Board evaluations are taking place in The Netherlands, but the goals, possibilities and results are yet unclear. This is the main motive for this research. Board evaluations are a relatively new phenomenon, which is why this research has an explorative character. My first goal is to describe what the opinions of board members, external facilitators, experts and scientists are of the goals, possibilities, results and methods of board evaluations, optionally with an external facilitator. My second goal is to look at the (added) value and practical take-out of board evaluations for De Nederlandsche Bank as financial supervisor.
{"title":"Board Evaluations in Practice","authors":"Margriet Stavast-Groothuis","doi":"10.2139/ssrn.2579637","DOIUrl":"https://doi.org/10.2139/ssrn.2579637","url":null,"abstract":"Board evaluations are taking place in The Netherlands, but the goals, possibilities and results are yet unclear. This is the main motive for this research. Board evaluations are a relatively new phenomenon, which is why this research has an explorative character. My first goal is to describe what the opinions of board members, external facilitators, experts and scientists are of the goals, possibilities, results and methods of board evaluations, optionally with an external facilitator. My second goal is to look at the (added) value and practical take-out of board evaluations for De Nederlandsche Bank as financial supervisor.","PeriodicalId":256682,"journal":{"name":"CGN: Board Decision-Making (Topic)","volume":"327 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-04-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133095684","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The paper discusses the idea that an institutionalized and effective board induction and training process could maximize the director’s contribution and thus improve board effectiveness in banks, especially if training and induction are done in a board that respects good practices with regards to board independence, board diversity, presence of board committees, degree of directors’ turnover, recommended by regulators and institutions. In the wake of the recent financial crisis, in fact, a growing “professionalisation” of directors may be considered as a tool to improve the board effectiveness in banks. Contrary to the relevance of the topic, the available literature is very poor. Using the qualitative research methods, the paper shows, first of all, the state of the art on board induction and training programs for directors in the 25 largest European banks and, then, the results of a survey about the opinions of an Italian panel on the topic. Findings confirm that induction and training programs for directors are a fundamental tool to improve the effectiveness of corporate governance. However there is a substantially limited dissemination of these practices in banks and, in those cases where these practices are used more extensively, it is possible to spot some areas of improvement compared to best practices. Overall, the most disappointing results, in terms of the dissemination of induction and training programs for directors, emerge from the interviews carried out on the Italian panel. Based on the results, some motivation and managerial implications are proposed.
{"title":"Enhancing Board Effectiveness: What About Induction and Training Programs for Directors?","authors":"Paola Schwizer, Rosalba Casiraghi, Valeria Stefanelli","doi":"10.2139/ssrn.1793277","DOIUrl":"https://doi.org/10.2139/ssrn.1793277","url":null,"abstract":"The paper discusses the idea that an institutionalized and effective board induction and training process could maximize the director’s contribution and thus improve board effectiveness in banks, especially if training and induction are done in a board that respects good practices with regards to board independence, board diversity, presence of board committees, degree of directors’ turnover, recommended by regulators and institutions. In the wake of the recent financial crisis, in fact, a growing “professionalisation” of directors may be considered as a tool to improve the board effectiveness in banks. Contrary to the relevance of the topic, the available literature is very poor. Using the qualitative research methods, the paper shows, first of all, the state of the art on board induction and training programs for directors in the 25 largest European banks and, then, the results of a survey about the opinions of an Italian panel on the topic. Findings confirm that induction and training programs for directors are a fundamental tool to improve the effectiveness of corporate governance. However there is a substantially limited dissemination of these practices in banks and, in those cases where these practices are used more extensively, it is possible to spot some areas of improvement compared to best practices. Overall, the most disappointing results, in terms of the dissemination of induction and training programs for directors, emerge from the interviews carried out on the Italian panel. Based on the results, some motivation and managerial implications are proposed.","PeriodicalId":256682,"journal":{"name":"CGN: Board Decision-Making (Topic)","volume":"51 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-03-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123353905","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2011-03-22DOI: 10.1515/9783899496321.1521
J. Winter
Modern remuneration systems for executive directors include substantial elements of performance based pay. The idea behind this is that by rewarding executives for performance their interests become aligned with those of the company’s shareholders, thus bridging the principal-agent gap. Executive remuneration through performance based pay has become an explicit corporate governance tool that is supposed to improve the governance of companies. Others have argued that the governance and design of performance based pay system is often poor, as result of which the principal-agent problem actually increases. This paper argues that even if we can improve the governance and design of executive performance based pay, it cannot be made to work because people behave differently than performance based pay assumes. Research revealing our bounded rationality, bounded awareness and bounded ethicality shows that we simply cannot handle executive performance based pay. Regulation will not solve the problem, what is needed is a paradigm change, a refocusing of attention by shareholders, non-executive and executive directors. Such a paradigm change requires a deconstruction of the current myths surrounding performance based pay and the creation of new remuneration narratives.
{"title":"Corporate Governance Going Astray: Executive Remuneration Built to Fail","authors":"J. Winter","doi":"10.1515/9783899496321.1521","DOIUrl":"https://doi.org/10.1515/9783899496321.1521","url":null,"abstract":"Modern remuneration systems for executive directors include substantial elements of performance based pay. The idea behind this is that by rewarding executives for performance their interests become aligned with those of the company’s shareholders, thus bridging the principal-agent gap. Executive remuneration through performance based pay has become an explicit corporate governance tool that is supposed to improve the governance of companies. Others have argued that the governance and design of performance based pay system is often poor, as result of which the principal-agent problem actually increases. This paper argues that even if we can improve the governance and design of executive performance based pay, it cannot be made to work because people behave differently than performance based pay assumes. Research revealing our bounded rationality, bounded awareness and bounded ethicality shows that we simply cannot handle executive performance based pay. Regulation will not solve the problem, what is needed is a paradigm change, a refocusing of attention by shareholders, non-executive and executive directors. Such a paradigm change requires a deconstruction of the current myths surrounding performance based pay and the creation of new remuneration narratives.","PeriodicalId":256682,"journal":{"name":"CGN: Board Decision-Making (Topic)","volume":"72 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-03-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134608857","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Motivated by agency theory, this study investigates how staggered boards influence accounting discretion. The results indicate that staggered boards do affect accounting discretion. In fact, the impact of staggered boards on accounting discretion is substantially larger (about seven times stronger) than the effect of all other corporate governance provisions combined. Firms with a staggered board exercise less income inflating accounting discretion. Further evidence reveals that accounting discretion has a benign effect on subsequent firm value. Yet, the presence of staggered boards reduces significantly the favourable effect of accounting discretion on subsequent firm performance. The evidence is robust to a large number of control variables including other governance provisions. The evidence is in line with the notion that staggered boards improve managers' job security, reduce managerial myopia, and thus induce managers to exercise less short-term transitory accounting discretion.
{"title":"Staggered Boards, Accounting Discretion, and Firm Value","authors":"P. Jiraporn, Yixin Liu","doi":"10.2139/ssrn.1684676","DOIUrl":"https://doi.org/10.2139/ssrn.1684676","url":null,"abstract":"Motivated by agency theory, this study investigates how staggered boards influence accounting discretion. The results indicate that staggered boards do affect accounting discretion. In fact, the impact of staggered boards on accounting discretion is substantially larger (about seven times stronger) than the effect of all other corporate governance provisions combined. Firms with a staggered board exercise less income inflating accounting discretion. Further evidence reveals that accounting discretion has a benign effect on subsequent firm value. Yet, the presence of staggered boards reduces significantly the favourable effect of accounting discretion on subsequent firm performance. The evidence is robust to a large number of control variables including other governance provisions. The evidence is in line with the notion that staggered boards improve managers' job security, reduce managerial myopia, and thus induce managers to exercise less short-term transitory accounting discretion.","PeriodicalId":256682,"journal":{"name":"CGN: Board Decision-Making (Topic)","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-09-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115210009","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper compares the competitiveness and resilience of firms governed by a single board that were considered “too big to fail” in 2008 with firms governed by a network of boards. Network governance introduces a division of power, checks and balances with stakeholder engagement. Hierarchical firms and/or regulators governed by a unitary board can deny the reliable identification, communication, analysis and mitigation of operating problems and risks. These problems increase with the size of the organization and are exacerbated by information overload on senior managers, directors and/or regulators. The 2008 financial problems were anticipated by some employees and external commentators. However, stakeholders exposed to risks possessed insufficient influence in either governing and/or regulating firms to take corrective action. Empirical evidence reveals that the resilience of network governed organizations arises from distributed intelligence, decision-making and controls that facilitate the mitigation of risks while providing competitive and/or operating advantages. The paper concludes that it is imprudent for regulators to allow financial firms that are excessively large and/or with excessively complex operations to exist without network governance or for any such non-financial firms to be publicly traded.
{"title":"Can Network Governance Reduce Risks for Financial Firms Too Big to Fail?","authors":"S. Turnbull, M. Pirson","doi":"10.2139/ssrn.1533920","DOIUrl":"https://doi.org/10.2139/ssrn.1533920","url":null,"abstract":"This paper compares the competitiveness and resilience of firms governed by a single board that were considered “too big to fail” in 2008 with firms governed by a network of boards. Network governance introduces a division of power, checks and balances with stakeholder engagement. Hierarchical firms and/or regulators governed by a unitary board can deny the reliable identification, communication, analysis and mitigation of operating problems and risks. These problems increase with the size of the organization and are exacerbated by information overload on senior managers, directors and/or regulators. The 2008 financial problems were anticipated by some employees and external commentators. However, stakeholders exposed to risks possessed insufficient influence in either governing and/or regulating firms to take corrective action. Empirical evidence reveals that the resilience of network governed organizations arises from distributed intelligence, decision-making and controls that facilitate the mitigation of risks while providing competitive and/or operating advantages. The paper concludes that it is imprudent for regulators to allow financial firms that are excessively large and/or with excessively complex operations to exist without network governance or for any such non-financial firms to be publicly traded.","PeriodicalId":256682,"journal":{"name":"CGN: Board Decision-Making (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-01-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131004301","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Microfinance organizations provide financial services to low income people. These organizations have been increasing dramatically worldwide. This increment calls attention for these organizations and their boards to make strategic decisions which enable them perform well and compete with each other. Based on literature, this paper identifies six types of microfinance stakeholders who sit on boards. These are clients, employees, government, donors, creditors and owners. The paper discusses different roles of these stakeholders when they sit on boards of Microfinance Organizations. These roles are further explained to show how they contribute to the process of making strategic decisions. Literature on boards, strategic decision making and stakeholder theory are used as the guidance in showing how micro finance stakeholders on boards can be advantageous to these organizations, specifically in strategic decision making. Practical implications, propositions and areas for future research on stakeholders and strategic decisions in Microfinance organizations are identified and encouraged.
{"title":"Roles Of Stakeholders In Strategic Decision-Making Of Microfinance Organizations","authors":"N. Mori","doi":"10.2139/ssrn.1535970","DOIUrl":"https://doi.org/10.2139/ssrn.1535970","url":null,"abstract":"Microfinance organizations provide financial services to low income people. These organizations have been increasing dramatically worldwide. This increment calls attention for these organizations and their boards to make strategic decisions which enable them perform well and compete with each other. Based on literature, this paper identifies six types of microfinance stakeholders who sit on boards. These are clients, employees, government, donors, creditors and owners. The paper discusses different roles of these stakeholders when they sit on boards of Microfinance Organizations. These roles are further explained to show how they contribute to the process of making strategic decisions. Literature on boards, strategic decision making and stakeholder theory are used as the guidance in showing how micro finance stakeholders on boards can be advantageous to these organizations, specifically in strategic decision making. Practical implications, propositions and areas for future research on stakeholders and strategic decisions in Microfinance organizations are identified and encouraged.","PeriodicalId":256682,"journal":{"name":"CGN: Board Decision-Making (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134167453","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Good corporate governance is an important pillar of the market economy and it enhances investor confidence. A strong and balanced board of directors is necessary as a supervising body for the executive management of a company with dispersed ownership. The Ethiopian company law does not have adequate legislative provisions on governance issues related to the separation of supervision and management responsibilities, and on the composition, independence and remuneration of board of directors in share companies. Besides, the draft Commercial Code has not yet been finalized. This article critically examines Ethiopia’s company law with specific reference to the powers, composition and remuneration of board of directors in light of internationally recognized best practices and principles of corporate governance. It argues that there is a need to distinguish between corporate governance and corporate management in Ethiopian company law, and that the board should be suitably composed of non-executive and truly independent members who should be professionally competent. Furthermore, directors’ remuneration should be incentive-oriented based on company and individual best performance, subject to the caveat against excessive amounts of remuneration that go beyond the achievement of this purpose.
{"title":"Overview of Corporate Governance in Ethiopia: The Role, Composition and Remuneration of Boards of Directors in Share Companies","authors":"H. Tura","doi":"10.4314/MLR.V6I1.2","DOIUrl":"https://doi.org/10.4314/MLR.V6I1.2","url":null,"abstract":"Good corporate governance is an important pillar of the market economy and it enhances investor confidence. A strong and balanced board of directors is necessary as a supervising body for the executive management of a company with dispersed ownership. The Ethiopian company law does not have adequate legislative provisions on governance issues related to the separation of supervision and management responsibilities, and on the composition, independence and remuneration of board of directors in share companies. Besides, the draft Commercial Code has not yet been finalized. This article critically examines Ethiopia’s company law with specific reference to the powers, composition and remuneration of board of directors in light of internationally recognized best practices and principles of corporate governance. It argues that there is a need to distinguish between corporate governance and corporate management in Ethiopian company law, and that the board should be suitably composed of non-executive and truly independent members who should be professionally competent. Furthermore, directors’ remuneration should be incentive-oriented based on company and individual best performance, subject to the caveat against excessive amounts of remuneration that go beyond the achievement of this purpose.","PeriodicalId":256682,"journal":{"name":"CGN: Board Decision-Making (Topic)","volume":"2014 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128063166","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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