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New research on governance from Harvard Business School faculty on issues including governance policy, Boards and other governing institutions and the influence of shareholders and government regulators.
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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; Comment(s) posted.

Comments on Macri's Macro by Federico Sturzenegger

by Rafael Di Tella

Rafael Di Tella analyzes a paper by Federico Sturzenegger, the Governor of the Central Bank of Argentina under President Mauricio Macri, detailing the country’s efforts to stabilize the economy following 12 years of a populist administration.

The Impact of Regulation on Strategic Positioning: Self-Regulation in the RTE Cereal Industry

by Young Hou and Dennis Yao

Regulations often change the competitive environment firms operate in by inducing product repositioning. This study examines the responses and performance impacts resulting from industry self-regulation to improve the nutritional content of children’s cereals. Dynamic links between product positioning and product brand equity resources are explored.

Should a Pension Fund Try to Change the World?

Re: Rebecca M. Henderson, 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; Comment(s) posted.

Does Facebook's Business Model Threaten Our Elections?

by George Riedel

America's 2016 presidential election was the target of voter manipulation via social media, particularly on Facebook. George Riedel thinks history is about to repeat itself. Open for comment; Comment(s) posted.

The Gift of Global Talent: Innovation Policy and the Economy

by William R. Kerr

High-skilled workers in today’s knowledge-based economy are arguably the most important resource to the success of businesses, regions, and industries. This chapter pulls from Kerr’s book The Gift of Global Talent to examine the migration dynamics of high-skilled individuals. He argues that improving our knowledge of high-skilled migration can lead to better policy decisions.

If Your Customers Don't Care What You Charge, What Should You Charge?

by Kristen Senz

Consumer inertia is the tendency of some customers to buy a product, even when superior options exist. Alexander J. MacKay discusses how that habit affects competitive strategy and even regulatory oversight. Open for comment; Comment(s) posted.

Political Influence and Merger Antitrust Reviews

by Mihir N. Mehta, Suraj Srinivasan, and Wanli Zhao

This paper uses a large sample of United States mergers between 1998 and 2010 to study how political connections help firms obtain favorable antitrust regulatory outcomes for mergers. Given that antitrust regulators are subject to congressional oversight, the authors predict and find evidence that outcomes systematically favor firms that are constituents of politicians serving on judiciary committees.

Investor Lawsuits Against Auditors Are Falling, and That's Bad News for Capital Markets

by Martha Lagace

It's becoming more difficult for investors to sue corporate auditors. The result? A weakening of trust in US capital markets, says Suraj Srinivasan. Open for comment; Comment(s) posted.

Forgiving Student Loan Debt Leads to Better Jobs, Stronger Consumers

by Dina Gerdeman

Without the burden of student loan debt, people seek higher-paying careers, stabilize their finances, and contribute to the economy, says Marco Di Maggio. Open for comment; Comment(s) posted.

rTSR: When Do Relative Performance Metrics Capture Relative Performance?

by Paul Ma, Jee-Eun Shin, and Charles C. Y. Wang

Managers are increasingly evaluated based on relative performance metrics, particularly relative total shareholder returns (rTSR). This paper finds that the majority of firms that tie CEO performance-based contracts to rTSR do a remarkable job of filtering out the systematic risk in TSR. However, a significant portion of firms make relatively poor choices in the design and selection of rTSR, a result of weak governance and an overreliance on compensation consultants.

Ethics Bots and Other Ways to Move Your Code of Business Conduct Beyond Puffery

by Michael Blanding

Digital technologies such as artificial intelligence and robotics allow companies to create more effective codes of business conduct, says Eugene Soltes. But technology isn't the only solution. Open for comment; Comment(s) posted.

The Unexpected Way Whistleblowers Reduce Government Fraud

by Kristen Senz

Even unfounded allegations by whistleblowers can force government contractors to renegotiate their terms, say Jonas Heese and Gerardo Perez Cavazos. Open for comment; Comment(s) posted.

The Changing Landscape of Auditor Litigation and Its Implications for Audit Quality

by Colleen Honigsberg, Shivaram Rajgopal, and Suraj Srinivasan

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.

Bank Boards: What Has Changed Since the Financial Crisis?

by Shiva Rajgopal, Suraj Srinivasan, and Forester Wong

Since the 2008 financial crisis, bank boards have not improved their cultural or gender diversity compared to other companies, nor are they better qualified than before the crisis. Outside directorships of bank directors and the extent of CEOs also being Chairman also remains the same. However, there is some evidence of better risk oversight both from managers and the board.

The 'Amazon Effect' Is Changing Online Price Competition—and the Fed Needs to Pay Attention

by Roberta Holland

Amazon's power in the retail sector puts price pressure on what competitors charge, with implications for how federal regulators govern inflation, says Alberto F. Cavallo. Open for comment; Comment(s) posted.

Can Mark Zuckerberg Rebuild Trust in Facebook?

Bill George discusses his case study, "Facebook Confronts a Crisis of Trust," including why Zuckerberg handled the crisis as he did, the role of companies in protecting privacy, and the pros and cons of regulation. Open for comment; Comment(s) posted.

Fintech's Game-Changing Opportunities for Small Business

by Martha Lagace

In the new book Fintech, Small Business, & the American Dream, Karen Mills describes how technology is opening up new capital for entrepreneurs. Around the corner: The transformative benefits of AI and big data. Open for comment; Comment(s) posted.

Managed Ecosystems and Translucent Institutional Logics: Engaging Communities

by Elizabeth J. Altman, Frank Nagle, and Michael Tushman

Organizations increasingly rely on engagement with external communities of contributors. This paper explores transitions to a managed-ecosystem governance mode and its implications for strategy and innovation. To be successful, firms must develop the capabilities to shepherd communities, leverage without exploiting them, and share intellectual property rights.