Corporate Board role duties and composition

Journal Information
ISSN / EISSN : 18108601 / 23122722
Current Publisher: Virtus Interpress (10.22495)
Total articles ≅ 295
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Michael Adusei
Corporate Board role duties and composition, Volume 16, pp 19-34; doi:10.22495/cbv16i2art2

This study examines the effect of female on boards on risk-taking with data from 401 microfinance institutions (MFIs) drawn from 64 countries. The study also investigates whether the effect is sensitive to the outreach performance of MFIs. The MFIs sampled for this study are spread across the six MFI regions. The study measures MFI risk by its risk-taking Z-score and risk-adjusted return on assets. The fixed effects estimation technique, known to overcome the omitted variable bias, is deployed to analyze the data. The results show that female representation in the boardroom increases the risk-taking of MFIs. However, when female on boards interacts with the depth of outreach performance of an MFI, its positive impact on MFI risk is observed. It suggests that female directors are more likely to be beneficial to risk management in MFIs that lend more to indigent clients. Several tests, including an instrumental variable test for endogeneity, have been conducted to confirm the robustness of these results.
Corporate Board role duties and composition; doi:10.22495/cb

Hugh Grove, Mac Clouse, Tracy Xu
Corporate Board role duties and composition, Volume 16, pp 8-18; doi:10.22495/cbv16i2art1

The key question and major lessons learned in this research are that individual companies and their boards of directors could use the board director benchmarking information compiled in the Conference Board Report to assess their own boards of directors’ corporate governance practices. For an initial benchmarking approach, this paper compared a poor long-term market performance company (Grove & Clouse, 2019) with a strong long-term market performance company (Grove & Lockhart, 2019). The following benchmarked differences in the boards of directors of these two companies were key success factors for constellation: specific industry knowledge, younger directors, coaching/nurturing, involved roles, long-term compensation of directors, no board entrenchment, board assessment, and board committee rotation. The major sections of this paper are literature review, corporate board practices, benchmarking board of directors: poor long-term market performance example, benchmarking board of directors: strong long-term market performance example, conclusions, and future research. A major limitation of this paper, which could be investigated in future research, is to analyze benchmarked board categories to see if they help explain differences in comparative long-term market performances by many companies since companies and their markets are diverse.
Montserrat Manzaneque-Lizano
Corporate Board role duties and composition, Volume 16, pp 4-6; doi:10.22495/cbv16i1_editorial

The articles of this issue are nice examples of studies that intend to broaden our understanding of the role of the board of directors as a key driver of corporate governance and performance.
Daisuke Asaoka
Corporate Board role duties and composition, Volume 16, pp 47-59; doi:10.22495/cbv16i1art5

Corporate governance reform in Japan was triggered by the introduction of a new corporate governance code in 2015. The code is notable for requiring the addition of two or more independent directors to the boards of listed firms, which previously had consisted largely of internally promoted directors enjoying lifetime employment. Applying the framework of behavioral law and economics, we analyze the change from the two aspects of “offense” and “defense” by the board of directors, meaning, respectively, enhancing the quality of group decision-making by producing collective intelligence, and preventing corporate misconduct by introducing the viewpoints of outsiders. The former is not immune to psychological biases such as groupthink and escalation of commitment, but these can be mitigated by ensuring equal consideration of all participants’ viewpoints, and, notably, the participation of women. The latter is affected by other biases, such as obedience to authority and diffusion of responsibility, but establishing an internal system for reporting misconduct, with outside directors at the top, can be effective if the outsiders’ position is perceived as credible.
Jackson Mills, Karen M. Hogan
Corporate Board role duties and composition, Volume 16, pp 39-46; doi:10.22495/cbv16i1art4

In this paper, we explore relationships between CEO facial width, a proxy for testosterone levels during adolescence, and financial management decisions. Using methodology from prior research, we collect a sample of 968 S&P 500 CEO profiles and analyze them to determine the facial width-to-height ratio (fWHR). We expect that greater CEO facial width will be associated with riskier, more aggressive financial policies. We find that higher CEO facial width-to-height ratio (fWHR) is associated with more aggressive financial management decisions. Specifically, we find a positive relationship between CEO fWHR and firm leverage and a negative relationship between CEO fWHR and firm cash holdings. These relationships are also observed among subsamples where CEOs are likely to wield substantial influence over financial management policies, such as long-tenured CEOs. We do not find evidence that CEO selection process explains the observed relationship between fWHR and financial policies. Thus, it appears that the relationships documented between CEO fWHR and firm financial policies are likely consistent with managerial preference and that high testosterone levels may induce CEOs to pursue aggressive financial policies. We show that high-fWHR CEOs tend to own a smaller fraction of their firms. This suggests an increased priority for more masculine CEOs on pursuing their own best interests (diversification in their personal portfolios) ahead of signaling alignment with shareholders, while the reverse is true for CEOs with lower fWHRs. The results are robust to the inclusion of industry and year fixed effects and firm-year controls. This paper adds to the literature that shows individual differences in CEOs, in this case, CEO masculinity, can predict differences in the financial managerial characteristics of firms and financial policies.
Felice Matozza, Eugenio D’Amico
Corporate Board role duties and composition, Volume 16, pp 28-38; doi:10.22495/cbv16i1art3

A co-leadership structure at the executive level is characterized by the presence of two co-CEOs exerting mutual influence on each other while working together towards common goals. This study relies on the unity of command and social comparison theories to investigate the relationship between power differences within co-CEO dyads and firm innovation. The results from a sample of US firms led by co-CEOs in the 2000 2016 period indicate an inverted U-shaped relationship, such that: 1) power differences between co-CEOs are positively related to firm innovation when power differences are below a high level; and 2) this positive relationship becomes negative as power differences become very large. This study improves upon Krause, Priem, and Love’s (2015) analysis by arguing that social psychological factors affect collaboration between co-CEOs and advances innovation literature by illustrating that the conditions under which a co-leadership structure promotes innovation are non-linear. These results suggest important implications for scholars and practitioners who are dealing with the strategic framing of the top executive team and aim at pursuing corporate results in terms of innovation.
Hugh Grove, John M. Holcomb, Mac Clouse, Tracy Xu
Corporate Board role duties and composition, Volume 16, pp 19-27; doi:10.22495/cbv16i1art2

The 2019 Business Roundtable Statement on the Purpose of a Corporation, endorsed by 183 CEOs of major U.S. companies, is not such a dramatic break from the past, but rather the next step in a steady retreat from a purely financial approach and an evolution to embrace a stakeholder approach, which is now gaining more and more lip service. The major purpose of this paper is to analyze this Business Roundtable Statement and relate it to three major corporate governance issues: CEO pay, non-financial performance metrics, and sustainability reporting. Then the paper introduces the Commonsense Corporate Governance Principles, which were initially published in 2016 and updated with Version 2.0 in 2018, sponsored by 21 CEOs of major U.S. companies. These Principles provide significant guidance and recommendations for corporations, boards of directors, shareholders, and other stakeholders to follow if they want to create an environment-friendly to meet the fundamental commitments in the Business Roundtable Statement. Accordingly, the major sections of this paper are introduction, CEO pay issues, non-financial performance metrics, sustainability reporting, corporate governance impacts, key points in both versions of the Commonsense Principles, key changes in the Commonsense Principles 2.0, discussion, and conclusions.
Franco Ernesto Rubino, Giovanni Bronzetti, Graziella Sicoli, Maria Baldini, Maurizio Rija
Corporate Board role duties and composition, Volume 16, pp 8-18; doi:10.22495/cbv16i1art1

In recent years, both corporate governance and performance management have been subjected to considerable changes. In this dynamic context, it is interesting to study the evolution of the relationship between performance and governance. Does governance still affect performance? The purpose of this paper is to verify the presence and intensity (extent) of the relationship between corporate governance and performance in Italian listed companies by using both accounting and non-accounting performance measures. The purpose of this paper is to investigate the effects of prior firm performance on board composition and governance structure of some companies listed on the Italian stock exchange, analysing how a governance approach influences the performance of sample companies. For the research the methodology used is quantitative and we used regression analysis on a sample of 23 Italian listed companies: mechanical companies and public utilities to find that the company's performance was positively related to the size of the board. The empirical analysis conducted allowed us to verify the hypothesis according to which the increase in Corporate Governance Best Practices influences company performance. However, the results we have received do not allow us to arrive at completely unequivocal interpretations. The results showed we have received do not allow us to arrive at completely unequivocal interpretations; the main limit is the sample size used in this study was relatively small.
Rosaria Cerrone
Corporate Board role duties and composition, Volume 15, pp 58-69; doi:10.22495/cbv15i3art5

The paper explores how risk management and internal audit functions can be used effectively to strengthen governance frameworks and ensure compliance with new regulatory requirements in the financial services industry. The aim of the paper is the description of the regulatory framework which gives great relevance to risk management both in banks and in insurance companies. A right and efficient risk management scheme, in fact, is based on efficient corporate governance of the financial intermediary. Better corporate governance ensures the achievement of risk management principles. For this, the paper explores the organizational and governance structure of financial intermediaries. The paper is a timely addition to the current discussion around the relevance of sound governance for banks and insurance. It extends the effort to evaluate risk governance standards at these financial intermediaries against regulatory requirements. The paper comes to the conclusion that risk mitigation as the process of reducing risk exposure and minimizing the likelihood of an incident needs to be continually addressed to ensure the business is fully protected and this aim is reached by linking controls to risks, activities, policies, and procedures and to track their effectiveness.
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