Business and Shareholder Relations
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- 23 Mar 2023
- Research & Ideas
As Climate Fears Mount, More Investors Turn to 'ESG' Funds Despite Few Rules
Regulations and ratings remain murky, but that's not deterring climate-conscious investors from paying more for funds with an ESG label. Research by Mark Egan and Malcolm Baker sizes up the premium these funds command. Is it time for more standards in impact investing?
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- 16 Feb 2023
- HBS Case
ESG Activists Met the Moment at ExxonMobil, But Did They Succeed?
Engine No. 1, a small hedge fund on a mission to confront climate change, managed to do the impossible: Get dissident members on ExxonMobil's board. But lasting social impact has proved more elusive. Case studies by Mark Kramer, Shawn Cole, and Vikram Gandhi look at the complexities of shareholder activism.
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- 13 Nov 2019
- Working Paper Summaries
Shareholder Activism and Firms’ Voluntary Disclosure of Climate Change Risks
Shareholder resolutions typically fail, and often by a wide margin. So why do active investors bother? It turns out that resolutions nonetheless can influence corporate transparency. Specifically, after being targeted with shareholder resolutions on environmental topics, this research shows that companies are more likely to publicly disclose their climate change risks—and that such disclosure increases these companies’ valuation.
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- 27 May 2019
- Working Paper Summaries
Voting Trusts and Antitrust: Rethinking the Role of Shareholder Rights and Private Litigation in Public Regulation, 1880s to 1930s
Historically, judges were reluctant to intervene in corporations’ internal affairs and displayed a particular wariness of shareholders’ derivative suits. By the end of the 19th century, however, they had begun to revise their views and to see shareholders’ private actions as useful checks on economic concentration.
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- 13 May 2019
- Working Paper Summaries
The Changing Landscape of Auditor Litigation and Its Implications for Audit Quality
Data from 1996 to 2016 shows that shareholder litigation against auditors has declined in recent years. Empirical evidence shows that Rule 10b-5, the Securities Act statute used for class action lawsuits, has lost its bite for use against auditors. This decline is driven, at least in part, by the US Supreme Court’s narrowing of liability standards. These findings suggest weakened shareholder protection with profound implications for investors.
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- 23 Apr 2018
- Research & Ideas
Sponsorship Programs Could Actually Widen the Gender Gap
Companies increasingly provide sponsors to help women get ahead. But certain aspects of sponsorship programs can hinder women instead, according to experimental research by Nancy R. Baldiga and Katherine B. Coffman. Open for comment; 0 Comments.
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- 12 Mar 2018
- Op-Ed
Op-Ed: Why BlackRock CEO Larry Fink Is Not a Socialist
BlackRock CEO Larry Fink’s open letter to CEOs has reignited the “shareholders versus stakeholders” debate. Bill George says it's actually not much of a debate: mission-driven, values-centered companies perform better. Open for comment; 0 Comments.
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- 11 Oct 2017
- Research & Ideas
The House Wants to Squelch Voices of ‘Small’ Shareholders. Research Shows Those Voices Matter.
Company management frequently seeks to exclude investor proposals even though some ultimately win shareholder support, according to new research by Eugene F. Soltes, Suraj Srinivasan, and Rajesh Vijayaraghavan. Open for comment; 0 Comments.
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- 28 Aug 2017
- Research & Ideas
Should Industry Competitors Cooperate More to Solve World Problems?
George Serafeim has a theory that if industry competitors collaborated more, big world problems could start to be addressed. Is that even possible in a market economy? Open for comment; 0 Comments.
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- 17 Jul 2017
- Working Paper Summaries
The Relevance of Broker Networks for Information Diffusion in the Stock Market
How information is generated by market participants, shared, and incorporated into prices is one of the key questions for understanding how financial markets operate. This study finds that intermediaries play a large role in the acquisition and dissemination of private information, which they extract from order flow and, more generally, from interaction with clients.
- 09 May 2017
- What Do You Think?
Should Management Be Primarily Responsible to Shareholders?
SUMMING UP Opinions among James Heskett's readers are divided over a critical corporate governance question: Should management put the shorter-term interests of shareholders over the longer-term needs of the company? Open for comment; 0 Comments.
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- 08 Nov 2016
- Working Paper Summaries
Managers' Cultural Background and Disclosure Attributes
How does the cultural background of executives affect the way in which they communicate with investors? This paper examines the impact of cultural backgrounds of individual managers based on their ethnic heritage on their disclosure narrative during earnings conference calls. Among the findings, managers from individualistic cultures are likely to use a more positive tone, use greater self-reference, and make fewer apologies in the Q&A portion of the conference calls. The capital market reacts to disclosure style in a predictable way: optimistic tone is associated with a positive stock return following the call. However, market participants do not adjust their interpretation of disclosure tone for firm value based on the cultural background of the management team.
- 07 Nov 2016
- Research & Ideas
Corporate Tax Strategies Mirror Personal Returns of Top Execs
Top executives who are inclined to reduce personal taxes might also benefit shareholders in their companies, concludes research by Gerardo Pérez Cavazos and Andreya M. Silva. Open for comment; 0 Comments.
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- 09 Aug 2016
- Working Paper Summaries
Shareholder Activism on Sustainability Issues
Shareholder proposals on environmental, social, and governance (ESG) topics have more than doubled in the last two decades. Testing the effect that ESG proposals have on firms’ subsequent ESG performance and market valuation, the authors find a considerable portion (42 percent) of ESG proposals to be financially beneficial and associated with subsequent increases in environmental and social performance, too. Managers need to identify significant sustainability issues, based on their industry, wisely because errors could be value-destroying as the authors show declines in financial value for the rest of the sample (58 percent).
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- 20 Jun 2016
- Working Paper Summaries
What Else Do Shareholders Want? Shareholder Proposals Contested by Firm Management
Shareholder proposals are an important way for investors to communicate their demands to a firm’s management and board of directors. Here the authors gain insight into how such proposals can be excluded from a shareholder vote by management appealing to the Securities and Exchange Commission (SEC). Among the findings, firm managements seek to exclude almost half the proposals suggested by shareholders with nearly a quarter ultimately excluded with permission of the SEC.
- 16 Sep 2015
- Op-Ed
The Real Duty of the Board of Directors
Robert G. Eccles and Tim Youmans argue that a board's primary duty is not to the shareholders, but to the corporation itself. Open for comment; 0 Comments.
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- 15 Sep 2015
- Working Paper Summaries
Materiality in Corporate Governance: The Statement of Significant Audiences and Materiality
Contrary to common belief, a board’s duty is to the interests of the corporation itself rather than the particular audience of shareholders. While the board can choose to deem shareholders as the only significant audience, it does not have to do so. The board must decide which audiences are most significant for the ability of the corporation to create value over the short, medium, and long term. Then it can lay the foundation for improved corporate reporting.
The Opioid Crisis, CEO Pay, and Shareholder Activism
In 2020, AmerisourceBergen Corporation, a Fortune 50 company in the drug distribution industry, agreed to settle thousands of lawsuits filed nationwide against the company for its opioid distribution practices, which critics alleged had contributed to the opioid crisis in the US. The $6.6 billion global settlement caused a net loss larger than the cumulative net income earned during the tenure of the company’s CEO, which began in 2011. In addition, AmerisourceBergen’s legal and financial troubles were accompanied by shareholder demands aimed at driving corporate governance changes in companies in the opioid supply chain. Determined to hold the company’s leadership accountable, the shareholders launched a campaign in early 2021 to reject the pay packages of executives. Should the board reduce the executives’ pay, as of means of improving accountability? Or does punishing the AmerisourceBergen executives for paying the settlement ignore the larger issue of a business’s responsibility to society? Harvard Business School professor Suraj Srinivasan discusses executive compensation and shareholder activism in the context of the US opioid crisis in his case, “The Opioid Settlement and Controversy Over CEO Pay at AmerisourceBergen.”