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New research on governing and advisory boards from Harvard Business School faculty on issues including how directors make strategic disclosure choices about their past and current experience, why committees need to be more integrated into our understanding of corporate governance, and the real duty of the Board of Directors.
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Firing McDonald’s Easterbrook: What Could the Board Have Done Differently?

by James Heskett

Letting a senior leader go is one of the biggest—and most fraught—decisions for a corporate board. Consider the recent CEO scandal and legal wrangling at McDonald's, says James Heskett. Open for comment; 0 Comments.

Nonprofit Boards: It is Time to Lift Your Gaze and See the System

by Shamal Dass, Kristy Muir, and V. Kasturi Rangan

Not every organization should attempt to solve problems at a system level, but can become more aware of systemic issues, ensuring that solutions dovetail into the macrosystem for best collective impact.

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.

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.

Are There Conditions Under Which Directors Should Consider Hiring a CEO Fired Elsewhere for Inappropriate Behavior?

by James Heskett

SUMMING UP: Executives fired fairly or unfairly over worker violence and harassment charges are about to seek new jobs. James Heskett's readers have widely divergent beliefs about whether they should ever be considered for new posts. 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.

Managing Reputation: Evidence from Biographies of Corporate Directors

by Ian D. Gow, Aida Sijamic Wahid, and Gwen Yu

A biography is part of a proxy statement summarizing a director’s past experience. For this study the authors analyzed almost 160,000 biographies of 12,895 directors to see how directors appear to make strategic disclosure choices about their past and current experience in biographies. Directors are less likely to disclose past and current directorships at firms that experienced adverse events such as accounting restatements, securities litigation, or bankruptcy. Directors who withhold information about adverse-event directorships experience a more favorable stock price reactions at appointment and lose fewer current directorships in the two years after the filing relative to the directors who disclose. However, there is no evidence that non-disclosure leads to different shareholder voting outcomes.

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.

Who Really Determines CEO Salary Packages?

by Carmen Nobel

Every CEO is different, as is every company. So why does one executive compensation package tend to look just like another? The answer lies in the prevalence of interlocking directorates and the use of compensation consultants, according to research by Susanna Gallani. Open for comment; 0 Comments.

The Real Duty of the Board of Directors

by Robert G. Eccles & Tim Youmans

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.

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.

Excessive Executive Pay: What’s the Solution?

by Roger Thompson

Now that the worst fears about economic meltdown are receding, what should be done about lingering issues such as over-the-top executive compensation? Does government have a role? Is it time we rethink corporate governance? HBS faculty weigh in. From the HBS Alumni Bulletin. Key concepts include: With White House support, congressional leaders are intent on shifting the balance of power in the boardroom away from management. Skeptics say more than two decades of well-meaning attempts to constrain ever-soaring corporate pay and to reform governance through legislation, regulation, and shareholder pressure have, for the most part, failed or even backfired. According to Professor Brian Hall, it is not a given that executive pay practices had a role in creating the financial crisis. Director independence on boards is a mixed blessing. Independence has a downside when directors don't understand the business, says Professor Jay Lorsch. We need to rethink corporate governance structure in fundamental ways for the 21st century, according to Professor Rakesh Khurana. Closed for comment; 0 Comments.

Mapping Your Board’s Effectiveness

by Robert S. Kaplan

To be effective, board members must understand their company’s strategy. Professor Robert S. Kaplan offers methods for using the Balanced Scorecard and strategy maps to increase board power. From Strategy & Innovation. Closed for comment; 0 Comments.

A Cure for Enron-Style Audit Failures

by Jay Lorsch

In an opinion piece in the Financial Times, Harvard Business School professor Jay Lorsch argues for legislation to create an independent, self-regulatory organization to oversee accounting firms. Enron, he says, is not an isolated incident. Closed for comment; 0 Comments.