scholarly journals Evolution of corporate governance towards intrinsic value

2019 ◽  
Vol 1 (1) ◽  
pp. 8-15 ◽  
Author(s):  
Hugh Grove ◽  
James C. Lockhart
Keyword(s):  
Corporate Governance ◽  
Boards Of Directors ◽  
Intrinsic Value ◽  
Research Question ◽  
Three Dimensional ◽  
Success Factor ◽  
Company Stock ◽  
Corporate Executives ◽  
Legal Personhood ◽  
Challenges And Opportunities

The major research question addressed by this paper is how to evolve corporate governance beyond its traditional shareholder focus towards the broader perspective of a stakeholder focus with intrinsic value. Intrinsic value refers to the monetary value of a company, stock, currency, or product determined by fundamental analysis, without reference to extant market value. It is ordinarily calculated by summing the discounted future income generated by the company, stock, currency or product to obtain its present value. In this paper we observe the evolution of corporate governance towards an intrinsic, long-term value focus by the boards of directors, corporate executives, owners and shareholders, regulators and legislators, and other stakeholders. These major players are encouraged to develop more wisdom in order to assess the emerging threats, challenges, and opportunities from technology for intrinsic value, especially with the perspective of the public corporation as a separate legal personhood, as advocated by the European Parliament’s Committee on Legal Affairs in 2015. The rapid increase in the development of artificial intelligence (AI) and other technologies has tremendous significance for these major players broadly contributing to effective corporate governance. To facilitate the development and evolution of intrinsic value for public corporations and other entities, these major players need wisdom for more effective corporate governance in challenging times. Accordingly, this paper discusses the evolution of corporate governance and board members’ perspectives from a shareholder focus to a stakeholder focus with intrinsic value; the key success factor being wisdom for boards; the three-dimensional wisdom scale; and, the AI challenge, including the “Deadly Soul” of a new machine, to the wisdom of company executives and their boards of directors.

scholarly journals New risks related to emerging technologies and reputation for corporate governance

2020 ◽  
Vol 9 (2) ◽  
pp. 64-74
Author(s):  
Hugh Grove ◽  
Mac Clouse ◽  
Tracy Xu
Keyword(s):  
Artificial Intelligence ◽  
Corporate Governance ◽  
Boards Of Directors ◽  
Emerging Technologies ◽  
Research Question ◽  
World Intellectual Property Organization ◽  
Global Marketplace ◽  
Challenges And Opportunities ◽  
Potential Risks ◽  
Management Issues

Artificial intelligence (AI) has moved from theory into the global marketplace. The United Nations World Intellectual Property Organization released the first report of its Technology Trends series on January 31, 2019. It considered more than 340,000 AI-related patent applications over the last 70 years. 50 percent of all AI patents have been published in just the last five years. The challenges, potential risks, and opportunities for business and corporate governance from emerging technologies, especially artificial intelligence, have been summarized as whereby machines and software can analyze, optimize, prophesize, customize, digitize and automate just about any job in every industry. Boards of directors and executives need to recognize and understand the new risks associated with these emerging technologies and related reputational risks. The major research question of this paper is how boards of directors and executives can deal with both risk challenges and opportunities to strengthen corporate governance. Accordingly, the following sections of this paper discuss key risk management issues: deep shift risks, global risks, digital risks and opportunities, AI initiatives risks, business risks from millennials, business reputational risks, and conclusions.

scholarly journals Monitoring AI progress for corporate governance

2020 ◽  
Vol 9 (1) ◽  
pp. 8-17
Author(s):  
Hugh Grove ◽  
Mac Clouse ◽  
Laura Schaffner ◽  
Tracy Xu
Keyword(s):  
Corporate Governance ◽  
Boards Of Directors ◽  
Global Economy ◽  
Research Question ◽  
Work Force ◽  
Quantum Computers ◽  
Main Research ◽  
Challenges And Opportunities ◽  
High Degree ◽  
Rapid Transformation

Artificial Intelligence technologies are predicted to contribute up to $16 trillion to the global economy by 2030. This rapid increase in AI development will have tremendous significance for all the major players for effective corporate governance and national leadership: boards of directors, owners, regulators, legislators, and the national public interest. While AI is believed to increase both the productivity and competitive advantage, it will lead to rapid transformation in the work force and evolve with a high degree of uncertainty. To facilitate the survival of public and other corporations and entities, all these major players should closely monitor the progress and pay attention to major trends in AI. The main research question of this paper is what are the key threats, challenges, and opportunities of AI. Major threats are the replacement of human activity with AI activity, which may not be able to be controlled by humans. Such control is a major challenge concerning AI as is the control and opportunity of human-AI partnerships. Digital dashboards and quantum computers are also part of all these challenges and opportunities. Accordingly, the paper studies the following AI topics currently being explored in the AI literature: key questions and issues for AI, monitoring trends in AI development, digital board audits for AI action plans, AI robotic process automation, and quantum computers with AI implications, AI progress assessment and conclusions.

scholarly journals Corporate governance for trillion dollar opportunities

2017 ◽  
Vol 13 (3) ◽  
pp. 19-27 ◽  
Author(s):  
Hugh Grove ◽  
Maclyn Clouse
Keyword(s):  
Artificial Intelligence ◽  
Corporate Governance ◽  
Big Data ◽  
Boards Of Directors ◽  
Industry 4.0 ◽  
The Internet ◽  
Technological Changes ◽  
Corporate Executives ◽  
Challenges And Opportunities ◽  
The Internet Of Things

Boards of Directors will have to play a key role in the technological survival and development of companies by asking corporate executives about their plans and strategies for these emerging technological changes and challenges. Key challenges and opportunities discussed in this paper, with corresponding corporate governance implications, included Big Data, Artificial Intelligence (AI) with Industry 4.0, AI with the Internet of Things (IoT), Deep Learning, and Neural Networks. Survival should not be the goal, but it may be the necessary first step for today’s companies. Potential winners seizing these trillion dollar opportunities will be company executives and Boards of Directors who can incorporate these technological changes into specific new business models, strategies, and practices. While the awareness on boards regarding risks originating from disruptive innovation, cyber threats and privacy risks has been increasing, Boards of Directors must equally be able to challenge executives and identify opportunities and threats for their companies. This shift for companies is not only about digital technology but also cultural. How can people be managed when digital, virtual ways of working are increasing? What do robotics and Big Data analysis mean for managing people? One way to accelerate the digital learning process has been advocated: the use of digital apprentices for boards. For example, Board Apprentice, a non-profit organization, has already placed digital apprentices on boards for a year-long period (which helps to educate both apprentices and boards) in five different countries. Additional plans and strategies are needed in this age of digitalization and lifelong learning. For example, cybersecurity risks are magnified by all these new technology trends, such as Big Data, AI, Industry 4.0, and IoT. Accordingly, the main findings of this paper are analysing the challenges and opportunities for corporate executives, Boards of Directors, and related corporate governance concerning the driving force of Big Data, Artificial Intelligence with Industry 4.0, Artificial Intelligence with the Internet of Things, Deep Learning, and Neural Networks.

scholarly journals Activist investors and implications for corporate governance: A case study of Barington Capital Group and L Brands

2019 ◽  
Vol 15 (2) ◽  
pp. 28-36 ◽  
Author(s):  
Hugh Grove ◽  
Mac Clouse
Keyword(s):  
Corporate Governance ◽  
Initial Public Offering ◽  
Boards Of Directors ◽  
Financial Analysis ◽  
Research Question ◽  
Public Information ◽  
Corporate Executives ◽  
Governance Analysis ◽  
Public Offering

The key research question of this paper is to explore the implications for both financial and corporate governance performances from the emergence of activist investors. This paper uses a dramatic case study of one specific activist investor’s role, Barington Capital Group, in analyzing the performance of a public company, L Brands, which lost $20 billion in market capitalization in the last three years while the U.S. stock market was going up significantly. In conclusion, this activist investor’s approach and recommendations in this case study could be used as operational guidelines by boards of directors and corporate executives for improving both their financial and corporate governance performances. From its financial analysis, Barington recommended either an initial public offering of the superior performing Bath & Body Works brand or a spinoff of the weak performing Victoria’s Secret brand. From its corporate governance analysis, Barington recommended that L Brands improve the composition of its board of directors whose deficiencies in director independence, industry experience, and diversity have hindered its ability to effectively oversee and advise management. Accordingly, the major sections of this paper are financial analysis, operational zeitgeist brand analysis, and corporate governance analysis. It is important to note that this paper was prepared exclusively with public information.

scholarly journals Contemporary financial reporting and intangible resources: Implications for corporate governance

2019 ◽  
Vol 3 (1) ◽  
pp. 39-47 ◽  
Author(s):  
Hugh Grove ◽  
Mac Clouse
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Boards Of Directors ◽  
Brand Names ◽  
Share Price ◽  
Short Term ◽  
Wall Street ◽  
Intangible Resources ◽  
Corporate Executives ◽  
Global Brand

The key question of this paper is what are the implications for corporate governance from the emergence of contemporary financial reporting and intangible resources? Going beyond traditional financial reporting, Boards of Directors and corporate executives should investigate the intangible resources of contemporary financial reporting. What intangible resources are causing the huge price to earnings (PE) ratio gap and the huge market to book (M/B) ratio gap for their companies? Possibly such gaps are driven by global brand names, global licensing, customer loyalty, product quality, and product innovation. Unfortunately, the short-term focus upon traditional financial reporting by both Wall Street and corporate executives to “make the numbers”, i.e. short-term (quarterly), predicted numbers, has damaged firms’ competitiveness. Such damages include postponing or cutting expenditures on emerging technologies, advertising, research and development, employee training, and maintenance expenses. Research has shown that such earnings management techniques are relatively futile efforts since a consensus earnings miss by a company generally produces an insignificant 1.5% to 2% share price drop. Boards of Directors should inform corporate executives accordingly. To offer solutions to these issues and implications for corporate governance, this paper is divided into the following sections: the emergence of contemporary financial reporting; asset value migration: the power of intangibles; top five future business value drivers: all intangibles; forward looking measures for intangible resources; market gaps: “old economy” versus “new economy” companies; global brands and global licensing; hidden intangible values made visible; international perspectives on contemporary financial reporting; and conclusions.

scholarly journals Climate change risk: Challenge for corporate governance

2021 ◽  
Vol 10 (2, special issue) ◽  
pp. 258-268
Author(s):  
Hugh Grove ◽  
Maclyn Clouse ◽  
Tracy Xu
Keyword(s):  
Climate Change ◽  
Corporate Governance ◽  
Global Climate Change ◽  
Boards Of Directors ◽  
Global Climate ◽  
Research Question ◽  
Empirical Studies ◽  
Future Research ◽  
Climate Change Risk ◽  
Climate Change Risks

The major research question of this paper is to analyze climate change risk as a challenge to corporate governance. Climate action failure was the environmental risk most frequently listed in the top ten country risks. It also becomes a major reason that many companies are taking their own initiatives on climate change action which poses an imminent challenge for corporate governance as boards of directors track and assess such initiatives by their own companies. Boards can play a key role in guiding their organizations into the next new normal in the wake of global pandemic, economic disruptions, and ongoing climate change problems. This paper identifies and studies the corporate governance risks and opportunities related to global climate change risk and provides recommendations to boards of directors. The major sections of this paper are global climate change risks, corporate climate change pledges, climate-related financial disclosures, major topics in the Global Climate Change report, whether companies are ready to manage major climate change risks and opportunities, climate-related investment benchmarks, and conclusions. Future research could investigate this climate change risk challenge with case studies or empirical studies.

scholarly journals Long-term stockholder and stakeholder value and corporate governance implications

2020 ◽  
Vol 2 (1) ◽  
pp. 18-26 ◽  
Author(s):  
Hugh Grove ◽  
Mac Clouse ◽  
Tracy Xu
Keyword(s):  
Corporate Governance ◽  
Business Strategy ◽  
Boards Of Directors ◽  
Research Question ◽  
Initial Step ◽  
Vital Role ◽  
Clear Understanding ◽  
Sustainable Value ◽  
Key Indicators

The key research question of this paper is to explore the major implications for corporate governance from the emergence of long-term stockholder and stakeholder value perspectives for the purpose of a corporation. The major implication for corporate governance is the significant opportunity for boards of directors to play a vital role in helping companies create long-term sustainable value. An initial step is to develop a clear understanding of the company’s business strategy and how long-term value is created through innovation and deployment of resources. Boards of directors need to understand what really creates long-term value in their companies and then make sure their companies develop ways to measure and manage such value in order to be able to “govern like owners” and fulfill their fiduciary roles. To facilitate this fiduciary role, McKinsey & Company’s Corporate Horizon Index with its five key indicators, investment, earnings quality, margin growth, quarterly management, and earnings-per-share growth, and their related hypotheses and measurement approaches can be used as a roadmap.

scholarly journals Due Diligence Procedures and Principles for Financial Analysis and Corporate Governance

2018 ◽  
Vol 12 (1) ◽  
pp. 107-114
Author(s):  
Hugh Grove ◽  
Mac Clouse
Keyword(s):  
Corporate Governance ◽  
Boards Of Directors ◽  
Financial Analysis ◽  
Financial Analysts ◽  
Forensic Analysis ◽  
Common Stock ◽  
Corporate Executives ◽  
Governance Practices ◽  
Global Companies ◽  
A Company

An initial set of seven procedures is developed for assessing a company’s common stock. A second set of ten procedures is developed for performing stealth or external financial (forensic) analysis on a company’s common stock. Also, a set of eight corporate governance principles, developed in secret over one year by 13 prominent CEOs of U.S. based, global companies, are elaborated for analyzing a company’s corporate governance practices in this paper. The purpose of this paper is to portray how these procedures and principles can be used by financial analysts and Boards of Directors in helping to assess the viability of the companies they are analyzing or serving and to develop key questions to ask of corporate executives. Thus, the first set of procedures elaborates seven reasons to consider in assessing a company’s stock. The second set of procedures develops ten steps of stealth forensics to investigate the possibility of financial shenanigans or fraud by a company. The last set of eight principles assesses the strength of corporate governance in a company. The importance of these principles is demonstrated by matching them with the practices of just 18 mainly global companies that managed to destroy $1.5 trillion of market capitalization. All these twenty-five procedures and principles will help strengthen financial analysis and corporate governance, especially for the role of financial analysts and Boards of Directors in assessing the value of companies’ common stock for investors.

THE EFFECT OF CORPORATE GOVERNANCE AND CORPORATE CULTURE ON FIRM MARKET VALUE TO IMPROVE FINANCIAL PERFORMANCE

2020 ◽  
Vol 1 (6) ◽  
pp. 930-940
Author(s):  
Fathiyah Fathiyah ◽  
Mufidah Mufidah
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Corporate Culture ◽  
Boards Of Directors ◽  
Audit Committee ◽  
Stock Exchange ◽  
Descriptive Analysis ◽  
Market Value ◽  
Company Performance ◽  
Financial Company

The purpose of this research is to analyze the effect of corporate governance and corporate culture  on firm market value to improve financial performance. Corporate governance  is measured by audit  committee,boards of directors, board meeting and nomination . Corporate culture is measured by Corporate culture promotion While financial  company performance is measured by return on assets.  This research was conducted on companies listed on the Indonesia Stock exchange on indexed LQ 45 for period of 2016-2018. The sample was selected for 25 companies. The method of analysis uses associate descriptive analysis with  path analysis. Based on the results of the study found that corporate governance and culture promotion indirectly effect on financial performance with firm market value as intervening variable.

The Integration of ERM and Strategy: Implications for Corporate Governance

2017 ◽  
Vol 31 (2) ◽  
pp. 69-82 ◽  
Author(s):  
Therese R. Viscelli ◽  
Dana R. Hermanson ◽  
Mark S. Beasley
Keyword(s):  
Corporate Governance ◽  
Boards Of Directors ◽  
Implementation Process ◽  
Structured Interviews ◽  
Executive Management ◽  
Strategic Direction ◽  
Strategic Value ◽  
Enterprise Risk ◽  
Leadership Structure ◽  
Risk Oversight

SYNOPSIS Since the early 2000s, expectations have increased for organizations to strengthen corporate governance with enterprise risk management (ERM) processes, with the accounting profession playing a major role in these efforts. The ultimate goal of an effective ERM process is to help boards and senior executives to manage risks in the context of strategy so that the organization is more likely to achieve its key objectives. We conduct semi-structured interviews of 15 ERM champions to provide insights about whether the ERM process is integrated with the strategic-planning and execution processes of the firm. We find that while the decision to launch ERM often is based on a desire for ERM to provide strategic value, the integration of ERM with strategy typically is limited. We then examine the ERM implementation process to identify possible ERM implementation practices limiting ERM's integration with strategy. We find that organizations' (1) culture and approach to preparing for ERM's launch, (2) ERM leadership structure, and (3) management of key risks appear to limit the intersection of ERM and strategy. Our summary of key findings highlights important considerations for boards of directors, executive management, and auditors as they assess the effectiveness of their risk oversight efforts in overseeing the strategic direction of the enterprise.

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