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Corporate Executives (corporate + executive)
Selected AbstractsThe Emergence of Corporate Governance from Wall St. to Main St.: Outside Directors, Board Diversity, Earnings Management, and Managerial Incentives to Bear RiskFINANCIAL REVIEW, Issue 1 2003M. Andrew Fields Recent corporate events have brought a heightened public awareness to corporate governance issues. Much work has been accomplished to date, but it is clear that much more remains to be done. This paper provides a review of empirical research in four relevant areas of corporate governance. Specifically, the paper provides an overview of (a) the role that outside directors play in monitoring managers, (b) the emerging literature on the impact of board diversity, (c) the existence of and incentives for corporate executives to manage firm earnings, and (d) managerial incentives to bear risk. [source] Baylor University Roundtable on The Corporate Mission, CEO Pay, and Improving the Dialogue with InvestorsJOURNAL OF APPLIED CORPORATE FINANCE, Issue 1 2010John Martin A small group of academics and practitioners discusses four major controversies in the theory and practice of corporate finance: ,What is the social purpose of the public corporation? Should corporate managements aim to maximize the profitability and value of their companies, or should they instead try to balance the interests of their shareholders against those of "stakeholder" groups, such as employees, customers, and local communities? ,Should corporate executives consider ending the common practice of earnings guidance? Are there other ways of shifting the focus of the public dialogue between management and investors away from near-term earnings and toward longer-run corporate strategies, policies, and goals? And can companies influence the kinds of investors who buy their shares? ,Are U.S. CEOs overpaid? What role have equity ownership and financial incentives played in the past performance of U.S. companies? And are there ways of improving the design of U.S. executive pay? ,Can the principles of corporate governance and financial management at the core of the private equity model,notably, equity incentives, high leverage, and active participation by large investors,be used to increase the values of U.S. public companies? [source] GLOBAL EVIDENCE ON THE EQUITY RISK PREMIUMJOURNAL OF APPLIED CORPORATE FINANCE, Issue 4 2003Elroy Dimson The size of the equity risk premium,the incremental return that shareholders require to hold risky equities rather than risk-free securities,is a key issue in corporate finance. Financial economists generally measure the equity premium over long periods of time in order to obtain reliable estimates. These estimates are widely used by investors, finance professionals, corporate executives, regulators, lawyers, and consultants. But because the 20th century proved to be a period of such remarkable growth in the U.S. economy, estimates of the risk premium that rely on past market performance may be too high to serve as a reliable guide to the future. The authors analyze a 103-year history of risk premiums in 16 countries and conclude that the U.S. risk premium relative to Treasury bills was 5.3% for that period,lower than previous studies suggest,as compared to 4.2% for the U.K. and 4.5% for a world index. But the article goes on to observe that the historical record may still overstate expectations of the future risk premium, partly because market volatility in the future may be lower than in the past, and partly because of a general decline in risk resulting from new technological advances and increased diversification opportunities for investors. After adjusting for the expected impact of these factors, the authors calculate forward-looking equity risk premiums of 4.3% for the U.S., 3.9% for the U.K., and 3.5% for the world index. At the same time, however, they caution that the risk premium can fluctuate over time and that managers should make appropriate adjustments when there are compelling economic reasons to think that expected premiums are unusually high or low. [source] SIX CHALLENGES IN DESIGNING EQUITY-BASED PAYJOURNAL OF APPLIED CORPORATE FINANCE, Issue 3 2003Brian J. Hall The past two decades have seen a dramatic increase in the equitybased pay of U.S. corporate executives, an increase that has been driven almost entirely by the explosion of stock option grants. When properly designed, equity-based pay can raise corporate productivity and shareholder value by helping companies attract, motivate, and retain talented managers. But there are good reasons to question whether the current forms of U.S. equity pay are optimal. In many cases, substantial stock and option payoffs to top executives,particularly those who cashed out much of their holdings near the top of the market,appear to have come at the expense of their shareholders, generating considerable skepticism about not just executive pay practices, but the overall quality of U.S. corporate governance. At the same time, many companies that have experienced sharp stock price declines are now struggling with the problem of retaining employees holding lots of deep-underwater options. This article discusses the design of equity-based pay plans that aim to motivate sustainable, or long-run, value creation. As a first step, the author recommends the use of longer vesting periods and other requirements on executive stock and option holdings, both to limit managers' ability to "time" the market and to reduce their incentives to take shortsighted actions that increase near-term earnings at the expense of longer-term cash flow. Besides requiring "more permanent" holdings, the author also proposes a change in how stock options are issued. In place of popular "fixed value" plans that adjust the number of options awarded each year to reflect changes in the share price (and that effectively reward management for poor performance by granting more options when the price falls, and fewer when it rises), the author recommends the use of "fixed number" plans that avoid this unintended distortion of incentives. As the author also notes, there is considerable confusion about the real economic cost of options relative to stock. Part of the confusion stems, of course, from current GAAP accounting, which allows companies to report the issuance of at-the-money options as costless and so creates a bias against stock and other forms of compensation. But, coming on top of the "opportunity cost" of executive stock options to the company's shareholders, there is another, potentially significant cost of options (and, to a lesser extent, stock) that arises from the propensity of executives and employees to place a lower value on company stock and options than well-diversified outside investors. The author's conclusion is that grants of (slow-vesting) stock are likely to have at least three significant advantages over employee stock options: ,they are more highly valued by executives and employees (per dollar of cost to shareholders); ,they continue to provide reasonably strong ownership incentives and retention power, regardless of whether the stock price rises or falls, because they don't go underwater; and ,the value of such grants is much more transparent to stockholders, employees, and the press. [source] WHAT DO WE KNOW ABOUT STOCK REPURCHASES?JOURNAL OF APPLIED CORPORATE FINANCE, Issue 1 2000Gustavo Grullon Stock repurchases by U.S. companies experienced a remarkable surge in the 1980s and ,90s. Indeed, in 1998, the total value of all stock repurchased by U.S. companies exceeded for the first time the total amount paid out as cash dividends. And the U.S. repurchase movement has gone global in the past few years, spreading not only to Canada and the U.K., but also to countries like Japan and Germany, where such transactions were prohibited until recently. Why are companies buying back their stock in such amounts? After dismissing the popular argument that stock repurchases boost earnings per share, the authors argue that repurchases serve to add value in two main ways: (1) they provide managers with a tax-efficient means of returning excess capital to shareholders and (2) they allow managers to "signal" to investors their view that the firm is undervalued. Returning excess capital is value-adding for two reasons: First, it helps prevent companies from pursuing growth and size at the expense of profitability and value. Second, by returning capital to investors, repurchases (like dividends) play the critically important economic function of allowing investors to channel their investment from mature or declining sectors of the economy to more promising ones. But if stock repurchases and dividends serve the same basic economic function, why are repurchases growing more rapidly? Part of the explanation is that, because repurchases are taxed as capital gains and dividends as ordinary income, repurchases are a more tax-efficient way of distributing excess capital. But perhaps even more important than their tax treatment is the flexibility that (at least) open market repurchases provide corporate managers-flexibility to make small adjustments in capital structure, to exploit (or correct) perceived undervaluation of the firm's shares, and possibly even to increase the liquidity of the stock, which could be particularly valuable in bear markets. For U.S. regulators, the growth in open market stock repurchases raises some interesting issues. Perhaps most important, companies are not required to (and rarely do) furnish their investors with details about a given program's structure, execution method, number of shares repurchased, or even its duration. Policy regulators (and corporate executives as well) should consider some of the benefits provided by other systems, notably Canada's, which provide greater transparency and more guidelines for the repurchase process. [source] The Bunshaft Tapes: A Preliminary ReportJOURNAL OF ARCHITECTURAL EDUCATION, Issue 2 2000Reinhold Martin Among the material collected in the Gordon Bunshaft Papers in the Avery Architectural and Fine Arts Library Archives at Columbia University are seventeen audiocassette tapes documenting a series of interviews between Arthur Drexler (1925-1987), curator of architecture and design at the Museum of Modern Art, and Gordon Bunshaft (1909-1990) of Skidmore, Owings & Merrill (SOM). In these tapes, Bunshaft and Drexler proceed systematically through Bunshaft's work for SOM, with Drexler consistently probing for evidence of authorial intentionality, resisted by Bunshaft. This report considers the manner in which these tapes construct a complex "orality," in which Bunshaft's testimony refuses the intertextual mediation implied by Drexler's questions, which themselves rely on the authority of an oral testimony to guarantee the authenticity of the answers. In turn, Bunshaft's refusals to engage with architectural discourse in the name of a pseudotransparent pragmatics demonstrate the extent of his identification with the ethos of his clients, corporate executives whose "visionary" status in the postwar period was a function of their own-discursive-privileging of pragmatic action over reflective discourse. [source] Can the attorney-client and work-product privileges survive the annual audit?JOURNAL OF CORPORATE ACCOUNTING & FINANCE, Issue 4 2009Blaise M. Sonnier The IRS has been aggressively pursuing tax accrual workpapers in court. If the IRS prevails, corporate executives who rely on the legal advice of attorneys in making decisions may be providing litigation road maps to those who sue their companies. This potential exposure of tax accrual workpapers is a wake-up call for executives. They must review their procedures for seeking and securing legal advice. The authors reveal the vital steps management must take to protect privileged documents. © 2009 Wiley Periodicals, Inc. [source] Digital analysis: A better way to detect fraudJOURNAL OF CORPORATE ACCOUNTING & FINANCE, Issue 4 2007James A. Tackett The Sarbanes-Oxley Act (SOX) has put corporate executives under the gun when it comes to detecting financial statement fraud. Unfortunately, most methods for discovering fraud are expensive and time-consuming. But there is one fast, inexpensive method you may not be using: digital analysis. The author explains what it is and how to use it. © 2007 Wiley Periodicals, Inc. [source] The political bottom line: the emerging dimension to corporate responsibility for sustainable developmentBUSINESS STRATEGY AND THE ENVIRONMENT, Issue 6 2005Jem Bendell Abstract This paper explores the idea that businesses are being moved to proactively manage their political activities and influence in relation to their often-expressed responsibility for promoting sustainable development, which we define as managing the ,political bottom line'. We argue that three key drivers account for this shift: first, the growing criticism of voluntary corporate responsibility initiatives; second, the increasing awareness and targeting of corporate political activities, and third, a realization among certain corporate executives and financiers that, without changes to public policies, an individual company's own voluntary responsibility may not deliver sufficient commercial returns. We describe several initiatives on public policy dimensions of sustainable development, which indicate that some companies are beginning to manage their political power in light of societal concerns. In conclusion, we discuss the potential and limits of a ,political bottom line' concept by critiquing the mainstream triple bottom line discourse.Copyright © 2005 John Wiley & Sons, Ltd and ERP Environment. [source] CREATING VALUE IN PENSION PLANS (OR, GENTLEMEN PREFER BONDS)JOURNAL OF APPLIED CORPORATE FINANCE, Issue 4 2003Jeremy Gold Pension funds are typically one-half to two-thirds invested in equities because equities are expected to outperform other financial assets over the long term, and the long-term nature of pension fund liabilities seems well suited to absorbing any short-term return volatility. What's more, U.S. GAAP currently makes it possible to take credit in advance for the higher anticipated earnings on equity investments without acknowledging their inherent risk. But by allowing the higher expected returns from stocks to reduce a company's current pension expenses, the accounting treatment conflicts with some very basic principles of finance (in particular, the idea that investors must earn higher returns on riskier investments just to "break even"), conceals systematic biases in the actuarial analysis, and gives managers considerable latitude to manipulate the bottom line. The authors suggest a startlingly different approach. They argue that pension assets should be invested entirely in duration-matched debt instruments for two reasons: (1) to capture the full tax benefits of pre-funding their pension obligations and (2) to improve overall corporate risk profiles by converting general stock market risk into firm-specific operating risk, where corporate managers should have a comparative advantage and can generate real value. Investing exclusively in bonds would take better advantage of the tax-exempt status of pension plans and greatly reduce fund management costs, while at the same time helping o shore up fund quality and sharpening corporate executives' focus on their real operating assets. [source] | ||||||||||