 0; text-align: center; "><img alt="" border="0" height="320" data-original-height="264" data-original-width="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjri6SlatP_OONHy7FOr9BgvXNv-bBvkE2J7OLwuVIDJXY-Laymw18mPNSvKl2iIBE9R3cJoXCplSAEIOhqmRRuI283wWdGVMVzbbWTWQbC9ydcC6Aex-_BbE0N4s5muAwXFdbNTRYueDaKPLiW0gnvWe_3xsAAc6WO-IMy2lTU6eRnXx9ELLcFdgowbv9z/s320/Gugler%20and%20Peev.jpg"/></a></div>
The book, which is edited by Evgeni Peev and Klaus Gugler and published by Cambridge University Press & Assessment, covers a number of countries. These include Germany, Italy, Sweden, and the UK. The book benefits from contributions by Johan Eklund, Rondi Laura, and Alexander Wagner among others. I am the author of the chapter on the UK.
Ultimately, the book attempts to answer the important question as to whether national corporate governance systems have converged or not since the 1990s. More information about the book can be found <a href="https://www.cambridge.org/core/books/european-corporation/8334BE7443EB618F12A64C7267D5BA8B" target="_blank">here</a>.Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-49512818352700277112023-06-04T12:27:00.001+02:002023-06-04T12:27:33.696+02:002023 Conference of the International Corporate Governance Society (ICGS) at IE University in MadridJointly with my colleagues <a href="https://www.ie.edu/university/about/faculty/patricia-gabaldon-quinones/" target="_blank">Patricia Gabaldon</a> and <a href="https://www.ie.edu/faculty/juan-pedro-gomez/" target="_blank">Juan Pedro Gomez</a>, I am pleased to organise the 2023 annual conference of the <a href="https://icgsociety.org/" target="_blank">International Corporate Governance Society</a> in Madrid at IE University on 20-22 October 2023. The conference theme is Sustainable Corporate Governance. Paper proposals and full papers can be submitted until 30 June 2023.
The keynote speakers will be <a href="https://es.linkedin.com/in/helena-vi%C3%B1es-fiestas-8b5ab441" target="_blank">Helena Viñes Fiestas</a>, <a href="https://search.asu.edu/profile/331791" target="_blank">Amy Hillman</a> and <a href="https://www.frankfurt-school.de/en/home/research/staff/Zacharias-Sautner" target="_blank">Zacharias Sautner</a>.
More information can be obtained from the conference website at <a href="https://www.ie.edu/icgs2023/" target="_blank">https://www.ie.edu/icgs2023/</a>.Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-57345759611572850892022-10-09T11:03:00.001+02:002022-10-09T11:04:19.589+02:00It's a Matter of Trust<p>I use my research to analyze how the levels of trust in a society impact shareholder voting. </p><p>Trust lies under all business relations. While contracts may tie us together and can be helpful in specifying the rights and obligations of signatories in specific situations, a contract can never really cover every eventuality. Thus, at the end of the day, there is trust – and it is necessary when entering into a contractual relationship with a new counterparty. Ultimately, trust enables strangers to work together and to produce goods and services. At the global level, high levels of trust may explain why some countries have been striving economically while others are stuck in what economists call a low-trust poverty trap. Please see <a href="https://www.ie.edu/insights/articles/its-a-matter-of-trust/" target="_blank">here</a> for details.</p><p><br /></p>Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-16331561680861037552022-05-02T13:11:00.002+02:002022-05-02T13:12:34.755+02:00Governance Through Ownership and Sustainable Corporate GovernanceIn my latest publication for the <i>Oxford Research Encyclopedia of Business and Management</i>, I define <b>sustainable corporate governance</b> as follows:<div><br /></div><div>"Sustainable corporate governance is the set
of arrangements that ensure that the firm focuses on maximizing long-term
shareholder value, which goes hand in hand with the consideration of broader stakeholder
interests in the firm’s decision-making. The focus on long-term shareholder
value creation not only enhances the survival of the firm in the long run, but
it also promotes the preservation of the firm’s ecosystem."</div><div><br /></div><div>I then review the literature on whether and how different types of shareholders promote sustainable corporate governance in their investee firms. Read more <a href="https://doi.org/10.1093/acrefore/9780190224851.013.370" target="_blank">here</a>.</div><div><br /></div><div><span style="font-family: inherit;">Source:<span style="text-align: justify; text-indent: -26.35pt;"><span style="font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><span style="text-align: justify; text-indent: -26.35pt;">Goergen, M.
(2022), ‘Governance through Ownership and Sustainable Corporate Governance’, in
<i>Oxford Research Encyclopedia of Business and Management</i>, Oxford University
Press, </span><a href="https://doi.org/10.1093/acrefore/9780190224851.013.370" style="text-align: justify; text-indent: -26.35pt;" target="_blank">https://doi.org/10.1093/acrefore/9780190224851.013.370</a><span style="text-align: justify; text-indent: -26.35pt;">.</span></span></div><p class="MsoNormal" style="margin-left: 62.35pt; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -26.35pt;"><span style="font-family: inherit;"><o:p></o:p></span></p><div><br /></div><div><br /></div>Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-52073654697561765792021-05-02T10:47:00.002+02:002021-05-02T10:47:30.927+02:00CEO Duality: For Better and for Worse<p>Separating the roles of the CEO and the chair of the board of directors is considered best practice by many regulators, but should this be? Professor Marc Goergen draws from his research to discuss how combining the two roles can affect a firm’s leadership and shareholder value. Please read more <a href="https://www.ie.edu/insights/articles/ceo-duality/" target="_blank">here</a>. </p>Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-11832125795953910242021-04-18T09:54:00.000+02:002021-04-18T09:54:16.082+02:00As mulheres dão mais sustentabilidade à direção das empresas<p>Coverage of my research on board diversity and renewable energy consumption by Portuguese newspaper Diário de
Noticias can be found <a href="https://www.dn.pt/opiniao/as-mulheres-dao-mais-sustentabilidade-a-direcao-das-empresas-13557014.html" target="_blank">here</a>. The article is in Portuguese.</p>Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-49614157881866704502021-03-20T09:37:00.001+01:002021-03-20T09:37:13.097+01:00Gender Diversity of Boards. IE Researchers: Gender Focus.<p> Please click the link below to watch my discussion with my colleague, <a href="https://www.ie.edu/school-global-public-affairs/faculty-and-research/faculty/patricia-gabaldon/" target="_blank">Professor Patricia Gabaldon</a>, on gender diversity on boards, from 18 March 2021. We discussed the benefits that gender diversity can bring to boards and companies, and the barriers that women encounter when trying to get to top leadership positions.</p><p><a href="https://www.linkedin.com/video/live/urn:li:ugcPost:6778344373999468544/">https://www.linkedin.com/video/live/urn:li:ugcPost:6778344373999468544/</a></p><p><br /></p><p><br /></p>Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-63660219635025057052021-01-06T10:55:00.002+01:002021-01-06T10:55:49.988+01:00Corporate Governance. A Global Perspective<p><b>Philosophy of the Book</b></p>
<p>
Existing textbooks on corporate governance tend to have a strong focus on UK
and/or US corporate governance. This focus is somewhat surprising as the UK
and US corporate governance systems have features which clearly set them apart
from pretty much the rest of the world. Indeed, the typical British and
American stock-market listed firm is widely held (held by many shareholders)
and control therefore lies with the management rather than the shareholders.
In contrast, most stock-exchange listed firms from the rest of the world have
a large shareholder whose control is substantial enough to have a significant
influence over the firm’s affairs. Given these marked differences in ownership
and control, corporate governance issues emerging in non-UK and non-US firms
tend to be very different from those that may affect British and American
companies. Hence, it is important for a textbook to bear in mind the diversity
of ownership and control across the world in order to provide a holistic
overview of corporate governance issues across the world. Indeed, there is no
single way of – or system for – ensuring good corporate governance. Further,
while national and cross-national regulators over the last two decades have
advocated the superiority of the Anglo-American approach to corporate
governance, the 2008 financial crisis highlights that there is no perfect
system and that each system has shortcomings which may result in spectacular
corporate failures.
</p>
<p>
Importantly, this global perspective is adopted throughout my textbook and
is not just limited to a particular part of the book or individual chapters.
The adoption of a global perspective is not only important given the nature
and diversity of corporate governance, but is also paramount given the
increasingly international character of student bodies in most universities
(including MBA programmes).
</p>
<p>
Rather than focusing on corporate governance regulation as some of the
established textbooks do, my textbook builds on existing academic research, but
without ignoring practice. The adoption of a strong theoretical framework is
important as it sets the basis for a critical analysis of existing corporate
governance practice and regulation. Frequently, existing textbooks consider
corporate governance regulation to be set in stone, failing to question the
premises it is built on as well as its effectiveness. For example, successive
UK codes of best practice have been based on the premise that independent,
non-executive directors are key to good corporate governance despite the lack
of academic evidence on the effectiveness of non-executive directors. Even
more worryingly as suggested by recent research on director networks,
independent directors are often only independent by name.
</p>
<p>
My book also adopts a multidisciplinary perspective which is important given
that corporate governance relates to a range of issues such as economic,
financial, accounting, legal, ethical and behavioural issues. Again, existing
textbooks frequently have too narrow a focus such as on corporate governance
regulation, environmental accounting and corporate social responsibility.
</p>
<p>
Finally, an effort has been made to convey to the reader the leading edge of
knowledge in a given area of corporate governance in an objective and unbiased
way. For some areas, the evidence is as yet inconclusive. Rather than
proposing unfounded conjectures or taking the approach adopted by regulators
as the (only) way forward, this book clearly spells out the lack of knowledge
in a particular area. While in some cases this lack of knowledge may be
frustrating to the reader, the alternative of lulling the reader into a false
sense of security is perceived to be worse.
</p>
<p>
To summarise, my textbook adopts a global perspective, reflects the
multidisciplinary nature of the area and provides a critical review of
existing institutional and legal arrangements.
</p>
<p><b>Synopsis of the Subject Matter of the Book</b></p>
<p>The book is divided into the following five parts:</p>
<p></p>
<ul style="text-align: left;">
<li>Part I – Introduction to Corporate Governance</li>
<li>Part II – Macro Corporate Governance</li>
<li>Part III – Improving Corporate Governance</li>
<li>Part IV – Corporate Governance and Stakeholders</li>
<li>Part V – Conclusions </li>
</ul>
<p></p>
<p></p>
<div class="separator" style="clear: both; text-align: center;">
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<br />Part I introduces corporate governance. Lecturers who wish to cover the
basics of corporate governance, without going into too much detail, may
concentrate on this part. This part reviews the various definitions of corporate
governance and discusses the main theories, including the principal-agent model.
It also reviews the patterns of corporate control across the world, highlighting
the differences between the UK and USA on one side and the rest of the world on
the other side. While in the UK and the USA there is normally no or little
difference between control and ownership, in the rest of the world there is
often a major difference between the two. It is important to be aware of such
deviations between control and ownership as they generate particular conflicts
of interests which would not emerge otherwise. Both the differences in corporate
control and deviations between ownership and control create conflicts of
interests in most corporations which are very different from the conflict of
interests at the basis of the principal-agent model. Hence, the principal-agent
theory has only limited applicability across the world.
<p></p>
<p>
Part II contains an in-depth review of the macro-level aspects of corporate
governance. Rather than describing the various systems of corporate governance
via a lengthy list of fairly concise sections devoted to individual countries
as some texts do, the approach that is adopted here is a comparative one. The
focus will be on the characteristics shared across the various systems as well
as those characteristics that make them distinct. This part will begin with a
review of the various taxonomies of corporate governance systems after
discussing the economic and political context in which global capitalism has
risen. It will then review the evidence on the link between corporate
governance, the development of financial markets and growth. The last chapter
of this part will be on corporate governance regulation, with the focus being
on the main national regulatory approaches (e.g. prescriptive rules versus
codes of best practice) as well as their advantages and shortcomings.
</p>
<p>
Part III focuses on the ways to enable good corporate governance within
countries as well as within individual corporations. This part starts with a
chapter on the board of directors. Given the importance that various
regulators and codes of best practices – as well as academic research – have
attached to this corporate governance mechanism, it deserves its own chapter.
The following chapter focuses on the other corporate governance devices that
are employed across the world to ensure that managers create shareholder
value. The next chapter deals with corporate governance in emerging markets.
Emerging economies are often dominated by crony capitalism such as inherited
wealth and political interference in corporate affairs, both of which make
improvements in corporate governance particularly challenging. This chapter
will also discuss the role of stock markets in economic development. The
following chapter then reviews the ways and means by which individual
companies can deviate from their national corporate governance standards by
offering their shareholders and other stakeholders better protection against
expropriation by the management and large shareholders. Such means include
cross-listing on foreign stock markets, cross-border mergers and
(re)incorporations in foreign countries or other federal states of the same
country. This part also includes a chapter on corporate governance issues
faced by firms that are in the process of going public and or have recently
gone public. These firms suffer from issues such as the pronounced asymmetry
of information between insiders and outsiders. They also have stakeholders,
such as venture capitalists, that are not normally present in more mature
firms as well as CEOs that are typically more powerful than their counterparts
in more mature firms. The final chapter covers behavioural issues, such as
excessive loyalty of the board members to the CEO (or the major shareholder)
and managerial overconfidence or hubris.
</p>
<p>
Part IV covers issues relating to corporate stakeholders other than the
shareholders. These issues include corporate social responsibility (CSR) and
socially responsible investment (SRI), debtholder related issues (the positive
role of debtholders in corporate governance as well as the conflicts of
interests that debtholders may be subject to), the rights and the voice of
employees across the various corporate governance systems, and the role and
responsibilities of gatekeepers (such as auditors, credit-rating agencies and
stock-exchange regulators) in corporate governance.
</p>
<p>
Part V concludes the book by drawing the lessons from the previous chapters,
identifying the challenges that those concerned with improving corporate
governance face and by proposing ways forward. To be effective, markets need
good governance. Recent events have shown that bad market governance – in
particular bad corporate governance – has not only negative effects for the
markets concerned, but has also much more wide-ranging and devastating effects
on wealth distribution and social justice for society as a whole. In other
words, corporate governance failures tend to not only result in the
expropriation of the shareholders of the immediate corporations concerned, but
also affect other economic actors and stakeholders such as debtholders,
taxpayers, consumers and job-market participants.
</p>
<div>
More information about the book can be found
<a href="https://www.cengage.co.uk/books/9781473759176/" target="_blank"
>here</a
>.
</div>
<p></p>
Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-20114856955637455012020-07-05T10:17:00.000+02:002020-07-05T10:17:15.090+02:00Women on Boards Leads to Greater Sustainability<div>Why would female directors be more likely to promote the use of renewable energy than their male peers? What evidence is there that women care more about ethics and corporate social responsibility (CSR) than men? Marc Goergen, Finance Professor at IE Business School, answers these questions and elaborates on why women are key in the move towards a more sustainable society. <a href="https://www.ie.edu/building-resilience/knowledge/women-boards-leads-greater-sustainability/" target="_blank">Read more.</a></div><div><br /></div>Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-87136286900853988932020-06-22T13:26:00.002+02:002020-06-22T13:37:44.786+02:00BVCA response to Warwick Business School report<p style="text-align: justify;"><i>In what follows, I and my co-authors respond to criticism voiced by the British Private Equity and Venture Capital Association (BVCA) about a study we conducted. The original BVCA press release can be found <a href="https://www.bvca.co.uk/media-and-publications/news/bvca-press-releases/details//BVCA-Response-to-Warwick-Business-School-Report" target="_blank">here</a>.</i></p><p style="text-align: justify;">A new paper by Geoffrey Wood of Warwick Business
School, Marc Goergen of Cardiff University and Noel O'Sullivan of Loughborough
University - 'The Employment Consequences of Private Equity Acquisitions: The
Case Of Institutional Buy Outs' - looks at the changes to employment and
productivity in companies that have been the subject of institutional buyouts
(IBOs) compared to matched companies that did not receive such a buyout.</p><p style="text-align: justify;"><o:p></o:p></p>
<p style="text-align: justify;">The paper looks at an initial total of 106 IBOs
undertaken over the period 1997 to 2006. This is in the context of 2,200
management buyouts (MBOs) and 500 management buy-ins (MBIs)<a name="_ftnref1"></a><a href="https://www.bvca.co.uk/media-and-publications/news/bvca-press-releases/details//BVCA-Response-to-Warwick-Business-School-Report" target="_blank"><span style="mso-bookmark: _ftnref1;">[1]</span><span style="mso-bookmark: _ftnref1;"></span></a><span style="mso-bookmark: _ftnref1;"></span> taking place in the UK over the same time
period.<o:p></o:p></p>
<p style="text-align: justify;">As it makes explicit, the study focuses
"exclusively on the employment consequences of institutional buyouts
(IBOs), as these are more likely to lend themselves to the type of negative
employee consequences politicians and trade union representatives are most
concerned about".<o:p></o:p></p>
<p style="text-align: justify;">Rather than ensuring that the report overcomes
the difficulties of recognising the heterogeneity of private equity investment
and providing "greater empirical clarity" to the issue, this simply
means that the report is a partial and unrepresentative look at private equity.
The study concerns itself with a very small subsection of private equity deals
and therefore any claims that this represents the private equity industry as a
whole are erroneous.<o:p></o:p></p>
<p style="text-align: justify;"><i style="mso-bidi-font-style: normal;">We do not
claim that our study is representative of the whole private equity industry; the
focus of our study is institutional buy-outs (IBOs). IBOs are acquisitions by
private equity houses of publicly quoted UK companies. Hence, contrary to some
of the existing studies we do not include relatively small, unquoted private
companies. Some of the companies covered by our study include Debenhams, Pizza
Express and United Biscuits. <o:p></o:p></i></p>
<p style="text-align: justify;">It appears that the authors have begged the
question - they have started with the hypothesis that private equity is
damaging to employment, wages and productivity, and sought to examine only
those deals which they believe are most likely to prove this hypothesis.<o:p></o:p></p>
<p style="text-align: justify;"><i style="mso-bidi-font-style: normal;">Our
hypothesis is that <u>one particular type</u> of private equity, i.e. IBOs, is damaging
for employment. In contrast to previous studies, we do not amalgamate very
different types of private equity. Few would disagree that management buy-outs,
which do not involve a change in management, are bad for employment. By
amalgamating MBOs with other types of private equity, one would equally bias
outcomes toward positive employment effects. This is something we have gone out
of our way to avoid.<o:p></o:p></i></p>
<p style="text-align: justify;"><i style="mso-bidi-font-style: normal;">The fact
that one actitvity has mostly positive effects does not provide a justification
for ignoring the mostly negative effects of certain expressions of that
activity.<o:p></o:p></i></p>
<p style="text-align: justify;">Of the 106 IBOs the report claims to examine, by
the time of the first year post-buyout this number has fallen to 68. By year
four, the number is just 56 - an ever smaller sample size than the one
originally stated.<o:p></o:p></p>
<p style="text-align: justify;"><i style="mso-bidi-font-style: normal;">The drop in
our sample is a reflection of the secretiveness of the private equity industry
and the difficulty of tracing target firms after their acquisition. We have
made a colossal effort to trace firms after their acquisition, but in some
cases a lack of disclosure, often combined with a move of the target firm’s
headquarters to tax heavens such as Nassau or Luxembourg, has prevented us from
obtaining data post-acquisition. The cynic would state that some private equity
houses make a huge effort to hide their target firms within a chain a shell
companies. We encourage the BVCA to improve disclosure by the industry so that
studies such as ours can be more representative..<o:p></o:p></i></p>
<p style="text-align: justify;">Of further note, the report looks only at the
first four years post-buyout. The average private equity holding periods tend
to be five to seven years. As such, it provides an incomplete view of the
impact of private equity backing. In addition, a significant number of the
companies in the IBO sample (40 of 106) are from 2005 and 2006 - meaning the
performance of both these and the comparator companies is likely to have been
impacted by the global financial crisis and the attended economic uncertainty.<o:p></o:p></p>
<p style="text-align: justify;"><i style="mso-bidi-font-style: normal;">This
criticism is not founded. We adjust for industry-wide as well as
period-specific trends in the data. In any case, our study compares the private
equity targets with two control samples of non-acquired firms. We cannot think
of any reason why the global financial crisis would have hit the private equity
targets, but not the non-acquired control firms of a similar size and operating
in the same industries.<o:p></o:p></i></p>
<p style="text-align: justify;">Despite acknowledging the fact that the companies
undergoing an IBO tend to be underperforming (with productivity statistically
significantly lower for the IBO companies), the report fails to acknowledge
that this is likely to lead to restructuring and the divestment of
underperforming segments of the business. The reduction in employment numbers
that the study points towards is therefore unsurprising in this context.<o:p></o:p></p>
<p style="text-align: justify;"><i style="mso-bidi-font-style: normal;">We agree
that restructuring of the target could be beneficial. However, we observe a
statistically significant drop in employment <u>after</u> adjusting for
differences in productivity and labour costs between the private equity targets
and the non-acquired firms. If your argument were correct, we would not find
any differences in employment growth between the target firms and the
non-acquired firms as such differences would be entirely explained by the lower
productivity and the higher wage costs in the target firms.<o:p></o:p></i></p>
<p style="text-align: justify;">As indicated above, a more typical form of
private equity investment is via management buyout, in which the existing
management team of a company acquires a controlling equity stake in the
business with private equity support.<o:p></o:p></p>
<p style="text-align: justify;">Studies in this area are far more encouraging and
find that companies that have been the subject of an MBO outperform comparable
companies that have not. Indeed, Wood et al acknowledge this point in their own
report.<o:p></o:p></p>
<p style="text-align: justify;">For example, in September 2012 a report by the
Centre for Management Buyouts and the Credit Management Research Centre found
private equity-backed buyouts achieved superior economic and financial
performance over the period 1995 to 2012, which includes the economic downturn,
than comparable non-private equity buyouts and listed companies<a name="_ftnref2"></a><a href="http://www.bvca.co.uk/home/Home-for-launch/features/BVCAresponsetoWarwickBusinessSchoolreport#_ftn2"><span style="mso-bookmark: _ftnref2;">[2]</span><span style="mso-bookmark: _ftnref2;"></span></a><span style="mso-bookmark: _ftnref2;"></span>. This was a far larger study than Wood et
al as it is based on a dataset of 400,299 company-year observations and 30,736
observations of companies that experienced a private equity backed buyout.<o:p></o:p></p>
<p style="text-align: justify;">Private equity's positive impact on productivity
has been well-established in a number of similar academic reports (a sample of
which can be found below). By looking at such a small section of private equity
activity, the paper produced by Warwick Business School is of minor relevance
to the wider debate about how the private equity industry creates value in the
companies in which it invests.<o:p></o:p></p>
<p style="text-align: justify;"><i style="mso-bidi-font-style: normal;">Again, the authors
of this reply equate private equity with MBOs. The point of our study is that
amalgamating IBOs and MBOs is not justified. While there may be fewer IBOs than
MBOs the former concern large public firms whereas the latter concern smaller,
frequently private held firms. If this makes our study irrelevant then we are
happy to accept this criticism.<o:p></o:p></i></p>
<p class="MsoNormal" style="text-align: justify;"><i style="mso-bidi-font-style: normal;"><o:p> </o:p></i></p>
<p class="MsoNormal" style="text-align: justify;"><i style="mso-bidi-font-style: normal;"><span style="mso-spacerun: yes;"> </span><o:p></o:p></i></p>
<p class="MsoNormal" style="text-align: justify;"><i style="mso-bidi-font-style: normal;"><o:p> </o:p></i></p><br />Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-42541737317456132592020-04-11T12:49:00.000+02:002020-04-11T12:49:04.791+02:00CEO Overconfidence and the Speed of Adjustment of Cash HoldingsFirms hold cash for several reasons, e.g., to seize strategic opportunities as they arise or as a buffer against unexpected shocks. While research has focused on the question as to how much cash a firm should hold, it has mostly ignored how quickly firms move back to their optimal or target cash holdings level once they have been pushed away from that level. Read more <a href="https://ecgi.global/news/ceo-overconfidence-and-speed-adjustment-cash-holdings" target="_blank">here</a>.Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-55084970375290831712020-03-22T10:35:00.001+01:002020-12-20T19:39:25.261+01:00Corporate Control Across The World<script charset="utf-8" data-zindex="1000000" id="asp-embed-script" src="https://spark.adobe.com/page-embed.js" type="text/javascript"></script><a class="asp-embed-link" href="https://spark.adobe.com/page/Y1IkBPTFvfr7x/" target="_blank"><img alt="Corporate Control Across The World" border="0" src="https://spark.adobe.com/page/Y1IkBPTFvfr7x/embed.jpg?buster=1584869494202" style="width: 100%;" /></a>
<p>A visual story about corporate control across the world.</p>
<p>This visual story is loosely based on chapters 1 to 3 of my textbook entitled <i><a href="https://www.cengage.co.uk/books/9781473759176/" target="_blank">Corporate Governance. A Global Perspective</a></i>.</p>Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-3114418883597443162020-03-13T20:13:00.000+01:002020-03-13T20:15:19.764+01:00How Female Directors Affect Dividend PolicyA commentary in the Fortune Magazine mentions my research on how female directors influence dividend policy. The study itself can be downloaded for free from the <a href="https://www.sciencedirect.com/science/article/pii/S0929119917300020" target="_blank">Journal of Corporate Finance</a>. The commentary can be found <a href="https://fortune.com/2020/03/05/catalyst-diversity-equity-inclusive-workplaces/">here</a>.Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-6995956419568169142020-01-11T21:24:00.000+01:002020-01-12T10:05:33.200+01:00Corporate Governance for New Ventures - Course OutlineThis is an updated version of my 2019 course outline, which can be found <a href="https://www.profmarcgoergen.com/2019/02/corporate-governance-course.html" target="_blank">here</a>. All of the practical cases can be obtained from Harvard Business Publishing.<br />
<h3>
COURSE DESCRIPTION</h3>
Who Should Take this Course?<br />
Corporate governance is frequently reduced to compliance and box ticking. This course will show you that corporate governance is more than this and that it can be used proactively to create value. The course will also show you that the optimal corporate governance arrangements vary across firms: What may be optimal for a mature firm may not work for an early venture, and vice-versa.<br />
<br />
This course is aimed at three different constituencies. First, it is aimed at budding entrepreneurs who want to know more about designing the governance of their ventures in view of ultimately going public. Second, it is also aimed at those who aspire to a career as a non-executive director. Finally, the course should also be of interest to investors and other parties interested in how corporate control, ownership and governance vary across the world.<br />
<h4>
Course Overview</h4>
This course aims to introduce you to recent developments in the theory and practice of corporate governance. The course starts by reviewing the conflicts of interests from which corporations may suffer, considering their control and ownership as well as the institutional and legal environment. The course proposes ways of mitigating such conflicts of interests. It also questions the simplistic view of the corporation as a device for creating solely value for its shareholders. For once, there is growing pressure on corporations – from both society at large and some professional investors – to be socially responsible. In addition, the course reviews leading edge topics in corporate governance, with special emphasis on corporate governance issues pertaining to young ventures and firms that are about to go public. Importantly, the course adopts an international perspective by comparing the main corporate governance systems across the world.<br />
<h3>
EMPLOYABILITY</h3>
Since the first codes of best practice in corporate governance emerged during the 1990s, corporate governance has been constantly on the agenda. Corporate governance affects what can and cannot be done within and by an organisation. In turn, the actions and decisions of an organisation also affect its corporate governance. This makes corporate governance a vital part of any organisation. In addition, investors and stock market authorities value companies with strong governance. Hence, knowledge about corporate governance is increasingly valued by employers. Such knowledge may also open up new career opportunities such as independent, non-executive directorships.<br />
<h3>
LEARNING OBJECTIVES</h3>
On completion of the course you should be able to:<br />
<ol>
<li>Evaluate the current state of corporate governance in an international context</li>
<li>Describe differences in corporate control and managerial power across the world</li>
<li>Assess the potential conflicts of interests that may arise in various corporate governance environments</li>
<li>Understand the main roles of the board of directors and issues pertaining to board composition and board gender balance</li>
<li>Explain the potential consequences of weak corporate governance on corporate decision making and firm value</li>
<li>Comprehend investors’ expectations about corporate governance arrangements</li>
<li>Be aware of biases in human behaviour and how they may affect corporate governance</li>
<li>Analyse the importance and development of corporate social responsibility and socially responsible investment</li>
<li>Differentiate the corporate governance needs of a young venture from those of a more mature business</li>
<li>Discuss how firms from weak corporate governance systems can improve their access to capital by cross-listing in a better system </li>
</ol>
<h3>
SYLLABUS </h3>
<ol>
<li>Defining corporate governance and key theoretical models</li>
<li>Corporate control across the world</li>
<li>Control versus ownership rights</li>
<li>Boards of directors</li>
<li>Behavioural biases and corporate governance</li>
<li>Corporate governance regulation in an international context</li>
<li>Corporate governance in initial public offerings and cross-listings</li>
<li>Corporate social responsibility (CSR) and socially responsible investment (SRI)</li>
</ol>
<h3>
READING LIST</h3>
<a href="https://www.cengage.co.uk/books/9781473759176/" target="_blank">Goergen, M. (2018), Corporate Governance. A Global Perspective, Andover: Cengage, ISBN 978-1-4737-5917-6.</a><br />
<h3>
PROGRAMME</h3>
<h3>
Session 1</h3>
Introduction<br />
Defining corporate governance and key concepts<br />
<i>B.C.: Goergen (2018)</i><br />
<h4>
Session 2</h4>
Case discussion<br />
<i>P.C.: Battle for the Soul of Capitalism: Unilever and the Kraft Heinz Takeover Bid (A) (317127-PDF-ENG)</i><br />
<h4>
Sessions 3 – 4</h4>
Corporate control across the world<br />
Control versus ownership rights<br />
<i>B.C.: Goergen (2018), chapters 2-3</i><br />
Student presentations (Session 4): Identifying ownership, control and special shareholder rights for a case company<br />
<h4>
Session 5</h4>
Case discussion<br />
<i>P.C.: Magna International, Inc. (A) (211044-PDF-ENG)</i><br />
<i>P.C.: Magna International, Inc. (B) (211045-PDF-ENG)</i><br />
<h4>
Session 6</h4>
Board crisis simulation<br />
<i>P.C.: Board Crisis Simulation (BCS) (A) (IN1169-PDF-ENG)</i><br />
<i>P.C.: Board Crisis Simulation (BCS) (B) Profiles (IN1170-PDF-ENG)</i><br />
<i>B.C.: Goergen (2018), chapters 7-8</i><br />
<h4>
Session 7</h4>
Case discussion<br />
<i>P.C.: A Corporate Governance Breach at SingPost (SMU173-PDF-ENG)</i><br />
<h4>
Session 8</h4>
Boards of directors and behavioural biases<br />
Simulations<br />
No preparation required for the simulations and all material will be made available during the session<br />
<i>B.C.: Goergen (2018), chapter 12</i><br />
<h4>
Session 9</h4>
Student presentations: Corporate governance regulation in a country of your choice<br />
<i>B.C.: Goergen (2018), chapters 4 and 6; Padgett (2011), chapter 7</i><br />
<h4>
Session 10</h4>
Corporate governance in initial public offerings and cross-listings<br />
<i>B.C.: Goergen (2018), chapters 10-11; no equivalent chapters in Padgett (2011)</i><br />
<h4>
Session 11</h4>
Case discussion<br />
<i>P.C.: Alibaba Goes Public (A) (115029-PDF-ENG)</i><br />
<h4>
Session 12</h4>
Case discussion<br />
<i>P.C.: The Uber Board Deliberates: Is Good Governance Worth the Firing of an Entrepreneurial Founder? (CU242-PDF-ENG)</i><br />
<h4>
Session 13</h4>
Corporate social responsibility (CSR) and socially responsible investment (SRI)<br />
<i>B.C.: Goergen (2018), chapter 13; Padgett (2011), limited coverage in chapter 4</i><br />
<h4>
Session 14</h4>
Case discussion<br />
<i>P.C.: Dieselgate – Heavy Fumes Exhausting the Volkswagen Group (HK1089-PDF-ENG)</i><br />
<h4>
Session 15</h4>
Final examProf. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-2493698138912442612019-10-20T11:40:00.001+02:002020-01-11T20:53:19.514+01:00When Women Are on Boards, Male CEOs Are Less OverconfidentA number of governments (notably those in India, California, and parts of Europe) are pushing for greater female representation in the boardroom. And several studies suggest why: Having women on the board results better acquisition and investment decisions and in less aggressive risk-taking, yielding benefits for shareholders. What’s less clear is why these effects happen. <a href="https://hbr.org/2019/09/research-when-women-are-on-boards-male-ceos-are-less-overconfident">See more.</a><br />
<br />
The effects of women on boards are also discussed in chapter 7 of my corporate governance <a href="https://www.amazon.co.uk/Corporate-Governance-Perspective-Marc-Goergen/dp/147375917X/ref=sr_1_1?keywords=marc+goergen&qid=1571565081&smid=A3P5ROKL5A1OLE&sr=8-1">textbook</a>.Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-62491010303443503082019-05-01T08:46:00.000+02:002019-05-01T08:46:03.166+02:00Trust and Shareholder VotingVoting at annual general shareholder meetings (AGMs) has been shown to be valuable. This makes perfect sense as voting gives shareholders a say on important corporate decisions, such as the composition of the board of directors and the approval of mergers and acquisitions. It also enables shareholders to express their support or dissent of the current management. Surprisingly though, voter turnout at AGMs across the world is relatively low with an average of slightly less than 60 percent of voting shares. Nevertheless, there is variation across countries with voter turnout ranging from a low of 41 percent in New Zealand to a high of 100 percent in Cyprus. In addition, the average approval rates for management-initiated proposals range between 84 percent and 100 percent, indicating that shareholders are less likely to show dissent to the firm’s management in some countries compared to others. What explains these variations across countries? ... <a href="https://www.law.ox.ac.uk/business-law-blog/blog/2018/09/trust-and-shareholder-voting">Read more</a>Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-69138464618227161822019-05-01T08:37:00.000+02:002019-05-01T08:37:10.039+02:00How an Issuer’s Multiple Credit Ratings Can Affect Its IPOWhile the list of prospective issuers with credit ratings is lengthy, literature is sparse on how ratings from multiple credit rating agencies (CRAs) affect the performance of a company’s initial public offering (IPO). Our research is motivated by the lack of such literature and by Sangiorgi and Spatt (2017), who argue that multiple ratings are socially optimal if the benefit of the additional rating outweighs the cost of information production. This argument aligns with the “shopping hypothesis” and “information production hypothesis” of Bongaerts et al. (2012). Under the former hypothesis, issuers “shop” for an additional rating in hopes of improving … <a href="http://clsbluesky.law.columbia.edu/2019/04/04/how-an-issuers-multiple-credit-ratings-can-affect-its-ipo/" target="_blank">Read more</a>Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-85785333999670478482019-05-01T08:34:00.000+02:002019-05-01T08:34:25.944+02:00Firms’ Rationales for CEO Duality: Evidence from a Mandatory Disclosure RegulationThe common practice of combining the roles of the CEO and chairman of the board (CEO duality) has been the topic of one of the longest debates in corporate governance. On the one side, a majority of S&P 500 firms combine the two roles. On the other side, investors and governance experts—via shareholder proposals and public campaigns—frequently pressure firms into separating the two roles, emphasizing a lack of effective managerial oversight under CEO duality. Nevertheless, most such proposals do not receive majority support, which suggests disagreement among shareholders about the value of CEO duality. Such disagreement is consistent with the inconclusive academic literature on the relation between CEO duality and firm performance (for a review, see Krause, Semadeni, and Cannella, 2014), as well as the lack of reliability of extant studies likely suffering from the non-random choice of board structures. The above discussion highlights the need for both practitioners and scholars to better understand why firms combine or separate the CEO and chairman roles.<br />
<br />
Read more <a href="https://corpgov.law.harvard.edu/2019/04/04/firms-rationales-for-ceo-duality-evidence-from-a-mandatory-disclosure-regulation/">here</a>.Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-15354313546150349422019-02-17T14:50:00.003+01:002019-02-23T10:30:23.618+01:00Chapter 1 - "Corporate Governance. A Global Perspective" - Multiple-choice Quiz<iframe name='proprofs' id='proprofs' width='550' height='650' frameborder=0 marginwidth=0 marginheight=0 src='https://www.proprofs.com/quiz-school/story.php?title=mjqwotexoaupnc&id=2408869&ew=530'></iframe><div style='font-size:10px; font-family:Arial, Helvetica, sans-serif; color:#000;text-align:left;'><a href='https://www.proprofs.com/quiz-school/story.php?title=mjqwotexoaupnc' target='_blank' title='Chapter 1 by ProProfs'>Chapter 1 by ProProfs</a></div>Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-87157760850719724372019-02-02T12:14:00.000+01:002019-02-02T12:17:36.673+01:00Corporate Governance Course<br />
<div align="center" class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt; text-align: center;">
<div style="text-align: left;">
<b><span style="font-family: "arial" , sans-serif;">COURSE DESCRIPTION</span></b></div>
</div>
<div class="MsoNormal">
<div style="text-align: justify;">
<span style="font-family: "arial" , sans-serif;">This is a slightly different version of the course outline I published sometime ago and which can be found <a href="https://www.profmarcgoergen.com/2014/03/corporate-governance-module-outline.html" target="_blank">here</a>. The focus here is more on young and entrepreneurial firms - including those from emerging markets - rather than more mature businesses.</span></div>
</div>
<div class="MsoNormal" style="text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;"><br /></span></b>
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">Who Should Take this
Course<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Corporate
governance is frequently reduced to compliance and box ticking. This course
will show you that corporate governance is more than this and that it can be
used proactively to create value. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "arial" , sans-serif;">This
course is aimed at three different constituencies. First, it is aimed at
budding entrepreneurs who want to know more about designing the governance of
their ventures in view of ultimately going public. Second, it is also aimed at
those who aspire to a career as a non-executive director. Finally, the course
should also be of interest to investors and other parties interested in how
corporate control, ownership and governance vary across the world.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">Course Overview<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "arial" , sans-serif;">This
course aims to introduce you to recent developments in the theory and practice
of corporate governance. The course starts by reviewing the conflicts of
interests from which corporations may suffer, considering their control and
ownership as well as the institutional and legal environment. The course
proposes ways of mitigating such conflicts of interests. It also questions the
simplistic view of the corporation as a device for creating solely value for
its shareholders. For once, there is growing pressure on corporations – from
both society at large and some professional investors – to be socially responsible.
In addition, the course reviews leading edge topics in corporate governance,
including corporate governance issues pertaining to young ventures and firms
that are about to go public as well as behavioural issues at the board level.
Importantly, the course adopts an international perspective by comparing the
main corporate governance systems across the world.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">LEARNING OBJECTIVES<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "arial" , sans-serif;">On
completion of the module you should be able to:<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<ol start="1" style="margin-top: 0cm;" type="1">
<li class="MsoNormal" style="mso-list: l1 level1 lfo2; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Evaluate the current state of
corporate governance in an international context<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Describe differences in corporate
control and managerial power across the world<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Assess the potential conflicts of
interests that may arise in various corporate governance environments<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Understand the main roles of the
board of directors and issues pertaining to board composition and board
gender balance<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Critically evaluate the
effectiveness of the main corporate governance mechanisms and their impact
on firm value<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Explain the potential consequences of
weak corporate governance as well as behavioural biases on corporate
decision making and firm value<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Analyse the importance and
development of corporate social responsibility and socially responsible
investment<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Differentiate the corporate
governance needs of a young venture from those of a more mature business<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Discuss how firms from weak
corporate governance systems can improve their access to capital by
cross-listing in a better system <o:p></o:p></span></li>
</ol>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">SYLLABUS
</span></b><span style="font-family: "arial" , sans-serif;"><o:p></o:p></span></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<br /></div>
<ol start="1" style="margin-top: 0cm;" type="1">
<li class="MsoNormal" style="mso-list: l2 level1 lfo1; tab-stops: list 36.0pt; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Defining
corporate governance and key theoretical models<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l2 level1 lfo1; tab-stops: list 36.0pt; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Corporate
control across the world<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l2 level1 lfo1; tab-stops: list 36.0pt; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Control
versus ownership rights<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l2 level1 lfo1; tab-stops: list 36.0pt; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Taxonomies
of corporate governance systems<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l2 level1 lfo1; tab-stops: list 36.0pt; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Boards
of directors<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l2 level1 lfo1; tab-stops: list 36.0pt; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Incentivising
managers <o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l2 level1 lfo1; tab-stops: list 36.0pt; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Corporate
governance regulation in an international context<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l2 level1 lfo1; tab-stops: list 36.0pt; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Corporate
governance in initial public offerings and cross-listings<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l2 level1 lfo1; tab-stops: list 36.0pt; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Behavioural
biases and corporate governance<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l2 level1 lfo1; tab-stops: list 36.0pt; text-align: justify;"><span style="font-family: "arial" , sans-serif;">Corporate
social responsibility and socially responsible investment<o:p></o:p></span></li>
</ol>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">READING
LIST<o:p></o:p></span></b></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; page-break-after: avoid; text-align: justify;">
<span style="font-family: "arial" , sans-serif;">The main reading and
textbook for this module is:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; page-break-after: avoid; text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Goergen, M. (2018), <i style="mso-bidi-font-style: normal;">Corporate Governance. A Global Perspective</i>,
Andover: Cengage, ISBN 978-1-4737-5917-6.<o:p></o:p></span></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">PROGRAMME<o:p></o:p></span></b></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">Session
1<o:p></o:p></span></b></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Defining corporate governance and key
theoretical models</span></div>
<div class="MsoNormal" style="text-align: justify;">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "arial" , sans-serif;">B.C.: Goergen (2018),
chapter 1<o:p></o:p></span></i></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">Sessions 2-3<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Corporate
control across the world</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Control
versus ownership rights<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "arial" , sans-serif;">B.C.: Goergen (2018),
chapters 2-3<o:p></o:p></span></i></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">Session
4<o:p></o:p></span></b></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Identifying ownership, control and
special shareholder rights for a case company</span></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "arial" , sans-serif;">Material
will be made available in advance of the session <o:p></o:p></span></i></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;"><span style="mso-tab-count: 1;"> </span><o:p></o:p></span></b></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">Sessions
5-6<o:p></o:p></span></b></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Taxonomies of corporate governance
systems</span></div>
<div class="MsoNormal" style="text-align: justify;">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "arial" , sans-serif;">B.C.: Goergen (2018),
chapter 4<o:p></o:p></span></i></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">Sessions
7-9<o:p></o:p></span></b></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Boards of directors</span></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Incentivising managers <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "arial" , sans-serif;">B.C.: Goergen (2018),
chapters 7-8<o:p></o:p></span></i></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">Sessions
10-11<o:p></o:p></span></b></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Corporate governance regulation in an
international context</span></div>
<div class="MsoNormal" style="text-align: justify;">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "arial" , sans-serif;">B.C.: Goergen (2018),
chapter 6<o:p></o:p></span></i></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">Session 12<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Corporate
governance in initial public offerings and cross-listings</span></div>
<div class="MsoNormal" style="text-align: justify;">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "arial" , sans-serif;">B.C.: Goergen (2018), chapters
10-11<o:p></o:p></span></i></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">Session 13<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Behavioural
biases and corporate governance</span></div>
<div class="MsoNormal" style="text-align: justify;">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "arial" , sans-serif;">B.C.: Goergen (2018),
chapter 12<o:p></o:p></span></i></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">Session
14<o:p></o:p></span></b></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Behavioural experiments</span></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">Session
15<o:p></o:p></span></b></div>
<div class="MsoNormal" style="page-break-after: avoid; text-align: justify;">
<span style="font-family: "arial" , sans-serif;">Corporate social responsibility and
socially responsible investment</span></div>
<div class="MsoNormal" style="text-align: justify;">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "arial" , sans-serif;">B.C.: Goergen (2018),
chapter 13<o:p></o:p></span></i></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 12.0pt; page-break-after: avoid; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">ADDITIONAL
COURSE RESOURCES<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 12.0pt; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "arial" , sans-serif;">Websites<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-left: 18.0pt; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "symbol"; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif;">Prof.
Marc Goergen’s blog:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: 18.0pt; text-align: justify;">
<span style="font-family: "arial" , sans-serif;"><a href="http://profmarcgoergen.com/">http://profmarcgoergen.com/</a>
<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: 18.0pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-left: 18.0pt; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "symbol"; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif;">European
Corporate Governance Institute (ECGI): <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 18.0pt; margin-right: 0cm; margin-top: 0cm; text-align: justify;">
<span style="font-family: "arial" , sans-serif;"><a href="http://www.ecgi.global/">http://www.ecgi.global/</a>)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 18.0pt; margin-right: 0cm; margin-top: 0cm; text-align: justify;">
<i style="mso-bidi-font-style: normal;"><span style="font-family: "arial" , sans-serif;">A free, extensive library covering most
national and international codes of corporate governance can be found on the
website of the European Corporate Governance Institute (ECGI): <a href="http://ecgi.global/content/codes">http://ecgi.global/content/codes</a><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-left: 18.0pt; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "symbol"; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif;">Andrei
Shleifer’s publications and dataset website:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 18.0pt; margin-right: 0cm; margin-top: 0cm; text-align: justify;">
<span style="font-family: "arial" , sans-serif;"><a href="http://scholar.harvard.edu/shleifer/publications">http://scholar.harvard.edu/shleifer/publications</a>
<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: 18.0pt; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: "symbol"; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "arial" , sans-serif;">Social
Sciences Research Network:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 18.0pt; margin-right: 0cm; margin-top: 0cm; text-align: justify;">
<span style="font-family: "arial" , sans-serif;"><a href="http://www.ssrn.com/">http://www.ssrn.com/</a> <o:p></o:p></span></div>
<br />Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-8419636232912579322018-12-09T15:49:00.000+01:002018-12-09T15:49:00.316+01:00Too Much of a Good Thing Is Not Necessarily BetterStarting with the <a href="https://www.cengage.co.uk/books/9781473759176/" target="_blank">1992 Cadbury Report</a> in the UK, the emphasis of most codes of best practice has been on ensuring a sufficient number of independent directors on corporate boards. Successive codes of best practice have then attempted to increase the number of independent directors even further. It is then no surprise that Spain's Iberdrola has won successive <a href="https://www.libremercado.com/2018-11-07/poner-al-accionista-en-el-centro-del-gobierno-corporativo-funciona-1276627799/" target="_blank">prizes</a> for its corporate governance. Indeed, nine of Iberdrola's 14 members of its <a href="https://www.iberdrola.com/corporate-governance/board-directors" target="_blank">board of directors</a> are independent directors with another three being external directors and the remaining two being executives.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-F9pArm0VZMgKhmmmEDf9XZhZZFKrxR4j1HtG0G6t8Axj8eDqatXDn5gGSCDkj8jIvQ8qrozxz37mtmJjYDuX8ZRCCWCIdg8W572YAfisSL3mSf21Qe-8-YfztVgY4niWrCEjknaqoQwT/s1600/Iberdrola+board.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="561" data-original-width="644" height="278" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-F9pArm0VZMgKhmmmEDf9XZhZZFKrxR4j1HtG0G6t8Axj8eDqatXDn5gGSCDkj8jIvQ8qrozxz37mtmJjYDuX8ZRCCWCIdg8W572YAfisSL3mSf21Qe-8-YfztVgY4niWrCEjknaqoQwT/s320/Iberdrola+board.png" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Iberdrola's board of directors, Source: <a href="https://www.iberdrola.com/corporate-governance/board-directors">https://www.iberdrola.com/corporate-governance/board-directors</a></i></td></tr>
</tbody></table>
<br />So does having more independent directors on a board always mean better corporate governance? Well, not necessarily. First, the <a href="https://onlinelibrary.wiley.com/doi/10.1111/1467-8551.12290" target="_blank">academic literature</a> on the value consequences of board independence <span style="font-family: Calibri, sans-serif; font-size: 11pt;">–</span> with board independence typically measured by the percentage of independent directors on the board <span style="font-family: Calibri, sans-serif; font-size: 11pt;">–</span> has found little or no evidence of an effect of board independence on firm performance and value. Still, this literature is riddled with major methodological issues, which make it difficult to obtain conclusive evidence as to the existence and form of a link between board independence and firm performance. Many will also remember the case of the British bank <a href="https://en.wikipedia.org/wiki/Northern_Rock" target="_blank">Northern Rock</a>, which experienced the first bank run for more than 150 years in 2007. Northern Rock had exemplary corporate governance as it was in full compliance with the Combined Code, the then UK code of best practice in corporate governance. The problem with Northern Rock was that its independent directors did not have a clue about its risky business model, which consisted of financing mortgages, i.e. long-term loans for house purchases, via the money market, a market for raising funds with maturities ranging from overnight to just below a year. When the money market collapsed during summer 2007, Northern Rock was in deep trouble. Its independent directors simply had not had the expert knowledge to ask Northern Rock's the right questions about the appropriateness and riskiness of its business model.<br />
<br />
Second, <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/j.1540-6261.2007.01206.x" target="_blank">corporate governance theory</a> (yes, there is such a thing!) suggests that the balance between executive and independent directors matters and that this balance is determined by the firm's needs for monitoring and advice from its board. Mature firms with large free cash flows, such as Iberdrola, likely require more monitoring than advice from their board of directors. For such firms, more rather than fewer independent directors would be the best way forward in terms of ensuring good corporate governance. In contrast, smaller, younger and high-growth firms require advice rather than monitoring from their board. For such firms, a board dominated by independent directors may make the executives feel uncomfortable about seeking advice from the board. Hence, and contrary to most codes of best practice, more independent directors does not necessarily equate to better corporate governance for all firms. One size does not fit all when it comes to corporate governance.<br />
<br />
Returning to Iberdrola, one expects this firm's monitoring needs to exceed its needs for advice as it is a mature firm and in a relatively safe industry. Hence, more rather than fewer independent directors seems the way forward. Still, Iberdrola also has <a href="https://www.iberdrola.com/corporate-governance/board-directors/composition" target="_blank">CEO-chairman duality</a> as Mr José Ignacio Sánchez Galán assumes the roles of both CEO and chairman. And, he has been on Iberdrola's board since 2001, a tenure well beyond the maximum tenure recommended by various international codes of best practice, including the French, German and UK codes. To be fair, Iberdrola has a vice-chair, Ms Inés Macho Stadler, to counterbalance the power of the CEO-chair. Still, she has also been on the board for a long time with her initial appointment dating back to 2006. Apart from Mr Sánchez Galán, Mr Francisco Martínez Córcoles is the only other executive on the board. However, he has only been on the board since March 2017. As a result of all the above, one could criticize Iberdrola's board of over-reliance on the all powerful CEO-chair.<br />
<br />
<i style="background-color: white; color: #4e4e4e; font-family: arial, tahoma, helvetica, freesans, sans-serif; font-size: 14.85px; text-align: justify;">Legal disclaimer: This blog reflects my personal opinion and not necessarily that of my employer. Any links to external websites are provided for information only and I am neither responsible nor do I endorse any of the information provided by these websites.</i><span style="background-color: white; color: #4e4e4e; font-family: "arial" , "tahoma" , "helvetica" , "freesans" , sans-serif; font-size: 14.85px; text-align: justify;"> </span>Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-41410873969124742482018-11-17T10:07:00.000+01:002018-12-09T15:33:52.270+01:00The Relationship between Public Listing, Context, Multi-nationality and Internal CSRThis cross-country study argues that corporate social responsibility (CSR) has an internal as well as an external focus: although the internal aspect has been less carefully examined in the literature, ‘doing good’ for society necessarily involves treating employees properly. Focusing on this internal aspect of corporate social responsibility, we investigate how firm and country characteristics affect the likelihood of a firm having a CSR statement and how it impacts the way such firms treat their internal stakeholders and their staff. In particular, our paper examines employer-employee interdependence – how the existence of a CSR statement affects a firm’s investment in its staff and the downsizing of its workforce when required – according to types of firms and legal families.<br />
<br />
The following research questions are addressed: <a href="https://www.law.ox.ac.uk/business-law-blog/blog/2018/04/relationship-between-public-listing-context-multi-nationality-and" target="_blank">read more</a><br />
<br />
The <a href="https://www.sciencedirect.com/science/article/pii/S0929119917305990" target="_blank">published study</a> is now available free of charge from here.Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-23897859411720311842018-08-31T11:22:00.000+02:002018-09-06T10:24:06.066+02:00Trust and Shareholder VotingTheory as well as empirical studies suggest that voting at annual general shareholder meetings (AGMs) creates value. Indeed, voting gives shareholders a final say on major company decisions, such as appointments to the board of directors and the approval of takeover offers. It also enables shareholders to show their support the current management or to disagree with the latter. It is then somewhat surprising that, on average, voter turnout at AGMs is only about 60%. Still, the average voter turnout varies across the world with a minimum of 41% for New Zealand and a maximum of 100% for Cyprus. Moreover, the average approval rates for management-initiated proposals vary between 84% and 100%.<br />
<br />
In <a href="http://cgi.global/working-paper/trust-and-shareholder-voting" target="_blank">a study</a> with <a href="https://www.wiso.uni-koeln.de/en/research/find-an-expert/experts3/jun-prof-dr-peter-limbach/" target="_blank">Peter Limbach</a> and <a href="http://www.finance.uni-koeln.de/en/department/staff/research-assistants/simon-lesmeister/" target="_blank">Simon Lesmeister</a>, we propose the level of trust in others that prevails in a country has an effect on shareholder voting and explains differences in voting patterns across countries. The economics literature (see e.g. <a href="https://doi.org/10.1111/1468-0297.00609" target="_blank">Zak and Knack 2001</a>) finds that trust increases economic performance, as measured by GDP per capita growth. The argument is as follows: In high-trust countries economic agents do not have to expend as much time on monitoring each other. Hence, they have more time for productive tasks. Therefore, countries with high trust levels should have better economic performance. By examining whether trust affects the level of shareholder monitoring of management, as proxied by voter turnout at AGMs and support of management-initiated proposals, we perform a more direct test of this argument.<br />
<br />
Trust has been shown to vary quite substantially across countries with only 3% of Filipinos trusting others while as 74% of Norwegians agree that others can be trusted. By studying the voting outcomes at ordinary and extraordinary AGMs of companies from more than 40 countries, we find empirical support of our main hypothesis: Shareholders in countries with high trust spend less time on monitoring the management of their companies.<br />
<br />
In detail, we find that for high-trust countries voter turnout at AGMs is significantly lower while the approval rate for management-initiated proposals is significantly higher. We also find evidence that the lower levels of shareholder voting or monitoring in high-trust countries are not exploited by the firms’ managers. Although low voter turnout and high approval rates for management proposals have been shown to decrease future stock performance, this negative effect is neutralised in high-trust countries. Hence, in high-trust countries it might be optimal for shareholders to trust management and reduce monitoring.<br />
<br />
<i>This post was originally published on the webpages of the <a href="http://ecgi.global/news/trust-and-shareholder-voting" target="_blank">European Corporate Governance Institute</a>.</i><br />
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<span style="-webkit-text-stroke-width: 0px; background-color: transparent; color: black; display: inline !important; float: none; font-family: Times New Roman; font-size: 16px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">The internet appendix for the paper entitled "Trust and Shareholder Voting" is available from <a href="https://www.profmarcgoergen.com/2018/07/trust-and-shareholder-voting.html" target="_blank">here</a></span><span style="-webkit-text-stroke-width: 0px; background-color: transparent; color: black; display: inline !important; float: none; font-family: Times New Roman; font-size: 16px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">.</span><b></b><i></i><u></u><sub></sub><sup></sup><strike></strike>Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0tag:blogger.com,1999:blog-227682440598978137.post-31131711963340770512018-08-22T20:25:00.001+02:002018-10-27T11:26:43.340+02:00How Acquisition Performance Affects the Market for Non-Executive Directors<div style="background-color: white; border: 0px; box-sizing: border-box; color: #232323; font-family: "times new roman", georgia; font-size: 16px; margin-bottom: 1.5em; outline: 0px; padding: 0px; position: relative; vertical-align: baseline;">
In the United Kingdom, successive codes of best practice in corporate governance have highlighted the important role of outside or non-executive directors in ensuring that corporations are run for the benefit of their shareholders. While the first code of best practice, the 1992 Cadbury Report, recommended that there should be a sufficient number of non-executives on the board, the 2003 Higgs Report was much more prescriptive, recommending that there should be a majority of non-executives on the board (excluding the chairman). Similarly, U.S. regulation has been emphasizing the important role of independent or non-executive directors. More specifically, the NYSE and NASDAQ listing rules require companies to have a majority of independent directors.</div>
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Despite many national regulators pushing for greater non-executive presence on boards, there are few academic studies finding evidence that a greater proportion of non-executives improve firm performance or value. Indeed, most studies do not find any significant impact of non-executives, and at least <a href="https://doi.org/10.2307/2331397" style="border: 0px; box-sizing: border-box; color: #0069aa; font-family: inherit; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; position: relative; text-decoration-line: none; vertical-align: baseline;" target="_blank">one study</a> even finds a negative effect.</div>
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Does this mean that non-executive directors do not matter, that the efforts of regulators have been misguided? One strand of research, which has found that non-executive directors have value, has been studying the labor market for directors. Eugene Fama and Michael Jensen were the first to point out the role of this market in giving directors incentives to create shareholder value. The question that arises is whether this market rewards directors perceived as doing a good job with more future board positions and penalizes those perceived as doing a bad job with fewer board positions. The earliest such studies have focused on <em style="border: 0px; box-sizing: border-box; font-family: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; position: relative; vertical-align: baseline;">executive</em> directors rather than non-executives. Typically, these studies have found that directors, who performed well during their executive careers, end up holding more non-executive directorships. There is also evidence of the disciplinary role of this market, as executives who cut their firm’s dividend are penalized by holding fewer non-executive board seats.</div>
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What about the market for <em style="border: 0px; box-sizing: border-box; font-family: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; position: relative; vertical-align: baseline;">non-executive</em> directors? Evidence suggests that the labour market rewards non-executives who are good monitors, as evidenced by their willingness to fire badly performing CEOs. In turn, they are punished for being ineffective monitors, as evidenced by the few board seats they hold if their firms have been sued for financial fraud. Nevertheless, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2200552" style="border: 0px; box-sizing: border-box; color: #0069aa; font-family: inherit; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; position: relative; text-decoration-line: none; vertical-align: baseline;" target="_blank">a recent study by Steven Davidoff</a> and colleagues on the effects of the 2008 subprime mortgage crisis does not find any evidence that the labor market punished non-executive directors of badly performing financial institutions.</div>
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<a href="https://doi.org/10.1111/1467-8551.12290" target="_blank">Our study</a> focuses on UK firms making acquisition decisions as we are interested in ascertaining how the quality of such decisions affects the future careers of the non-executives involved. Acquisitions are not only one of the most important strategic decisions made by boards, but also represent a discrete event allowing shareholders to assess their wealth effects. We study UK firms that completed at least one acquisition between 1994 and 2010. We focus on UK firms for a number of reasons. First, and as discussed above, during our period of study successive codes of best practice put more emphasis on the monitoring role of non-executives in corporate governance, resulting in a greater percentage of such directors on boards. Second, these successive codes of best practice also discouraged CEO-chair duality, recommending that the roles of the CEO and the chair of the board of directors should be assumed by two separate individuals. This results in a clear delineation between the roles of executives and non-executives in the boardroom. Finally, in contrast to the U.S., where the majority of firms have staggered boards restricting shareholders from removing certain directors at a given time, there are no such restrictions concerning UK boards.</div>
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We follow our firms for five years after the acquisition has been completed. Hence, our research period effectively ends in 2015. We investigate whether the post-acquisition performance of the acquirers affects the future career of the non-executives in place during the year of the acquisition. More specifically, we study whether post-acquisition performance of the acquirers affects the number of board seats that the non-executives hold five years after the completion of the acquisitions. We use a number of performance measures, including accounting performance, market performance and dividend payout.</div>
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We do not find that post-acquisition accounting and market-based performance have any effect on the number of board seats held by the non-executives on the board of the acquirer. We do, however, find that dividend cuts and omissions reduce the number of board seats the non-executive holds, and dividend increases augment that number. How can we explain our findings that the post-acquisition dividends affect the careers of the non-executives, whereas other measures of performance do not? First, dividends are more tangible for most investors, as they are associated with cash in hand whereas capital gains, for example, are only realized once a stock has been sold. Second, as James Lintner’s interviews with managers in the 1950s suggest, managers are very reluctant to change the dividend. Hence, any such change is likely to be much more salient than changes to other performance measures. Finally, shareholders do not value dividends only because they are a regular source of cash, but also because they address Michael Jensen’s free cash flow problem by reducing retained profits and by forcing firms to return to the stock market more often for financing, thereby subjecting themselves to the regular scrutiny of the capital markets. We also show that acquirers pay out the extra value created by the acquisitions to their shareholders via increased dividends. Bad acquisitions, which are associated with negative stock market performance, result in dividend cuts, or even omitted dividends, five years after the acquisition. Finally, we show that a bad acquisition is unlikely to have an immediate, detrimental effect on performance, as its effect on a non-executive’s career is gradual. Hence, our study suggests that dividends matter and should be accounted for when exploring the impact of post-acquisition performance on the future careers of non-executive directors.</div>
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<i>Our study is available for free (open access) from the website of the <a href="https://doi.org/10.1111/1467-8551.12290" target="_blank">British Journal of Management</a>.</i><br />
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<i>Originally posted on the <a href="http://clsbluesky.law.columbia.edu/2018/04/04/how-acquisition-performance-affects-the-market-for-non-executive-directors/" target="_blank">Columbia Law School Blue Sky Blog</a>. The paper is available for free from the <a href="https://onlinelibrary.wiley.com/doi/10.1111/1467-8551.12290" target="_blank">British Journal of Management</a>.</i></div>
Prof. Marc Goergenhttp://www.blogger.com/profile/02005555505153470706noreply@blogger.com0