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Article
Publication date: 15 July 2021

Haynes Cooney, Peter Korsten and Anthony Marshall

The recent IBM Institute for Business Value CEO survey of 3,000 chief executives globally offers insight into CEO attitudes and behaviors in order to discern the…

Abstract

Purpose

The recent IBM Institute for Business Value CEO survey of 3,000 chief executives globally offers insight into CEO attitudes and behaviors in order to discern the strategies and actions most highly correlated to successful digital transformation and performance.

Design/methodology/approach

The IBM Institute for Business Value, in collaboration with the Oxford Economics, surveyed 3,000 CEOs and senior public sector executives between September and November 2020. The analysis identified a group of CEOs whose outlook on transformation and success with digital implementation sets them apart from others.

Findings

These Dynamic CEOs, who represent 38 percent of all commercial leaders in the IBM IBV research, shared two crucial insights: that traditional business models no longer differentiate their organizations; their organization?s digital transformation journey will never be complete.

Practical/implications

These Dynamic CEOs are almost 70 percent more likely to lead high performing organizations than other top leaders.

Originality/value

Almost 90 percent of Dynamic CEOs expect their business and IT investments to deliver a material improvement in business performance over the next three years, with the greatest emphasis on investments in customer experience improvement, decision-making processes and business agility.

Details

Strategy & Leadership, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1087-8572

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Book part
Publication date: 19 March 2018

Naseem Ahamed and Nitya Nand Tripathi

Change of leadership is a big and important incident in the life of a company. As important as it is for the company, it is equally a difficult decision to make for the…

Abstract

Change of leadership is a big and important incident in the life of a company. As important as it is for the company, it is equally a difficult decision to make for the board of directors. Most of the big companies have a committee dedicated toward laying out a succession plan of the existing chief executive officer (CEO). The big dilemma, however, is whether to appoint someone from within the company and let him or her lead as he or she has been associated with the company and knows the internal dynamics better or to induct some outsider and take advantage of his or her expertise/reputation in the market. The balance appears lopsided when the result of this chapter is perused. Companies on an average seem to reap more benefits if an existing executive is promoted to the office of CEO rather than hiring an outsider. The benefits which are talked here from promoting insiders are indirect ones and do not have a direct bearing with the finances of the company. As shown by the results that insiders are more likely to continue with the company for a longer duration as the CEO as well as not as the CEO which defers the hiring and firing costs (screening candidates, conducting interviews, huge severance packages, golden parachutes, etc., are the costs referred to) for a longer period. Other benefits arising from insider CEOs are upfront awareness about the company’s work culture, production/service capacity, efficiency, strategies followed till date, etc., which gives him or her a head start compared to an outsider.

Details

Global Tensions in Financial Markets
Type: Book
ISBN: 978-1-78714-839-0

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Book part
Publication date: 26 November 2016

Yusuf Mohammed Nulla

Abstract

Details

The Theory and Practice of Directors’ Remuneration
Type: Book
ISBN: 978-1-78560-683-0

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Book part
Publication date: 1 November 2008

Atreya Chakraborty and Shahbaz Sheikh

This study investigates the impact of corporate governance mechanisms on performance related turnover. Our results indicate that smaller boards and institutional block…

Abstract

This study investigates the impact of corporate governance mechanisms on performance related turnover. Our results indicate that smaller boards and institutional block holders are positively related to the likelihood of performance related turnover. CEOs that also hold the position of the chairman of the board or belong to a founding family face lower likelihood of turnover. CEO stock ownership is negatively related to turnover and CEOs who own 3 percent or more of their company stock face a significantly lower likelihood of performance related turnover. Moreover, protection from external control market has no effect either on the likelihood of turnover.

Details

Institutional Approach to Global Corporate Governance: Business Systems and Beyond
Type: Book
ISBN: 978-1-84855-320-0

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Article
Publication date: 16 July 2021

Christine Naaman and Li Sun

This study aims to examine whether and how the power of a chief executive officer (CEO) relates to firm-level research and development (R&D) investment.

Abstract

Purpose

This study aims to examine whether and how the power of a chief executive officer (CEO) relates to firm-level research and development (R&D) investment.

Design/methodology/approach

The authors use clustered standard errors ordinary least squares regression using a large sample of US firms from 1994 to 2017.

Findings

The authors find a significant negative relation between CEO power and R&D investment, suggesting that firms with more powerful CEOs are less likely to invest in R&D activities. Besides, the study finds that this significant negative relation is largely driven by firms with weaker corporate governance.

Originality/value

This study contributes to the finance literature on the impact and consequences of having powerful CEOs and the financial accounting literature on the determinants of R&D expenditures.

Details

Accounting Research Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1030-9616

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Article
Publication date: 15 July 2021

Radwan Alkebsee, Adeeb A. Alhebry and Gaoliang Tian

Scholars have investigated the association between executives' incentives and earnings management. Most of the extant literature focuses on equity executives' incentives…

Abstract

Purpose

Scholars have investigated the association between executives' incentives and earnings management. Most of the extant literature focuses on equity executives' incentives, while most of the earnings management literature focuses on accrual earnings management (AEM), not real earnings management (REM). This paper investigates the association between chief executive officers’ (CEOs) and chief financial officer (CFOs) cash compensation and REM and explores who has more influence on REM, the CEO or the CFO.

Design/methodology/approach

The authors use the data of all listed companies on the Shanghai and Shenzhen Stock Exchanges for the period from 2009 to 2017 and ordinary least squares regression as a baseline model and the Chow test to capture whether the CEO's or the CFO's cash compensation has more influence on REM. To address potential endogeneity issues, the authors use a firm-fixed effect technique and two-stage least squares regression.

Findings

The authors find that CEOs' and CFOs' cash compensation is significantly associated with REM, suggesting that paying non-equity compensation to the CEO and CFO is negatively associated with REM. The authors also find that the CFO's cash compensation has a more significant influence on REM than the CEO's cash compensation, suggesting that the CFO's accounting and financial knowledge strengthens his or her power on the quality of financial reporting.

Practical implications

The study contributes to the literature of agency and contract theories by using cash-based compensation to provide strong evidence that CEO's and CFO's compensation is associated with REM. It also contributes to the earnings management literature by examining the effect of CEOs' and CFOs' cash compensation on earnings management using proxies for REM-related activities. The study also contributes to the institutional theory by providing empirical evidence on the governance role of executives' cash compensation in deterring REM. Finally, it is the first to examine the relationship between CEO's and CFO's cash compensation and REM, and the first to explore who is more influential regarding REM in emerging markets, the CEO or the CFO.

Originality/value

As a response to the call for investigations of the role of non-equity-based compensation in earnings management and the call to consider non-developed institutional contexts in governance research, this study extends prior studies by providing novel evidence on the relationship between CEOs' and CFOs' non-equity compensation and REM in China's emerging market. The study documents that the CFO has a greater influence on REM than the CEO does.

Details

Journal of Accounting in Emerging Economies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2042-1168

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Article
Publication date: 29 July 2021

Xu Niu

In this paper, the author attempts to answer an important question upon founder-CEOs' exiting: How do they sell their remaining ownership shares? The literature has…

Abstract

Purpose

In this paper, the author attempts to answer an important question upon founder-CEOs' exiting: How do they sell their remaining ownership shares? The literature has largely been silent on this question, and therefore is missing an important piece of the puzzle on the final stage of the founding entrepreneurs' involvement in their companies.

Design/methodology/approach

The author uses both theoretical models and empirical methods to examine how founder-CEOs sell their remaining ownership shares.

Findings

The author finds that founder-CEOs of high-growth firms and those with high managerial ability are more likely to sell remaining ownership shares gradually rather than suddenly. Moreover, if either the growth or the managerial ability is high, founder-CEOs managing firms with high volatility tend to sell gradually.

Originality/value

This paper provides insights into the final stage of founding entrepreneurs' involvement in companies. The methodology of pattern recognition also helps investors and regulators in tracking and monitoring stock trading of founders and other company insiders.

Details

International Journal of Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1743-9132

Keywords

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Article
Publication date: 26 July 2021

Ayishat Omar, Alex P. Tang and Yu Cong

The purpose of this study is to investigate how compensation committee structure or characteristic impacts say on pay (SOP) voting dissent and the impact of SOP dissent on…

Abstract

Purpose

The purpose of this study is to investigate how compensation committee structure or characteristic impacts say on pay (SOP) voting dissent and the impact of SOP dissent on chief executive officer (CEO) turnover.

Design/methodology/approach

The authors use corporate governance and SOP data to test the relationships amongst variables. Additional analysis is performed using one-to-one propensity-score matched samples.

Findings

The authors find that firm-years with at least a female member present on the compensation committee are associated with lower SOP dissent. The authors find mixed results of the impact of SOP dissent on CEO turnover.

Practical implications

This paper suggests that diversity on the compensation committee, particularly the presence of at least a female member on the committee, serves as an important determinant of SOP voting outcome in the USA. The paper provides policymakers and practitioners with insights into factors influencing SOP voting outcomes and implications of SOP dissent for firms.

Originality/value

The findings of this paper contribute to the corporate governance literature by enhancing the understanding of the role of the compensation committee as it relates to SOP dissent and effect of SOP dissent on CEO turnover.

Details

Accounting Research Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1030-9616

Keywords

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Article
Publication date: 15 July 2021

Moncef Guizani and Ahdi Noomen Ajmi

This study aims to explore the role of board gender diversity in mitigating chief executive officer (CEO) luck. CEOs are “lucky” when they receive stock option grants on…

Abstract

Purpose

This study aims to explore the role of board gender diversity in mitigating chief executive officer (CEO) luck. CEOs are “lucky” when they receive stock option grants on days when the stock price is the lowest in the month of the grant, implying opportunistic timing.

Design/methodology/approach

This study uses a logistic regression analysis and an instrumental-variable analysis. The sample consists of 3,249 firm-year observations from 2010 through 2015.

Findings

The results show that female directors significantly deter the opportunistic timing of option grants. This study finds that gender diversity – as measured by the percentage of women on the board, the percentage of female independent directors and the percentage of female directors on the compensation committee are likely to reduce the odds that CEOs receive opportunistically timed lucky grants. The results are consistent with those in prior research that documents the benefits of board gender diversity.

Practical implications

The research findings are beneficial to policymakers and regulators, as it allows them to assess the importance of diversity on boards in the monitoring of the managers, particularly as it pertains to the design of CEO compensation packages. Furthermore, these findings have implications for Ibero-American countries as they shed light on the importance to undertake measures and reforms to promote board effectiveness by the introduction of gender diversity.

Originality/value

While prior research has examined the effect of board gender diversity on firm performance, the study is the first to investigate the effect of female directors on the opportunistic timing of option grants, using a rigorous empirical framework that explicitly accounts for endogeneity.

Resumen

Propósito

Este estudio busca explorar el papel de la diversidad de género en la junta directiva para mitigar la suerte del CEO. Los directores ejecutivos tienen “suerte” cuando reciben subvenciones de opciones sobre acciones en los días en que el precio de las acciones es el más bajo en el mes de la subvención, lo que implica un momento oportunista.

Diseño/Metodología

Empleamos un análisis de regresión logística, así como un análisis de variables instrumentales (IV). La muestra consta de 3249 observaciones de las firmas desde 2010 hasta 2015.

Hallazgos

Nuestros resultados muestran que las directoras disuaden significativamente el momento oportunista de la concesión de opciones. Descubrimos que la diversidad de género, medida por el porcentaje de mujeres en la junta directiva, el porcentaje de directoras independientes y el porcentaje de directoras en el comité de compensación probablemente reduzcan las probabilidades de que los directores ejecutivos reciban subvenciones afortunadas en el momento oportuno. Nuestros resultados son consistentes con los de investigaciones anteriores que documentan los beneficios de la diversidad de género en la junta.

Implicaciones practices

Los resultados de la investigación son relevantes para los responsables de la formulación de políticas y los reguladores, ya que les permite evaluar la importancia de la diversidad en los directorios en el seguimiento de los gerentes, particularmente en lo que respecta al diseño de paquetes de compensación de los directores ejecutivos. Además, estos hallazgos tienen implicaciones para los países iberoamericanos, ya que arrojan luz sobre la importancia de emprender medidas y reformas para promover la efectividad de los directorios mediante la introducción de la diversidad de género.

Originalidad

Si bien investigaciones anteriores han examinado el efecto de la diversidad de género de la junta en el desempeño de la empresa, nuestro estudio es el primero en investigar el efecto de las directoras en el momento oportunista de las concesiones de opciones, utilizando un marco empírico riguroso que explica explícitamente la endogeneidad.

Resumo

Objetivo

Este estudo busca explorar o papel da diversidade de gênero no conselho de administração para mitigar o destino do CEO. Os CEOs têm “sorte” de receber opções de compra de ações nos dias em que o preço das ações é mais baixo no mês de concessão, o que é um momento oportunista.

Desenho/Metodologia

Foi utilizada uma análise de regressão logística, bem como uma análise de variáveis instrumentais (IV). A amostra é composta por 3.249 observações de empresas de 2010 a 2015.

Conclusões

Nossos resultados mostram que as diretoras inibem significativamente o momento oportunista de outorga de opções. Descobrimos que a diversidade de gênero, medida pela porcentagem de mulheres no conselho de administração, a porcentagem de conselheiros independentes e a porcentagem de diretoras no comitê de remuneração, provavelmente reduz as chances de CEOs receberem subsídios da sorte em tempo hábil. Nossos resultados são consistentes com pesquisas anteriores que documentam os benefícios da diversidade de gênero no conselho.

Implicações práticas

Os resultados da pesquisa são relevantes para os formuladores de políticas e reguladores, pois permitem que avaliem a importância da diversidade nos conselhos na gestão de gerentes, especialmente no que se refere ao desenho de políticas. Além disso, esses achados têm implicações para os países ibero-americanos, uma vez que lançam luz sobre a importância de empreender medidas e reformas para promover a eficácia dos conselhos por meio da introdução da diversidade de gênero.

Originalidade

embora a evidência científica prévia tenha examinado o efeito da diversidade de gênero do conselho no desempenho da empresa, nosso estudo é o primeiro a investigar o efeito das diretoras no momento oportunista de concessões de opções, usando uma estrutura empírica rigorosa que explica explicitamente a endogeneidade.

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Article
Publication date: 29 June 2021

Shin-Rong Shiah-Hou

This study explores the effect of CEO power on earnings quality. If powerful CEOs make the information environment more opaque, they can easily conceal information to hide…

Abstract

Purpose

This study explores the effect of CEO power on earnings quality. If powerful CEOs make the information environment more opaque, they can easily conceal information to hide self-dealing behavior through earnings manipulation. Conversely, if powerful CEOs who are well-protected create a transparent information environment, they will provide better quality earnings.

Design/methodology/approach

The author constructs a composite index for CEO power by combining seven CEO characteristics and employs two variables including discretionary accruals and earnings response coefficient as proxies for earnings quality.

Findings

The author’s main results show a significant negative relation between CEO power and the firm's earnings quality. In addition, CEOs with stronger structural power and expert power are more likely to generate lower earnings quality, while those with stronger ownership power are more likely to provide higher earnings quality.

Originality/value

The findings suggest that CEO power reduces the firm's earnings quality because CEOs with structural power or expert power may destroy governance monitoring mechanisms.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

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