Corporate Governance

Motivations and potential monitoring effects of large shareholders : Table of Contents

Teresa M. Pergola, Daniel A. Verreault — Sat Oct 24 08:00:20 BST 2009

Abstract:
Purpose – The purpose of the paper is to synthesize and evaluate the stream of research that links large shareholders to the production of shared corporate benefits. Design/methodology/approach – The methodology is to review the literature with an emphasis on the development of findings. Findings – The presence of large shareholders is positive only if their incentives are aligned with other owners and they have the power to exert influence. The presence of large shareholders, even those whose interests are aligned with owners, does not always result in stronger governance structures. Research limitations/implications – The research is limited by the existing stream of literature and the completeness of our search process. Practical implications – A synthesis and evaluative summary of the research is presented that may be used by researchers, executives, and board members. Originality/value – From a research viewpoint, effective research designs should incorporate both incentive and power when assessing the monitoring role of large shareholders to aid in the validity and comparability of research results. From a practice viewpoint, managers and board members may use our summary figure to evaluate power relationships and likely reactions to strategic and tactical decisions in their firm's governance structure.

Corporate governance challenges in Poland: evidence from “comply or explain” disclosures : Table of Contents

Kevin Campbell, Magdalena Jerzemowska, Krzysztof Najman — Sat Oct 24 08:00:20 BST 2009

Abstract:
Purpose – The purpose of this paper is to analyse the reasons for non-compliance by Polish listed companies with elements of the Polish code of corporate governance Best Practices in Public Companies 2005. Design/methodology/approach – Based on 250 publicly available compliance statements filed in 2005 by companies listed on the Warsaw Stock Exchange (WSE) content analysis is used to classify the explanations provided for non-compliance with those corporate governance principles that attract high levels of non-compliance. Findings – The data analysis reveals that, despite a high level of overall compliance, three out of 50 code principles attract high levels of non-compliance. These principles concern the independence of supervisory board members, the composition of supervisory board committees and the appointment of auditors. The most contentious principle concerns the independence of supervisory board members, due to the presence of many majority-owned companies on the Warsaw Stock Exchange. Practical implications – The paper sheds light on the operation of the “comply or explain” approach to corporate governance in Poland and provides suggestions for improving the level and quality of compliance with the revised corporate governance code Best Practices for WSE Listed Companies, applicable from 2008 onwards. Originality/value – The paper provides an empirical investigation of the reasons given by Polish companies for non-compliance with the most controversial corporate governance principles. It highlights a tendency for some companies to report compliance that is conditional, suggesting that reported compliance under-represents the true level of compliance. We suggest that establishing a monitoring committee tasked with evaluating the quality of explanations for non-compliance and reducing ambiguities in the wording of code principles will improve the quality of Polish corporate governance in the long term.

University incorporated: implications for professional information security education : Table of Contents

Paul A. Watters — Sat Oct 24 08:00:20 BST 2009

Abstract:
Purpose – The purpose of this paper is to compare and contrast university governance structures with those of commercial providers of information security education. Design/methodology/approach – Policy analysis methods from social research are used. Professional information security education (and certification) is generally provided by commercial training arms of major IT vendors, independent industry groups and universities. While the “for profit” status of commercial training organisations is recognised, the commercial standing of universities is unclear, since they increasingly charge commercial-grade (or higher) fees for professional development, especially at the postgraduate level. The independence from commercial interests is one of the main attractions for students to undertake professional education at universities; however, if universities are becoming commercial, at what point and according to which criteria is the veracity of vendor-supplied training and university education considered equal, or indeed, superior? Findings – This paper briefly reviews the key drivers of university commercialisation, and discusses the implications for postgraduate education in the very sensitive area of information security, in an Australian context, especially where universities directly compete with private sector interests. The key findings are that universities who wish to offer information security programs in competition with private providers will need to adopt corporate-style governance policies and procedures, which include industry representation on boards, and ensuring that academic independence is not compromised by deeper vendor relationships. Originality/value – No other papers have specifically investigated the emerging trends in information security education, in an Australian context, and related these to the necessary changes in governance that will be required for universities to compete on equal terms with corporate providers.

Values-based corporate governance and organization behavior – guidelines from Manusmriti for ethical and social responsibility : Table of Contents

N. Sivakumar — Sat Oct 24 08:00:20 BST 2009

Abstract:
Purpose – The purpose of this paper is to develop a typology of organization behavior based on the guidelines from Manusmriti, an ancient Indian law text. The paper also purports to provide guidelines from the text for values-based corporate governance. Design/methodology/approach – The paper first develops an organizational behavior typology based on Manusmriti. The paper then provides guidelines for various aspects of values-based corporate governance. Findings – The paper finds that the guidelines from Manusmriti are relevant in providing a holistic approach to corporate governance which promotes ethical and social idealism. Practical implications – The paper has practical implications to practitioners of corporate governance in terms of developing structures which promote ethical and socially responsible behavior. Originality/value – The originality of the paper is in deriving guidelines for values-based corporate governance from Manusmriti.

Ten steps to enterprise-wide risk management : Table of Contents

Priscilla Burnaby, Susan Hass — Sat Oct 24 08:00:20 BST 2009

Abstract:
Purpose – The purpose of this paper is to discuss the objectives of enterprise-wide risk management (ERM), the Committee of Sponsoring Organizations (COSO) ERM Framework, and outline a method to implement ERM in organizations. Design/methodology/approach – This paper delineates ten steps organizations can use to develop a viable ERM system for any organization. Findings – It is highly recommended that a high-level risk officer with visible support from senior and board level executives has a separate function to oversee the development of an ERM department. Practical implications – Although the internal audit department has a large role in evaluation and monitoring the ERM system, it is management's responsibility to develop a strong ERM function that ties corporate strategy, the budget, controls, and the entity's performance measurement systems to risk management. Originality/value – The cost to the entity of implementing and maintaining of an ERM system is grossly out-weighed by the results and knowledge gained in evaluating, assessing, and overseeing risk to insure achievement of strategic objectives over the short- and long-term life of the organization.

An examination of the governance practices of Ghanaian media institutions : Table of Contents

Godfred Alufar Bokpin — Sat Oct 24 08:00:20 BST 2009

Abstract:
Purpose – The purpose of this paper is to examine the governance practices of Ghanaian media institutions by comparing the governance practices of public media institutions to that of private media institutions. Design/methodology/approach – The study adopts a comparative case study methodology by comparing the governance structures of public media institutions to that of the private media institutions. This is meant to ascertain whether public media institutions exhibit different or similar governance practices to that of private media institutions. The discussion is done in line with Taylor's nine principles of good governance. Findings – The findings reveal that governance lapses are widespread reflected in board appointment to slate of other procedures that depart from Taylor's principles of good governance. It is also discovered that some of Taylor's principles are not present in the governance structures of these institutions. These raise serious questions about the going concern of these institutions in playing their role as the fourth arm of government in Ghana. Originality/value – This is the first study of its kind in the sector, especially within Sub-Saharan Africa

Corporate governance, social responsibility and capital markets: exploring the institutional investor mental model : Table of Contents

Henry Petersen, Harrie Vredenburg — Sat Oct 24 08:00:20 BST 2009

Abstract:
Purpose – The purpose of this paper is to extend our understanding of corporate governance, social issues and capital markets by distinguishing between the socially responsible investing phenomenon and mainstream investing with respect to social issues. It attempts to clarify the domain by casting it in the theoretical frame of prospect theory and mental modeling. With a qualitative study done among large institutional investors in the Canadian securities industry, the article derives a proposed mental model of these institutional investors' cognitive model of social issues as they impact investments. Findings – The institutional investors in this study know exactly where value is derived from social investments suggesting that there may be more alignment between directors, investors and societal expectations than has been previously suggested. Research limitations/implications – The limited number of organizations in the study reduces the generalizability of the findings. Practical implications – Managers and directors must have an understanding of how shareholder value and responsibilities intersect. In our research, we have found that these executives positioned their firms as leaders on the social responsibility front. Interestingly, their major shareholders also understood how responsibility and shareholder value intersected and as a result, financial performance was not sacrificed. Originality/value – The findings from this research shed light on previous scholars' questions regarding the alignment of interests between managers, directors and social expectations. The firms analyzed make strategic investments that are considered to meet social expectations but that are also perceived to add value to the organization making the firm more attractive to institutional investors.

A specific role for boards in a regulatory framework: the New Zealand banking case : Table of Contents

M.L. McIntyre, David Tripe — Sat Oct 24 08:00:20 BST 2009

Abstract:
Purpose – The purpose of this paper is to present competing theories that argue: that boards of directors of locally incorporated subsidiaries of trans-national entities contribute positively to local operations; and that locally constituted boards are an unnecessary expense and can confound the governance efforts of the trans-national entities' boards of directors. Design/methodology/approach – The relative merits of the competing theories are considered by examining whether a small sample of trans-national entities choose to limit the role of their boards to the local regulator's minimum requirements, or to voluntarily exceed them. Findings – The paper finds that in all cases board construction meets the local regulator's requirements, but in some cases, trans-national entities have chosen to exceed minimum requirements, suggesting that in some cases a well constructed local board can make a positive contribution to local operations. Research limitations/implications – This research is limited by the fact that it considers one sector (banking) in one jurisdiction (New Zealand). Future research could consider other sectors and locations. Practical implications – The results in this paper suggest that there is latitude for regulators to expect more of local boards than is currently the case. Moreover, there is no conclusive empirical support for the argument that a local board is an unnecessary expense and might confound the governance initiatives of a parent company. Originality/value – To the best of the authors' knowledge, this is the first paper to empirically examine the two competing theories of locally constructed boards of directors set out above. It is of interest to regulators and others considering the role of local boards of directors.

A review of Latin American corporate governance literature: 2000-2009 : Table of Contents

Jean E. Harris — Sat Oct 24 08:00:20 BST 2009

Abstract:
Purpose – The purpose of this paper is to promote research about corporate governance in Latin America. A set of studies published in English since 2000 is identified and classified. Also, organizations and journals are identified that support research about corporate governance. Design/methodology/approach – One question guides this literature review. What pattern of research development, if any, is reflected in the literature reviewed? Findings – Analysis shows research has moved from an initial literature descriptive primarily of national practices, to an intermediate literature with questions largely implied from inquiry about the context of change, to a current literature designed explicitly to assess change. Practical implications – The overarching implication of recent literature is that good governance has social benefit as studied. The dominant type of recent study is grounded in finance and designed to address a specific question by adopting a market perspective and by applying methods of empirical analysis. These studies tend to find association between governance and firm performance, firm valuation or other measures of financial success. Originality/value – The value of examining literature is in the understanding and the direction it provides. Recent research results show good governance is beneficial for understanding the behavior of markets, and this may influence business policy and public policy as well as future research. And, for future direction, the study of corporate governance literature suggests a progression to multiple perspectives relative to research design that is inclusive of contributions from a diversity of disciplines and employs a variety of methodologies.