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Corporate GovernanceRemove Corporate Governance →

New research on corporate governance from Harvard Business School faculty on issues including the structure of board committees, the consequences of mandatory corporate sustainability reporting, and a cure of Enron-style audit failures.
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Short-Termism, Shareholder Payouts, and Investment in the EU

by Jesse M. Fried and Charles C.Y. Wang

Shareholder-driven “short-termism,” as evidenced by increasing payouts to shareholders, is said to impede long-term investment in EU public firms. But a deep dive into the data reveals a different story.

The European Commission’s Sustainable Corporate Governance Report: A Critique

by Mark Roe, Holger Spamann, Jesse Fried, and Charles Wang

The European Commission commissioned a report on sustainable corporate governance that purports to find serious problems of corporate short-termism. The report is wholly flawed: it conflates time horizon problems with externality problems, mismeasures investment and its financing, and proposes ineffective, possibly harmful reforms.

Shareholder Activism and Firms’ Voluntary Disclosure of Climate Change Risks

by Caroline Flammer, Michael W. Toffel, and Kala Viswanathan

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.

What Grade Would You Give Walmart CEO Doug McMillon?

by James Heskett

SUMMING UP: James Heskett's readers gave Walmart high marks for its response to gun violence but suggested the company could have been even more proactive. Open for comment; 0 Comments.

Should a Pension Fund Try to Change the World?

Re: Rebecca M. HendersonRe: George Serafeim

Can inclusivity, sustainability, and better governance boost economies? Rebecca Henderson and George Serafeim discuss the impact investing efforts of GPIF, Japan’s government pension fund. Open for comment; 0 Comments.

Everyone Knows Innovation is Essential to Business Success—Except Board Directors

by Michael Blanding

In a recent survey of 5,000 board members, innovation was not ranked high on their list of priorities. What are they not seeing? ask Boris Groysberg and Yo-Jud Cheng. Open for comment; 0 Comments.

What Are the Real Lessons of the Wells Fargo Case?

by James Heskett

SUMMING UP James Heskett's readers identify key failures in Wells Fargo's culture and leadership. Open for comment; 0 Comments.

Op-Ed: In Tackling #MeToo, Don’t Ignore Micro-Insults That Harm Women’s Careers

by Rosabeth Moss Kanter

The #MeToo movement is giving women power to speak out against sexual harassment, but Rosabeth Moss Kanter worries about less visible, but still harmful, "micro-insults" that undermine careers of women. Open for comment; 0 Comments.

Op-Ed: Google Engineer Deserved to be Fired by the CEO

by Bill George

Was Google CEO Sundar Pichai right to fire engineer James Damore after his condemnation of the company's diversity initiatives? Of course, answers Bill George; treating colleagues as gender stereotypes rather than as individuals poisons the workplace. Open for comment; 0 Comments.

Summing Up: What Are the Limits of CEO Activism?

by James Heskett

Do CEOs have a responsibility to speak out when they encounter social injustice? James Heskett's readers offer a variety of viewpoints. Open for comment; 0 Comments.

Governance Through Shame and Aspiration: Index Creation and Corporate Behavior in Japan

by Akash Chattopadhyay, Matthew D. Shaffer, and Charles C.Y. Wang

By exploiting the unique features of Japan’s JPX-Nikkei 400 index, this paper examines how membership in a stock index serves as a source of prestige that can motivate managers and influence corporate governance norms. Findings are important for understanding non-pecuniary mechanisms to induce meaningful changes in corporate behavior.

Stock Price Synchronicity and Material Sustainability Information

by Jody Grewal, Clarissa Hauptmann, and George Serafeim

This paper seeks to understand and provide evidence on the characteristics of emerging accounting standards for sustainability information. Given that a large number of institutional investors seek sustainability data and have committed to using it, it is increasingly important to develop a robust accounting infrastructure for the reporting of such information.

Should Management Be Primarily Responsible to Shareholders?

by James Heskett

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.

The Structure of Board Committees

by Kevin D. Chen and Andy Wu

Despite the central role of boards in corporate governance, there has been relatively little understanding of their internal organization, specifically the structure of board committees. Using a dataset of over 6,000 firms, the authors find that committee activity, especially the number of committees, has been stable over time. Most of the familiar non-required board committees are rarely used. The majority of directors sit on multiple committees. The benefits and costs of a committee depend on its type. Overall, committees need to be more integrated into our understanding of corporate governance.

Retail Execs Underplay Current Performance to Investors--but Why?

by Dina Gerdeman

In quarterly earnings calls with investors and analysts, some retail managers may underplay how their companies are actually performing, according to recent research by Kenneth Froot and colleagues. Open for comment; 0 Comments.

Who Pays for White-Collar Crime?

by Paul Healy and George Serafeim

Punishments of white-collar crime are systematically related to perpetrator, transaction, and company characteristics. This variation is consistent with executives determining appropriate punishments by an economic analysis of costs and benefits. Even so, senior male executives receive lighter punishments than female peers, for example. These and other variations suggest that not all decisions about punishment are taken with shareholders’ interests in mind: The self-interest of host company executives is also an important consideration.

How Activist Investors Became Respectable

by Joseph Fuller

Once reviled as villains operating on the fringes of the market, activist investors like Carl Icahn are now powerful forces at work in the mainstream of business, says Professor Joseph Fuller. And their influence is only growing. Open for comment; 0 Comments.

What Are the Limits of Transparency?

by James Heskett

Summing Up: What's the proper balance in an organization between transparency and opaqueness? Many of Jim Heskett's readers would err on the side of management forthrightness. Closed for comment; 0 Comments.

The Consequences of Mandatory Corporate Sustainability Reporting

by Ioannis Ioannou & George Serafeim

The number of firms reporting sustainability information has grown significantly in the past decade, both due to voluntary actions and to mandates from several national governments and stock exchange authorities. In this paper, London Business School's Ioannis Ioannou and Harvard Business School's George Serafeim investigate whether mandatory sustainability reporting has any effect on a company's tendency to engage in socially responsible management practices. Key concepts include: The researchers show that mandatory sustainability reporting effectively promotes socially responsible managerial practices. Overall, supervision of managers by boards of directors improves, bribery and corruption decreases, and credibility of managers in society increases. In companies where sustainability reporting is a requirement, employee training becomes a higher priority, and corporate boards supervise management more effectively. These positive results are more pronounced in countries that have stronger law enforcement, countries where assurance of sustainability data is more frequent, and countries that are generally more developed. Closed for comment; 0 Comments.

Building a Better Board

by Carmen Nobel

While corporate board members take their jobs more seriously than ever, they are not necessarily as helpful or effective as they could be, says HBS senior lecturer Stephen Kaufman. He recently sat down with HBS Working Knowledge to discuss what he considers to be the biggest practical issues facing boards today. Key concepts include: Board directors may not give an honest assessment of the company because they fear reprisal from the CEO or the other board members. In accurately evaluating a CEO's performance, board members must get feedback from other employees at the company, who possess insight into day-to-day operations that the directors do not. Closed for comment; 0 Comments.