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 Sustainable long-term value creation: New finance focus for boards of directors

2021 ◽  
Vol 5 (1) ◽  
pp. 22-30
Author(s):  
Hugh Grove ◽  
Maclyn Clouse ◽  
Tracy Xu
Keyword(s):  
Value Creation ◽  
Circular Economy ◽  
Boards Of Directors ◽  
Research Question ◽  
Business Strategies ◽  
Future Research ◽  
Clear Understanding ◽  
Sustainable Value ◽  
And Performance

The major research question of this paper is how boards of directors’ practices and performance can facilitate the new finance focus on sustainable, long-term value creation. This new finance focus presents opportunities to strengthen corporate performance which enhances the gatekeeper role of boards of directors in helping both shareholders and stakeholders. The following topics are discussed and analyzed in this paper: potential examples, strategic analysis, sustainability analysis, and the circular economy. We discovered several guiding principles based on previous literature, regulatory proposals, and industry practices. Effective boards of directors need to be engaged in sustainable strategy formation and make sure long-term sustainable value creation continues to develop and does not erode. They need to have relevant industry knowledge, diverse expertise, and a proclivity for thinking independently in both good times and bad times, such as the coronavirus pandemic. They also need to develop a clear understanding of sustainable business strategies and how long-term value is created and driven through innovation and the deployment of resources. In addition, we find that boards can assess and monitor ways to measure and manage long-term value creators and drivers and encourage their companies to become involved in the circular economy with its $4.5 trillion investment opportunities. Future research could use case studies and board interviews to investigate boards of directors’ practices and performance, concerning how boards have helped develop strategies and procedures to facilitate this new finance focus on long-term sustainable value creation.

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 Opening the black box: Unpacking board involvement in innovation

2019 ◽  
Vol 18 (4) ◽  
pp. 487-519 ◽  
Author(s):  
Patricia Klarner ◽  
Gilbert Probst ◽  
Michael Useem
Keyword(s):  
Corporate Governance ◽  
Boards Of Directors ◽  
Company Strategy ◽  
Behavioral Diversity ◽  
Pharmaceutical Firms ◽  
Scientific Innovation ◽  
Multiple Case ◽  
Temporal Dimensions

Corporate governance research suggests that boards of directors play key roles in governing company strategy. Although qualitative research has examined board–management relationships to describe board involvement in strategy, we lack detailed insights into how directors engage with organizational members for governing a complex and long-term issue such as product innovation. Our multiple-case study of four listed pharmaceutical firms reveals a sequential process of board involvement: Directors with deep expertise govern scientific innovation, followed by the full board’s involvement in its strategic aspects. The nature of director involvement varies across board levels in terms of the direction (proactive or reactive), timing (regular or spontaneous), and the extent of formality of exchanges between directors and organizational members. Our study contributes to corporate governance research by introducing the concept of board behavioral diversity and by theorizing about the multilevel, structural, and temporal dimensions of board behavior and its relational characteristics.

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.

Is Corporate Social Responsibility Really Able to Create Long-Term Sustainability Value?

2022 ◽  
pp. 194-216
Author(s):  
Manuel Moreno ◽  
Elena Mañas-Alcón ◽  
Oscar Montes-Pineda ◽  
Beatriz Fernández-Olit
Keyword(s):  
Corporate Governance ◽  
Corporate Social Responsibility ◽  
Value Creation ◽  
Social Values ◽  
Shared Value ◽  
Csr Strategies ◽  
Sustainable Value ◽  
Short Run ◽  
Corporate Social

This chapter analyzes the academic debate regarding the need to adopt a long-term vision of CSR strategies. It's based on the premise that short run is the dominant approach in financial markets, and this situation could be negatively conditioning the long-term sustainability value creation. New social values may be requesting different management decisions from companies, prioritizing long-term over short term results. A thorough literature review has been done across specialized journals, international reports, and key legislation, trying to determine and model the elements facilitating this sustainable value creation. It shows the alignment needed between CEO and their shareholders within the framework of corporate governance to create long-term value within CSR. There are signs of a possible financial over-performance of companies that strategically create a shared value with stakeholders based on environmental, social, and governance objectives, selected due to their materiality. A model is proposed to consider a long-term approach creating sustainable value in organizations.

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 Development of Corporate Governance Performance Indicators for Czech Manufacturing Companies

2015 ◽  
Vol 6 (1) ◽  
pp. 57-72 ◽  
Author(s):  
Marie Pavláková Docekalová ◽  
Alena Kocmanová ◽  
Jirí Kolenák
Keyword(s):  
Corporate Governance ◽  
Performance Indicators ◽  
Codes Of Conduct ◽  
Key Performance Indicators ◽  
Manufacturing Companies ◽  
Strategic Objectives ◽  
Two Factors ◽  
Key Indicators ◽  
The Relationship

Abstract Effective corporate governance is a key element in achieving long-term success for any company. The codes of conduct that corporate governance adopts directly determine the sustainability of business activities. With this in mind, this paper aims to demonstrate the results of research that identifies a set of key indicators of corporate governance performance. The presented research is quantitative. In order to identify key performance indicators, factor analysis was employed. It was found that corporate governance performance is influenced by two factors. For the first factor, the relationship between corporate governance and stakeholders is measured by key indicators: percentage of women within CG, contributions to political parties, politicians and related institutions and number of complaints received from stakeholders. The second factor, strategy & compliance, is generated from the following: percentage of strategic objectives met and total number of sanctions for breaching the law. This research aims to assist both academic and corporate practitioners who want to improve corporate governance performance and, through the use of key performance indicators, support the transparency and sustainability of their business.

scholarly journals EU sustainability directive and corporate governance: Implications for 15 of the largest EU companies

2017 ◽  
Vol 14 (3) ◽  
pp. 329-337 ◽  
Author(s):  
Hugh Grove ◽  
Maclyn Clouse
Keyword(s):  
Corporate Governance ◽  
Boards Of Directors ◽  
Sales Growth ◽  
Public Companies ◽  
Good Corporate Governance ◽  
Ceo Pay ◽  
Key Variables ◽  
Sustainability Practices ◽  
The Eu

This paper analyzes 15 of the largest EU public companies, including Volkswagen, that were included in Forbes’ 2015 list of “The World’s Biggest Public Companies” in order to investigate possible best practices for long-term sustainability, as emphasized by the EU Sustainability Directive. CEO pay and various well-known financial ratios were correlated with market capitalization creation to create a sustainability score which was then correlated to market cap creation to indicate possible long-term sustainability practices. Key correlations were CEO pay, sales growth, profit margin, and leverage or adequacy of capital. Such key variables could then be monitored for possible long-term sustainability practices by Boards of Directors for good corporate governance, as opposed to recent bad corporate governance by Volkswagen. In just the last year, Volkswagen managed to destroy all the prior three years of its market cap creation.

scholarly journals The effectiveness of boards of directors in two-tier board system: Evidence from Vietnamese-listed enterprises

2014 ◽  
Vol 1 (1) ◽  
pp. 12
Author(s):  
Quan Tran ◽  
Dimitrios N. Koufopoulos ◽  
Bernadette Warner
Keyword(s):  
Corporate Governance ◽  
Boards Of Directors ◽  
Governance Structure ◽  
Ceo Turnover ◽  
Vital Role ◽  
Independent Directors ◽  
Key Factors ◽  
Corporate Governance Structure ◽  
Ceo Dismissal ◽  
Ceo Age

This paper presents several theories to achieve a better understanding of corporate governance structures and their operations in a two-tier-board corporate governance structure. The author also analyses transitional economies using the case of Vietnam. The author investigates the influence of independent directors upon the probability of CEO turnover as well as the sensitivity of the link between performance and turnover. The findings show that non-executive directors are not always independent. At the same time, independent directors have a vital role to play in making decisions concerning CEO dismissal. These directors also reduce the effects of CEO ownership and CEO duality upon the probability of CEO turnover. In summation, the research found that performance and CEO age constitute key factors in CEO turnover, regardless of the corporation or board size.

scholarly journals Passive investors: Implications for corporate governance

2020 ◽  
Vol 4 (2) ◽  
pp. 8-17 ◽  
Author(s):  
Hugh Grove ◽  
Mac Clouse ◽  
Thomas King
Keyword(s):  
Corporate Governance ◽  
Stock Prices ◽  
Research Question ◽  
Theory And Practice ◽  
Investment Horizon ◽  
Short Term ◽  
Valuation Model ◽  
Governance Practices ◽  
Passive Investors

The key research question of this paper is to explore the major implications for corporate governance from the emergence and perspective of passive investors. Passive investors care more about long-term governance practices than short-term financial metrics. They do not trade shares when accounting balances or stock prices fluctuate since they have a long-term perspective. They desire a new investor relations approach, based upon independent directors discussing key corporate governance topics of board refreshment, sustainability, and compensation with the stewardship officers of passive investors. Thus, financial accounting is moving back to a stewardship purpose of accounting versus an investment valuation model. The corporate governance literature relating to investors has only focused on active, not passive, investors. The emergence and perspective of passive investors are relevant for updating the theory and practice of corporate governance as follows. Passive investors have a long-term sustainability perspective, not a short-term focus to make financial analysts’ quarterly predictions. Passive investors focus upon three board of directors’ committees: nominating, audit, and compensation, with emphasis on a stewardship officer, a lead director, board refreshment, an indefinite investment horizon, and sustainability risks.

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