Managers as Monitors: An Analysis of the Non‐executive Role of Senior Executives in UK Companies

An important aspect of current governance practice is the use of non‐executive directors to monitor the behaviour of company management. This paper examines the extent to which senior executives are utilized as non‐executives in large UK companies. The results suggest that executive directors are not an important source of non‐executive directors. The average number of non‐executive directorships held by each executive is 0.22. Indeed, 85% of executives hold no additional directorships. The holding of non‐executive directorships is positively related to the strength of board monitoring in the executive's company, executive tenure and company size. Executives in companies with greater growth opportunities and operating in regulated industries are less likely to hold non‐executive directorships.     

How Independent,Competent and Incentivized Should Non‐executive Directors Be? An Empirical Investigation of Good Governance Codes

There is a commonly held conviction among governance scholars and practitioners that increasing the number of non‐executive directors may have beneficial effects on board practices. This view has gained momentum after each wave of scandals. Given the relevance of the issue in governance studies and practices, the aim of this paper is to investigate how independent, competent and incentivized non‐executive directors should be according to governance scholars and board best practices. To answer this question, we conducted a review of the literature on non‐executive directors. We then collected corporate governance codes developed worldwide at the end of 2005, and made a comparative analysis of their recommendations about the independence, the competencies and the incentives of non‐executive directors. Our results show that (i) non‐executive directors' independence is a commonly recommended governance practice, the meaning of which differs widely among countries; (ii) non‐executive directors' competencies and incentives are not considered a governance issue to be regulated in detail; (iii) agency theory and the search for appropriate board demography tend to dominate the recommendations of governance literature and codes. Our findings have implications for both research and practice.     

Effects of Executive Characteristics and Venture Capital Involvement on Board Composition and Share Ownership in IPO Firms*

Combining the agency perspective, resource‐based view and upper echelon research, this paper examines factors affecting board selection and share ownership in initial public offerings (IPOs). In line with socio‐cognitive and behavioural research, it shows that board independence, cognitive capacity and the incentives of non‐executive directors are negatively associated with the experience and power of executive directors, and that large‐block share ownership is positively associated with the intensity and diversity of non‐executives' experience. However, the retained equity by venture capitalists negatively affects board independence and non‐executive directors' interests. The paper suggests a number of avenues for a future contextual analysis of the board development process in ‘threshold’ firms.     

Improve Board Effectiveness: the Need for Incentives

Roberts, McNulty and Stiles (2005) focus on the attitudes and behaviours of non-executive directors in their recommendations for improving board effectiveness. This paper addresses the importance of providing incentives for non-executives in order to improve board effectiveness. It first points out that the current norms and practices in corporate governance suggest that, without strong incentives, non-executive directors are unlikely to become engaged in corporate governance, to challenge executive decision, and to remain independent of executive influences. It then proposes that, for non-executive directors to develop the attitudes and behaviors recommended by Roberts, McNulty and Stiles, it is important to require them own a significant amount of company stocks over a long period of time. It also addresses some concerns regarding the use of stock ownership to improve the effectiveness of non-executive directors in corporate governance.     

The Market for Non‐Executive Directors: Does Acquisition Performance Influence Future Board Seats?

This paper investigates whether non‐executive directors associated with good (bad) board decisions are subsequently rewarded (penalized) in the market for directors. This question is addressed by assessing whether the post‐acquisition performance of acquiring companies influences the number of non‐executive directorships that non‐executives involved in these acquisitions hold subsequent to the acquisition. We find that non‐executives on the boards of acquirers that increase (omit or cut) their dividend subsequently hold more (fewer) non‐executive directorships in listed companies. Our findings suggest that the non‐executive labour market is efficient and rewards (penalizes) non‐executives for good (bad) acquisitions.     

CAPITAL,LABOR, AND THE FIRM: A STUDY OF GERMAN CODETERMINATION

Under the German corporate governance system of codetermination, employees are legally allocated control rights over corporate assets through seats on the supervisory board—that is, the board of nonexecutive directors. The supervisory board oversees the management board—the board of executive directors—approves or rejects its decisions, and appoints its members and sets their salaries. We empirically investigate the implications of this sort of labor participation in corporate decision making. We find that companies with equal representation of employees and shareholders on the supervisory board trade at a 31% stock market discount as compared with companies where employee representatives fill only one‐third of the supervisory board seats. We show that under equal representation, management board compensation provides incentives that are not conducive to furthering shareholders' interests, possibly because labor maximizes a different objective function than shareholders. We document that, under equal representation, companies have longer payrolls than their one‐third representation peers have. Finally, we provide evidence that shareholders respond to the allocation of control rights to labor by linking supervisory board compensation to firm performance and by leveraging up the firm. (JEL: G32, G34)     

权威董事专业性、高管激励与创新活跃度研究

通过我国A股上市公司2007年～2015年的数据, 实证检验了权威专业董事通过高管激励影响创新活跃度的逻辑链条.发现权威专业董事通过影响高管激励的结构与水平增强了企业创新的活跃度, 且不同类别的权威专业董事均能够产生积极作用.这种影响不仅促进了企业的实质性创新, 提升了企业的创新效率, 并使之具有可持续性.研究结论在对主要变量采取不同度量方式以及控制了内生性等因素影响的情况下依然成立.本文的研究结论拓展了权威专业董事职能发挥的途径, 增补了上市公司高管激励的经验证据, 同时, 为董事会治理有效性的识别提供了新的视角.对于当前企业高管创新激励机制的匹配性设计, 以及监管部门完善董事会治理规则具有一定的借鉴意义.     

The Role of Financial Institutions in the Corporate Governance of Listed Chinese Companies*

This paper explores the role of Chinese financial institutions in the corporate governance of listed companies through interviews with both senior managers of financial institutions and board directors of listed companies. Our results show that, while most securities companies are passive investors, a good proportion of the active mutual funds help their portfolio companies prepare financial forecasts, standardize their operations, raise external funds, strengthen their company image in the capital markets, and sometimes intervene in corporate issues. This limited role can be attributed to a number of factors specific to the Chinese context including highly concentrated state ownership, an immature regulatory environment, inadequate transparency and disclosure of financial information, and weak corporate governance within financial institutions themselves. It could also be affected by several other factors that are considered to cause institutional passivity in developed countries such as conflicts of interest, monitoring costs and lack of expertise.     

董事会特征与总经理变更

本文以在上海证券交易所1999年前上市的公司为样本,研究董事会特征等治理变量对总经理变更的影响。研究结果表明,对相对业绩下降公司的总经理变更能起到显著解释作用的变量只有董事会会议的次数和公司的领导结构。而其它治理变量,诸如董事会规模、管理董事比例、独立董事比例、股权集中度、董事会成员持股比例等,未能对总经理变更起到显著的解释作用。     

机构投资者持股与上市公司违规行为的实证研究

本文采用部分可观测的Bivariate Probit估计方法,对2001年至2009年中国1729家上市公司进行回归检验,发现机构投资者持股比例降低了公司违规行为倾向,同时增加了公司违规行为被稽查的可能性。该结论在控制了机构投资者变量内生性的因素后仍旧稳健。进一步研究表明,相比公司经营违规,机构投资者对信息披露违规倾向的影响更强。另外,相比证券机构投资者,养老保险基金、社保基金、企业年金持股的公司中违规公司比例更低。除此以外,机构投资者对公司违规的抑制与检举作用并不受其它公司治理变量的影响。本文的研究表明中国机构投资者在预防与打击上市公司违规行为方面发挥了重要的作用,并且也为上市公司与监管部门提供了治理和防范企业违规的线索。     

Board compensation and ownership structure: empirical evidence for Italian listed companies

This paper investigates the relationships among corporate ownership, the level of board compensation, and firms’ future performance within Italian listed companies. Board compensation could be related to corporate ownership characteristics, like the type of controlling shareholder, ownership concentration, the separation between cash flow and voting rights, and the presence of shareholders’ agreements. The evidence of high levels of board compensation associated with certain governance characteristics could signal, in a principal-agent framework, rent extraction by entrenched managers or by controlling shareholders versus minority shareholders; high board compensation, however, could be related to the need to hire directors with higher professional standing and also to the desire to create a network with other companies through the enlargement of the board, according to a social network view. In this paper we disentangle this issue showing the relationship between excess board compensation and future performance: examining firms listed on the Milan Stock Exchange over the period 1995–2002, we show that board compensation is linked to many governance characteristics, but excess compensation is never positively related to future performance. For founder family firms, in particular, high board compensation is associated with (a) smaller board size; (b) higher proportion of family members on the board; (c) lower future performance. The whole evidence therefore doesn’t support the hypothesis suggested by the social network view, but is consistent with a rent extraction hypothesis. These results could add new empirical evidence to the recent debate on the need for global remuneration reform. According to our results, some control mechanism and an increase in transparency of executive compensation schemes could be appropriate.     

股权制衡对并购中合谋行为经济后果的影响

以模型构建和实证检验相结合的方式,探讨股权制衡对并购活动中控股股东与高管人员合谋行为所产生的经济后果的影响。通过大股东效用模型论述股权制衡的治理功效,构建以Shapley指数计算的股权制衡度变量,以沪深A股上市公司1999年至2006年的并购事件作为样本,采用回归分析对模型推论进行检验。研究结果表明,当控股股东尝试以并购手段掏空上市公司时,将采取向高管人员提供利益回报的方式与其合谋。如果公司中存在制衡股东,高管人员获取私有收益的空间将被压缩,低效并购造成公司业绩损失的情况也会减少。实证结果显示,当控股股东与高管人员合谋时,上市公司的股权制衡程度越高,高管人员通过并购获取的私有收益越少,公司的并购绩效也越好。     

Total Board Compensation,Governance and Performance of Spanish Listed Companies

In this paper we present empirical evidence on the relationship between board remuneration of a sample of large Spanish companies and a set of explanatory variables such as performance and size of the company. The objective is to provide additional empirical evidence based on the agency theory for the Spanish institutional context, which differs from most ‘Anglo–Saxon’ model studies. We focus on the impact of a company's governance structure on the relationship between pay and performance. Specifically, we consider ownership concentration and firm leverage as key determinants of the board–shareholders relationship. Our results confirm the positive relationship between board remuneration and company performance, which is stronger for book values than for stock market measures. Industry performance also explains the remuneration and provides useful information for evaluating board behaviour. Company size is also related to board remuneration and affects the pay–performance relationship, although it is not relevant when we use an elasticity approach. Finally, the governance structure of companies is relevant when explaining the power of the compensation–performance relationship, and differences between the impact of ownership concentration and firm leverage on this relationship are found.     

Proprietary costs,governance and the segment disclosure decision

Focusing on the Spanish setting, characterized by high ownership concentration and a regulatory framework that traditionally has given more priority to the avoidance of proprietary and competition costs related to disclosure than to promoting transparency, this paper aims to identify the main factors influencing the segment reporting decision. In particular, we aim to test whether the strength of concentrated ownership structures together with the persistence of the pre-IAS reporting philosophy offsets the role of independent directors. If this is the case, it would be in spite of the new IAS/IFRS reporting standards based on relevance and transparency, and would also run counter to the improvements in the Spanish governance framework which strengthens the presence of independent non-executive directors. The empirical evidence suggests that, under the new IAS/IFRS reporting philosophy, proprietary costs may have lost relevance due to the introduction of mandatory segment information requirements. In addition, within an institutional context of high ownership concentration, independent directors play a significant role in raising the level of reported information. The context of the new IFRS 8 offers opportunities to observe how governance and proprietary costs affect the new ‘management approach’ to segment classification.     

Board of directors and insider trading with share repurchase programs

This study examines the relationship between insider trading and board of directors’ characteristics around stock repurchase announcements. It is hypothesized that information disparity between insiders and shareholders from share repurchases announcements creates opportunities for insiders to time their trading. However, there is little evidence on whether board characteristics reduce the probability of insider trading with repurchase announcements. Using data from firms listed on Forbes 500 between 1998 and 2004, we found that insider trading is related to share repurchase announcements. In order to focus on board of directors’ role, we controlled for board characteristics that may change the repurchase decision. Our results provide corroborative evidence of insider net selling around repurchase announcements and the advantages of board characteristics to offset insider trading. In particular, the results suggest that board tenure, directors’ ownership and board directorship change positively insider trading around repurchase announcements. Hence, Securities and Exchange Commission should consider rigorous restrictions on share repurchase announcements and be aware of potential influence of the corporate governance device.     

上市公司治理因素与财务困境关系的实证研究

对中国上市公司治理因素与财务困境的关系进行了实证研究。以1998~2005年被ST(special treatm ent)的公司及其配对样本共计528家作为研究样本,通过使用二元Log istic回归分析方法,发现大股东持股比例、H-10股权集中指数、股权制衡度、国家股比例、最终控制人类型、独立董事持股比例以及审计意见与公司发生财务困境的可能性显著负相关,管理者代理成本显著提高了公司陷入财务困境的危险性。而高管持股比例、董事会规模以及CEO的双职合一对困境发生的概率无显著影响。     

The Performance Implications of Ownership-driven Governance Reform

This paper explores the performance impact of recent changes in foreign shareholdings and boardroom reforms in Japan. Empirical research on the impact of reform on the Japanese corporate governance system could provide useful lessons for their European counterparts who are themselves facing similar pressures to reform. We found that although participation of outside directors in strategic decision-making was associated with positive stock returns, the increase in the ratio of outside directors, the separation of the board members and executive officers, and the reduction of board size were not related to firm performance.     

Symbolic Management and the Glass Cliff: Evidence from the Boardroom Careers of Female and Male Directors

This paper uses archival board data to demonstrate that women who take positions as directors of UK companies have shorter tenures than their male counterparts. The authors show that female directors face a much higher risk of dismissal as they approach nine years of service on the board, when their long service deprives them of the all‐important classification as ‘independent’. At this point, their position on the board becomes precarious. Male directors do not suffer the same increase in boardroom exit. This gender‐specific difference is clearly shown to be linked to the independence status. It is argued that these observations are consistent with the notion that female directors are being used in the symbolic management of corporate governance and that, at nine years, when the cloak of independence disappears, women directors are then exposed to the biases that arise from role congruity issues.     

中小商业银行公司治理机制与经营绩效关系的实证分析

理论和实证研究证明,良好的公司治理对金融体系稳健运行有十分重要的作用.商业银行公司治理的研究和实践既是银行业改革的迫切要求,也是银行业改革的核心内容之一.本文用36家商业银行2005年的截面数据,对股权结构、董事会、监事会和高管人员薪酬激励等四个治理机制与银行绩效之间的关系进行了实证研究.结果表明,国有与非国有控股商业银行绩效不存在显著差异,第一大股东对银行绩效的影响并不显著,但外部大股东能显著地提高银行绩效.董事会与监事会规模与银行绩效正相关,但独立性难以得到保证.此外,高管人员薪酬激励不能改善银行绩效.     

What do board members in art organizations do? A grounded theory approach

This paper explores the characteristics and activities of board members in art organizations. It describes two case studies within international artists’ residencies in France and Germany. Adopting a grounded theory approach, our study identifies the different characteristics of board members such as friendship, competence and diversity, together with board activities such as controlling, advising, legitimating, helping, exchanging and deciding. The contributions of this research are twofold. First, contrary to most governance literature, the independence of board members and board monitoring roles do not seem to be important issues for the two art organizations involved. Instead, friendship and networking appear to be key factors for the board, helping the organizations to be successful by giving them more chance to survive and grow. Second, as specific board members in the two cases studied, executive directors play a continual role of “governance entrepreneurs,” building and managing various board-related organs to counterbalance the influence of fund providers. In this way, executive directors attempt to satisfy their predominant public fund providers and to help the artists’ residencies survive.