Archive for the 'Academic Paper' Category

Boardroom Disputes – How to Manage the Good, Weather the Bad, and Prevent the Ugly

by the Center for Effective Dispute Resolution of the International Finance Corporation (IFC)

A dynamic board seeks to stimulate the flow of ideas, identify key issues, consider alternatives, and make informed decisions. And for that you need deliberation and debate. But these positive processes can sometimes turn into boardroom disagreements that must be dealt with properly and promptly; otherwise, they can devolve into acrimonious disputes that undermine the board’s effectiveness and the company’s performance.
This paper describes key steps that boards can take to mitigate the impact of disputes—and, even better, to minimize the risk of disputes arising in the first place. It deals with the board as a collective body that needs to cultivate its ability to manage disputes effectively—starting by establishing good corporate governance policies and practices.
The paper presents the Corporate Governance Dispute Resolution Self-Assessment and Progression Matrix, which summarizes specific elements of key steps the boards should undertake to effectively prevent and manage disputes:

  1. Clarify the roles of management and the board.
  2. Establish orderly board processes.
  3. Ensure the proper flow of information.
  4. Encourage a board culture that allows for effective discussions, debates, and deliberations.
  5. Step out of the boardroom to gain new perspectives.
  6. Apply dispute resolution skills and techniques.
  7. Incorporate ADR into the company’s culture and practices.

Download Report Here.

Challenges in Group Governance: The Governance of Cross-Border Bank Subsidiaries

by W. Richard Frederick for the International Finance Corporation (IFC)

This publication focuses on the governance of the subsidiaries of banking groups, with particular emphasis on cross-border bank subsidiaries. Thought on the issue originated during a series of high-level meetings organized by IFC on the governance of banks in Southeast Europe (SEE) in 2010—a time when the effects of the 2007–2008 financial crisis still lingered, giving the meetings a sense of urgency. Participants reflected on the role that governance may have played in the crisis and what could be done to prevent a recurrence.
One of the key observations made in developing this publication was that many banks view governance of subsidiaries as a “tick the box” exercise with marginal value to their operation — particularly when regulatory requirements do not take into account business exigencies. On the other hand, banks take governance seriously and appreciate its value when rules are balanced, measured, and practical, helping them achieve results. Another observation is that many banks do not fully appreciate the role governance plays in controlling risk in increasingly complex international banking groups.
The governance of bank subsidiaries has received insufficient study, and empirical evidence is scant—though there is burgeoning interest among banks. Given the scarcity of information and lack of a clear consensus, this publication stops short of making detailed recommendations. It encourages supervisors to adapt their approaches to fit market realities and to be more aware of the incentives for good governance. It also emphasizes the importance of proportionate and risk-driven approaches to supervision. At the same time, it encourages banks to look beyond the achievement of business goals and consider the issues of risk and stability that are ultimately a concern to us all. Download Publication Here.

Brazil: Report on the Observance of Standard and Codes: corporate governance country assessment

roscbrazilThis report assesses Brazil’s corporate governance policy framework. It highlights recent improvements in corporate governance regulation, makes policy recommendations, and provides investors with a benchmark against which to measure corporate governance in Brazil. It is an update of the 2005 corporate governance Report on the Observance of Standards and Codes (ROSC). Brazil’s experience over the past 10 years has shown the value of corporate governance reforms, both in Brazil and around the world. Good corporate governance enhances investor trust, helps to protects minority shareholders, and can encourage better decision making and improved relations with workers, creditors, and other stakeholders. It is an important prerequisite for attracting the patient capital needed for sustained long-term economic growth. This report is organized into four sections: section one is the commitment of the public and private sectors to reform; section two is shareholder rights; section three is disclosure and transparency; and section four is boards of directors. Download the report here.

Improved Corporate Governance Required to Help Reduce Risk and Positively Impact Performance for MENA Companies

June 4th 2013, Yahoo Finance

DUBAI, United Arab Emirates, June 4, 2013 (GLOBE NEWSWIRE) — GrowthGate Capital has published for the fourth consecutive year its White Paper on Private Equity in MENA in conjunction with Harvard Business School faculty members (MBA Class of 2013) and under the supervision of Professor Josh Lerner, the Jacob H Schiff professor of Investment Banking at Harvard Business School.

GrowthGate Capital has initiated and contributed to this White Paper as part of its commitment to raising the educational awareness of the Private Equity (PE) industry that benefits a whole community of LPs, GPs, regulators, professionals, advisers, academics and other practitioners interested in this subject.

 This year’s White Paper which is entitled: “Doing Well While Acting Good” addresses the topic of good corporate governance and its direct correlation to good corporate performance globally, and more specifically, in the context of the MENA region. The study reviews the various stages of development that corporate governance has witnessed and continues to face in the regional legal and corporate frameworks. Continue reading…

Who Cares? Corporate Governance in Today’s Equity Markets

Mats Isaksson and Serdar Çelik, 19th April 2013, OECD Corporate Governance Working Papers

There are two main sources of confusion in the public corporate governance debate. One is the confusion about the role of public policy intervention. The other is a lack of empirical knowledge about the corporate landscape where rules are supposed to be implemented and the functioning of today’s equity markets, where voting rights and cash flow rights are traded. To mitigate some of this confusion, this paper provides both an analytical framework for the role of public policy and a description of the empirical context that influences the conditions for that policy. It underlines the importance of focusing on the overall economic outcome and, in particular, how rules and regulations impact the conditions for companies to grow and create value by accessing public equity markets. In terms of the empirical context, we point to fundamental changes in the functioning of equity markets that may call for a fresh look at the economic effectiveness of corporate governance regulations.

Among other things, we document a dramatic shift in listings from developed to emerging markets over the last decade, which means that concentrated ownership at company level has become the dominant form of ownership in listed companies worldwide. We also discuss whether the lack of new listings of smaller companies in developed markets is related to excessive regulatory burdens and unintended consequences of a decade of profound stock market deregulation. The discussion about listings illustrates that corporate governance rules and regulations do not only affect companies that are already listed. From a policy perspective, it is equally important to assess the implications for unlisted companies that may, in the future, require access to public equity markets for growth and job creation. We also document how the lengthened and ever more complex chain of intermediaries between savers and companies may influence the efficiency of capital allocation and the willingness of investors to take an active long-term interest in the companies that they own. It is shown that institutional investors are a highly heterogeneous group and that their willingness and ability to engage in corporate governance primarily depend on the economic incentives that follow from their different business models, investment strategies and trading practices. We provide examples of how regulatory initiatives to increase shareholder engagement may have unintended consequences, and note that the diversity and complexity of the investment chain can render general policies or regulation ineffective. Continue reading…

The Bottom Line on Corporate Tweeting

Research suggests Twitter helps market liquidity of little-known companies.

It almost goes without saying that Twitter has changed the way corporations communicate. Despite much early sneering about the 140-character limit of a tweet, thousands of very serious companies fire off tweets daily about their latest news.

But does tweeting have any impact on investors? A new empirical study suggests that it does. In particular, Twitter seems to help little-known companies overcome the natural bias of traditional news media toward bigger companies that already get buzz.

The researchers, who include Elizabeth Blankespoor, an assistant professor of accounting at the Stanford Graduate School of Business, found that tweeting measurably increased the market liquidity of stocks that normally get little attention.

That’s important for both practical and theoretical reasons. As a practical matter, corporate investor-relations departments are pouring money into Twitter and other “push” technologies without completely knowing how well they work.

On a more theoretical level, the findings further undermine a key assumption about how markets work. The traditional assumption has been that markets instantly assimilate every new scrap of information as soon as it becomes public. If a company announces its latest earnings over thePR Newswire, for example, the traditional view is that the information reaches everybody in the market immediately.

Many analysts had already found that the real world was messier than that. In the real world, investors get much of their information from the news media — the Wall Street Journal, news services such as Bloomberg, and television networks such as CNBC. And news organizations pay much more attention to high-visibility companies because those are the ones that attract bigger audiences. Continue reading…

Enhancing Stewardship Dialogue

March 2013, ICSA (Institute of Chartered Secretaries and Administrators)

The relationship between companies and their investors lies at the heart of our capitalist system. When it is working well, common cause is taken on the journey through the risks and opportunities offered to the company by our erratic world economy, thus offering  some stability in planning the company’s strategy. There is good evidence that such stewardship is rewarding for the investor, and the company also benefits. The relationship can, however, be trivial, with the company’s shares being traded solely on their spot value. At its worst, good companies, through ignorance, can have much-needed support withdrawn at difficult or even potentially rewarding times. Investors, for whatever reason, can fail to use the governance tools they have been given when companies behave badly.

In the UK, these tools are considerable. Companies, for their part, also have a role to play in improving the quality of the interaction with their owners, and being responsive to investors’ concerns. We can do better, but as this guidance points out, the current system can work well when companies and/or investors try hard to make it work.
The most important point – as stressed in the guidance – is for both parties to have the right attitude in committing to continual improvement of a relationship based upon truth and trust, with an open two-way exchange. To strengthen the quality of the dialogue,
at a time remote from the results announcements, we have suggested that there is a conversation on the things that really matter in creating and destroying value, that is on strategy, risk and long-term comparative performance. Continue reading…


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