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Setting your own standards: Internal corporate governance codes as a response to institutional pressure
- Organization Science
"... T his paper is concerned with organizational response to institutional pressure. We argue that when faced with externally imposed standards, organizations can sometimes respond by developing alternative standards for the same practices. This "substitution response" can shift the attention ..."
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T his paper is concerned with organizational response to institutional pressure. We argue that when faced with externally imposed standards, organizations can sometimes respond by developing alternative standards for the same practices. This "substitution response" can shift the attention of stakeholders away from noncompliance with the original standards to adherence to the alternative standards. Empirically, we examine organizational response to the introduction of a governmentsponsored but nonmandatory corporate governance code. Unable to comply with all of the requirements of this very specific and demanding code, many firms responded by developing their own internal corporate governance codes. We predict and show that adoption of these internal codes is driven by the visibility of a firm's corporate governance practices and by mimetic forces. We also find that internal governance codes differ in their degree of ceremoniality and that ceremoniality is inversely related to organizational dependence on stakeholders who value good corporate governance. These findings help us to understand when organizational responses to institutional pressure take a ceremonial as opposed to substantive form.
A Study of Board Remuneration Committees: Structure and Effectiveness
, 2013
"... This thesis examines the structure and effectiveness of board remuneration committees. The study provides evidence on factors that determine the voluntary adoption of corporate governance recommendations regarding remuneration committees in 2008. The findings indicate that remuneration committee exi ..."
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This thesis examines the structure and effectiveness of board remuneration committees. The study provides evidence on factors that determine the voluntary adoption of corporate governance recommendations regarding remuneration committees in 2008. The findings indicate that remuneration committee existence is significantly associated with insider share ownership, institutional shareholding and marginally associated with change in CEO. Composition of the committee is significantly explained by independent directors and marginally explained by company complexity measured by geographical segments. The results suggest that agency costs and board capacity are incrementally relevant to adoption of the ASX remuneration committee recommendations, after controlling for company characteristics related to company size, governance quality, the appointment of a big 4 auditor and leverage. The results also indicate that companies are less likely to adopt the ASX remuneration committee recommendations in response to shareholder dissent on the annual remuneration report. The analysis then considers the association between adoption of the ASX remuneration committee recommendations and executive remuneration. Contrary to theoretical predications, the results infer that adoption of the ASX remuneration committee recommendations does not universally lead to more effective remuneration practices. Particularly, adoption of the ASX remuneration committee recommendations is associated in some cases with excessive levels of remuneration of the top five ranked executives and does not generally result in a stronger alignment between executives’ remuneration and measures of company performance.
at the UNIVERSITY OF THE WITWATERSRAND
"... DECLARATION AND COPYRIGHT I, Johannes Tshipa, declare that the research work reported in this dissertation is my own, except where otherwise indicated and acknowledged. It is submitted for the degree of Master of Management in Finance and Investment at the University of the Witwatersrand, Johannesbu ..."
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DECLARATION AND COPYRIGHT I, Johannes Tshipa, declare that the research work reported in this dissertation is my own, except where otherwise indicated and acknowledged. It is submitted for the degree of Master of Management in Finance and Investment at the University of the Witwatersrand, Johannesburg. This thesis has not, either in whole or in part, been submitted for a degree or diploma to any other universities. I further declare that all sources cited or quoted are indicated and acknowledged by means of a comprehensive list of references.
The Relationship Between Tenure and Outside Director Task Involvement: A Social Identity Perspective
"... Drawing from corporate governance research and social identity theory, the authors argue that the relationship between outside directors ’ time in office and outside director task involvement is more complex than generally anticipated. By using a unique multisource data set composed of peer ratings ..."
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Drawing from corporate governance research and social identity theory, the authors argue that the relationship between outside directors ’ time in office and outside director task involvement is more complex than generally anticipated. By using a unique multisource data set composed of peer ratings provided by fellow outside directors rating a focal director’s task involvement, this study analyzes director task involvement at the individual director level of analysis. The authors propose and empirically demonstrate that outside director tenure has an inverted U-shaped relationship with outside director task involvement that is moderated by a director’s social iden-tification with the organization. As such, the authors demonstrate that social identification with the organization provides a critical contingency for the curvilinear relationship between outside director tenure and outside director task involvement. Findings suggest that outside directors who socially identify with the organization are more likely to grow “stale in the saddle ” at lower levels of tenure. These findings provide support for the merit of analyzing outside directors at the individual level of analysis and suggest that a “one-size-fits-all ” approach may not be most appropriate in assessing the effects of tenure on outside director functioning. Acknowledgments: We are grateful to Associate Editor Sucheta Nadkarni and two anonymous JOM reviewers for
Effective Audit Committee as a Mechanism to Improve Corporate Governance: An Exploratory Study
"... Abstract Recently, an audit co mmittee (AC) is being looked upon as a distinct culture for improving corporate governance (CG) and has received wide-publicity across the globe. Government authorities, regulators and international bodies have indicated that they view an AC as a powerful mechanism th ..."
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Abstract Recently, an audit co mmittee (AC) is being looked upon as a distinct culture for improving corporate governance (CG) and has received wide-publicity across the globe. Government authorities, regulators and international bodies have indicated that they view an AC as a powerful mechanism that can enhance the reliability and transparency of financial information. Being mandatory under SEBI's Clause 49 of the Listing Agreement, an AC can be of great help to the board in imp lementing, mon itoring and continuing 'good' CG practices to the benefit of the corporation and all its stakeholders. This study performs a 'content' analysis on the AC reports of the top 500 listed companies in India during 2005 to 2008 to determine the in formation content of these reports and the extent to which these reports conform to the Clause 49 requirements of the SEBI. A lso, discussed are the various trends about an AC characteristics viz., size, co mposition, activity, as well as, the e xtent of non-audit services provided by auditors in the listed Indian co mpanies. No doubt, it is essential for the Indian corporations to accept and continue with the CG reforms that are 'demarcated' by the challenges of the 'new' millenniu m.
The effect of monitoring on CEO pay practices in a matching equilibrium Pierre Chaigneau† HEC Montreal
, 2014
"... We present a model of efficient contracting with endogenous matching and limited monitoring in which firms compete for CEOs. Firms with greater owner-ship concentration have a higher monitoring capacity, and can better handle the downside risk of hiring CEOs with more uncertain ability. The model ex ..."
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We present a model of efficient contracting with endogenous matching and limited monitoring in which firms compete for CEOs. Firms with greater owner-ship concentration have a higher monitoring capacity, and can better handle the downside risk of hiring CEOs with more uncertain ability. The model explains that CEOs in firms with a lower monitoring capacity have higher salaries, more pay-for-luck, and a lower sensitivity of pay to performance, thereby responding to some fundamental arguments of the managerial power perspective. Moreover, improvements in the monitoring capacity of the worst firms increase competition for CEOs and raise CEO pay in all firms.
A Contingency Framework of Enterprise Governance in the UK: A Value-Based Management Approach
, 2012
"... ii Corporate governance (CG) has recently received much attention because of the wave of financial scandals in the early 2000s and the more recent global financial crisis. CG reforms, including laws, codes and listing rules have been established to protect shareholders ’ rights and restore investors ..."
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ii Corporate governance (CG) has recently received much attention because of the wave of financial scandals in the early 2000s and the more recent global financial crisis. CG reforms, including laws, codes and listing rules have been established to protect shareholders ’ rights and restore investors ’ confidence in the capital market. These reforms have largely contributed to the evolution of internal and external governance mechanisms that are aimed at mitigating agency conflicts between managers and shareholders. However, overemphasis has been placed on the monitoring and control dimensions of governance, which may hinder entrepreneurial activities, obscure business prosperity and contribute to a narrow perspective on CG. It has been argued that there is a need to broaden CG beyond compliance (conformance) to a set of rules and laws, to include the performance aspects of governance that focus on strategy and value creation. In other words, governance should not only focus on monitoring managerial performance to ensure accountability to shareholders, but also on
1 The Choice of Legal Form and its Effects on Good Governance: A Case Study of an Austrian Professional Soccer Club
"... The corporate governance of professional soccer clubs (PSCs) has come under close scrutiny as the financial situation of PSCs has worsened and numerous governance failures have occurred in European soccer. Literature argues that the choice of legal form is a main driver of good governance and the pr ..."
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The corporate governance of professional soccer clubs (PSCs) has come under close scrutiny as the financial situation of PSCs has worsened and numerous governance failures have occurred in European soccer. Literature argues that the choice of legal form is a main driver of good governance and the primary beneficiaries of enhanced corporate governance standards would be the PSCs themselves. The aim of this paper is therefore to investigate the impact of different legal forms on the level of good governance. By using a case study approach, the prevailing forms of the traditional non-profit association, business management agreement and spin-off of the first team into a corporation are assessed with regards to their degree of good governance. The Austrian PSC investigated has experienced all three legal forms within a time frame of ten years, which displays a unique setting. The measurement against the principles of good governance introduced in the ‘Guide for Football Clubs’ identifies significant failures for the legal forms of the non-profit association and the business management agreement. Results reveal that in terms of good governance the spin-off of the first team into a corporation seems to be the most adequate legal form for medium and large size PSCs.