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Article
Publication date: 5 October 2015

Karim S. Rebeiz

The purpose of this paper is to unravel the root causes as to why the boardroom independence–corporate performance linkage remains an elusive conundrum in the academic…

Abstract

Purpose

The purpose of this paper is to unravel the root causes as to why the boardroom independence–corporate performance linkage remains an elusive conundrum in the academic literature, and to propose practical recommendations for future research endeavors.

Design/methodology/approach

The probing of the underlying issues is made via an extensive review of the existing literature. A thoughtful analysis is conducted from a multi-disciplinary perspective by soliciting feedback from academics with corporate governance expertise in finance, accounting, economy, strategy, management and organizational behavior.

Findings

The lack of consensus on the economic value of an independent boardroom is attributed to three reasons. The first reason is ontological complexities inherent to the very nature of the corporation. The second reason is methodological complexities intrinsic to normative research with large archival data. The third reason is self-serving behavioral motive that cannot be factored in archival data.

Research limitations/implications

The infusion of complementary methodologies to the existing empirical dogmatism would provide the framework for a better understanding of corporate governance challenges and opportunities, particularly as it relates to making causal inferences on boardroom independence and corporate performance.

Practical implications

New insights on boardroom independence would directly influence corporate practices.

Social implications

The determination as to what constitutes optimum boardroom configuration has emerged as an issue of considerable importance to shareholders, policymakers and other stakeholders.

Originality/value

Virtually no studies have been conducted in a comprehensive and systematic manner addressing the fundamental question as to why research pertaining to boardroom independence–corporate performance has not yielded unequivocal results in the relevant academic literature, thus the originality and value of this research.

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Article
Publication date: 28 January 2014

Pieter-Jan Bezemer, Stefan Peij, Laura de Kruijs and Gregory Maassen

This study seeks to explore how non-executive directors address governance problems on Dutch two-tier boards. Within this board model, challenges might be particularly

Abstract

Purpose

This study seeks to explore how non-executive directors address governance problems on Dutch two-tier boards. Within this board model, challenges might be particularly difficult to address due to the formal separation of management boards' decision-management from supervisory boards' decision-control roles.

Design/methodology/approach

Semi-structured interviews and a questionnaire among non-executive directors provide unique insights into three major challenges in the boardrooms of two-tier boards in The Netherlands.

Findings

The study indicates that non-executive directors mainly experience challenges in three areas: the ability to ask management critical questions, information asymmetries between the management and supervisory boards and the management of the relationship between individual executive and non-executive directors. The qualitative in-depth analysis reveals the complexity of the contributing factors to problems in the boardroom and the range of process and social interventions non-executive directors use to address boardroom issues with management and the organization of the board.

Practical implications

While policy makers have been largely occupied with the “right” board composition, the results highlight the importance of adequately addressing operational challenges in the boardroom. The results emphasize the importance of a better understanding of board processes and the need of non-executive directors to carefully manage relationships in and around the boardroom.

Originality/value

Whereas most studies have focussed on regulatory initiatives to improve the functioning of boards (e.g. the independence of the board), this study explores how non-executive directors attempt to enhance the effectiveness of boards on which they serve.

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Book part
Publication date: 1 June 2005

Karim S. Rebeiz

The efforts to improve on the stewardship role of corporate governance have mainly emanated from external forces, such as pressure from shareholder groups, regulators…

Abstract

The efforts to improve on the stewardship role of corporate governance have mainly emanated from external forces, such as pressure from shareholder groups, regulators, organized exchanges and courthouses. However, past research and field evidence, not the least being the Enron's scandal, have demonstrated that the independent structure of the board is far from being a guarantee to its optimum performance. Building on survey results administered to individuals with significant boardroom experience, it is argued in this paper that the quest for complete autonomy in the boardroom should be extended beyond the structural configuration to also include the psychological independence dimension.

Details

Corporate Governance
Type: Book
ISBN: 978-0-7623-1187-3

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Article
Publication date: 25 July 2019

Muhammad Usman, Muhammad Umar Farooq, Junrui Zhang, Nanyan Dong and Muhammad Abdul Majid Makki

The purpose of this paper is to investigate the crucial question of whether gender diversity in boardroom is associated with CEO pay and CEO pay-performance link.

Abstract

Purpose

The purpose of this paper is to investigate the crucial question of whether gender diversity in boardroom is associated with CEO pay and CEO pay-performance link.

Design/methodology/approach

The authors used the data of companies listed on the Pakistan Stock Exchange for a sample consisting of KSE-100 index companies for the period of five years. The authors used the ordinary least square regression technique to test the developed hypotheses. The authors also used the two-step Heckman selection model, two-stage least square regression and propensity score matching method to control the problem of endogeneity.

Findings

The authors find reliable evidence of a negative association between gender diversity and CEO pay and of board gender diversity’s strengthening the relationship between CEO pay and firm performance. The authors also find that women director are more effective in setting the optimal contract in non-family-owned firms and firms with dispersed ownership structure as compared to family-owned firms and firms with concentrated ownership structure. Moreover, results also reflect that the influence of board diversity on both CEO pay and CEO pay-performance link is stronger when gender diversity goes beyond tokenism.

Practical implications

The findings have implications in terms of providing the basis for policy makers to accord the same level of importance to gender diversity in the boardroom as well as contributing to the current debate on the desirability of mandating or recommending gender diversity on boardrooms.

Originality/value

This study is among the few studies which investigate the moderating role of boardroom gender diversity on the CEO pay-performance link. In addition, this study contributes to the institutional theory by providing the empirical evidence that the effect boardroom gender diversity on CEO pay and CEO pay-performance link varies by type of ownership.

Details

International Journal of Manpower, vol. 40 no. 7
Type: Research Article
ISSN: 0143-7720

Keywords

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Article
Publication date: 6 June 2016

Karim S. Rebeiz

Boardroom’s effectiveness has emerged as an issue of considerable importance in the minds of academics and practitioners, particularly in the aftermath of the highly…

Abstract

Purpose

Boardroom’s effectiveness has emerged as an issue of considerable importance in the minds of academics and practitioners, particularly in the aftermath of the highly visible corporate governance scandals of the past few decades. The purpose of this paper is to shed new lights on this topic by proposing a robust design framework for boardroom’s effectiveness.

Design/methodology/approach

The interpretative investigation is based on semi-structured interviews administered to directors of Fortune 500 firms. The adopted thematic analysis is phenomenology, or the feelings, experiences and perceptions of events as depicted first hand by individuals with significant boardroom’s experience.

Findings

Two central findings could be construed from this investigation. First, the optimum boardroom’s configuration is not a universal proposition. In other words, there are no magic recipes, and no one-size fits all approach. Rather, the optimum boardroom’s configuration ought to be framed in light of the overarching needs of the firm in relation to the dynamic forces in the external environment. Second, the design of boardrooms ought to span beyond structural aspects (i.e. the outwardly visible aspects) to also encompass two largely unobserved boardroom’s phenomena, namely, the directorship personal trait factors and the directorship behavioral patterns.

Research limitations/implications

The findings presented herein may be contaminated with cognitive and personal biases, a common and unavoidable occurrence in qualitative research. A more integrative research approach using inductive and deductive techniques would allow for triangulation of results, thus providing an additional dose of validity and relevance to the research findings.

Practical implications

There has been a growing disenchantment about the modus operandi of the board of directors among practitioners, particularly as it pertains to large corporations with diffuse and heterogeneous shareholders and stakeholders. New design guidelines for the board of directors would directly impact on corporate practices.

Social implications

The design of high performance boardrooms is instrumental to shareholders, policymakers, directors, executives, rank and file employees, suppliers, customers and other direct and indirect stakeholders, as it may help avert future corporate governance mishaps.

Originality/value

As of today, the academic and popular literature has yet to provide unequivocal guidance for the development of high performance boardrooms. This study fills an important gap in the prevailing corporate governance literature by integrating both structural and socio-cognitive factors into the design framework of the board of directors.

Details

Corporate Governance, vol. 16 no. 3
Type: Research Article
ISSN: 1472-0701

Keywords

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Article
Publication date: 30 April 2019

Muhammad Usman, Muhammad Umar Farooq, Junrui Zhang, Muhammad Abdul Majid Makki and Muhammad Kaleem Khan

This paper aims to investigate the question concerning whether gender diversity in the boardroom matters to lenders or not?

Abstract

Purpose

This paper aims to investigate the question concerning whether gender diversity in the boardroom matters to lenders or not?

Design/methodology/approach

To answer this question, the authors use the data from 2009 to 2015 of all A-share listed companies on the Shanghai and Shenzhen stock exchanges. The authors use ordinary least squares regression and firm fixed effect regression to draw our inferences. To check and control the issue of endogeneity the authors use one-year lagged gender diversity regression, two-stage least squares regression, propensity score matching method and Heckman two-stage regression.

Findings

The results suggest that the presence of female directors on the board reduces managerial opportunistic behavior and information asymmetry and, consequently, creditors’ perceptions about the probability of loan default and the cost of debt. The authors find that lenders charge 4 per cent less from borrowers that have at least one female board member than they do from borrowers with no female board members. The authors also find that the board structure (i.e. gender diversity) of government-owned firms also matters to lenders, as government-owned firms that have gender-diverse boards have a lower cost of debt (i.e. 5 per cent lower interest rate).

Practical Implications

The findings have implications for individual borrowers and for regulators. For example, borrowers can get debt financing at lower rates by altering their boards’ composition (i.e. through gender diversity). From the regulatory perspective, the results support recent legislative initiatives around the world regarding female directors’ representation on boards.

Originality Value

This paper makes several contributions. First, beyond the recent studies on boardroom gender, the authors investigate the relationship between gender diversity in the boardroom and the cost of debt. Second, the authors extend the literature on the association between government ownership and cost of debt by first time providing evidence that the board composition (e.g. gender diversity) of government-owned firms also matters to the lenders. The other contributions are discussed in the introduction section.

Details

Managerial Auditing Journal, vol. 34 no. 4
Type: Research Article
ISSN: 0268-6902

Keywords

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Article
Publication date: 16 July 2020

Muhammad Usman, Muhammad Abubakkar Siddique, Muhammad Abdul Majid Makki, Ammar Ali Gull, Ali Dardour and Junming Yin

In this paper, the authors investigate whether an independent and gender-diverse compensation committee strengthens the relationship between top managers' pay and firm…

Abstract

Purpose

In this paper, the authors investigate whether an independent and gender-diverse compensation committee strengthens the relationship between top managers' pay and firm performance in Chinese companies. The authors also investigate whether the independent compensation committee composed of all male directors is effective in designing the optimal contract for executives.

Design/methodology/approach

The authors use data from A-share listed companies on the Shenzhen and Shanghai stock exchanges from 2005 to 2015. As a baseline methodology, the authors use pooled ordinary least square (OLS) regression to draw inferences. In addition, cluster OLS regression, two-stage least square regression, the two-stage Heckman test and the propensity score matching method are also used to control for endogeneity issues.

Findings

The authors find evidence that an independent or gender-diverse compensation committee strengthens the link between top managers' pay and firm performance; that the presence of a woman on the compensation committee enhances the positive influence of committee independence on this relationship; that a compensation committee's independence or gender diversity is more effective in designing top managers' compensation in legal-person-controlled firms than they are in state-controlled firms; that gender diversity on the compensation committee is negatively associated with top managers' total pay; and that an independent compensation committee pays top managers more.

Practical implications

The study results highlight the role of an independent compensation committee in designing optimal contracts for top managers. The authors provide empirical evidence that a woman on the compensation committee strengthens its objectivity in determining top managers' compensation. The study finding supports regulatory bodies' recommendations regarding independent and women directors.

Social implications

The study findings contribute to the recent debate about gender equality around the globe. Given the discrimination against women, many regulatory bodies mandate a quota for women on corporate boards. The study findings support the regulatory bodies' recommendations by highlighting the economic benefit of having women in top management positions.

Originality/value

This study contributes to literature by investigating the largely overlooked questions of whether having a gender-diverse or independent compensation committee strengthens the relationship between top managers' pay and firm performance; whether an independent compensation committee is more efficient in setting executives' pay when it is gender-diverse; and whether the effect of independent directors and female directors on top managers' compensation varies based on the firm's ownership structure. Overall, the main contribution of the study is that the authors provide robust empirical evidence in support of the managerial power axiom.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

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Article
Publication date: 1 June 2002

The newspaper headlines and TV commentaries are nearly unanimous. There is a crisis of confidence in Corporate America.

Abstract

The newspaper headlines and TV commentaries are nearly unanimous. There is a crisis of confidence in Corporate America.

Details

Journal of Business Strategy, vol. 23 no. 6
Type: Research Article
ISSN: 0275-6668

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Article
Publication date: 24 January 2018

Jonty Tshipa, Leon Brummer, Hendrik Wolmarans and Elda Du Toit

Considering that the Johannesburg Stock Exchange (JSE) has enacted in its Listings Requirements, compliance of listed firms to International Financial Reporting Standards…

Abstract

Purpose

Considering that the Johannesburg Stock Exchange (JSE) has enacted in its Listings Requirements, compliance of listed firms to International Financial Reporting Standards (IFRS) and King Code of Good Corporate Governance, this study aims to investigate the impact of internal corporate governance attributes on the value relevance of accounting information in South Africa.

Design/methodology/approach

The fixed effect generalised least squares regression is used for the period from 2002 to 2014. Proxies for internal corporate governance are the size of the board, leadership structure, board activity, staggered board, boardroom independence, presence of key committees and board gender diversity. Value relevance is measured using the adjusted R2 derived from a regression of stock price on earnings and equity book values by following Ohlson’s accounting-based valuation framework.

Findings

The findings suggest that the net asset value per share is value-relevant in South African listed firms and also when the boardroom is largely independent. The value of earnings per share (EPS) is more robust when corporate governance structures, such as separating the roles of chief executive officer and chairperson, proportion of board-independent board members and presence of board committees, are in place. This suggests that EPS favours agency and resource dependence theories.

Practical implications

The value relevance of accounting information in the South African financial market underscores the importance of requisite rules and supervision regarding financial reporting to allow asset owners and managers in the allocation of capital decisions. This study supports the view that corporate governance plays a key role in ensuring, amongst others, credible financial reporting. The outcome of this study could inform the JSE to enforce, even stricter, compliance with IFRS and corporate governance to improve the value relevance of financial information.

Social implications

Significant corporate governance reforms around the world suggest that regulators and policy makers consider corporate governance as a pertinent tonic in ensuring, amongst others, credible financial reporting. The implications of the study might assure users of financial information of how compliance to corporate governance practices may influence the value of the firm. This paper provides empirical evidence in the South African context that EPS, unlike net asset value per share, is driven by corporate governance structures.

Originality/value

The period of this study is unique, because it covers a relatively stable economic period before the financial crisis, a challenging and unstable period of time when the financial crisis materialised, and the aftermath of the financial crisis. In addition, the examination period of the study also covers the two corporate governance reforms in South Africa, King II in 2002 and King III in 2009, as well as the new Companies Act No. 71 of 2008. These exogenous factors may influence the results.

Details

Corporate Governance: The International Journal of Business in Society, vol. 18 no. 3
Type: Research Article
ISSN: 1472-0701

Keywords

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Article
Publication date: 1 November 2003

Judy McGregor

A dramatic acceleration in “girl power” predicted for the boardrooms of major New Zealand business is examined against the notion that age is a traditional demographic…

Abstract

A dramatic acceleration in “girl power” predicted for the boardrooms of major New Zealand business is examined against the notion that age is a traditional demographic variable influencing board selection. For example, the average age of directors in Canada and the USA is 59 years, with 56 per cent of Canadian directors over 60 years. The paper examines whether there is a generational divide between younger women with higher educational qualifications who have “fast‐tracked” onto boards and older female directors with substantial business experience and expertise and the seniority to dedicate the time to board membership. Six interviews were undertaken with women under 40 years who are directors, and with older women, aged 45 years and over, on the same three boards. Similarities and differences in selection and perceptions of the role are analysed. Whether being young and female is a form of double jeopardy or an expression of boardroom diversity in action is explored.

Details

Women in Management Review, vol. 18 no. 7
Type: Research Article
ISSN: 0964-9425

Keywords

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