Corporate Governance

The unexpected effect of high-speed trains on board talent

London-Paris, Barcelona-Madrid, Rome-Bologna – what is common among these city pairs? Surprisingly enough, travelling between these cities is faster by train than by plane. In fact, fast trains connect Europe quite well, allowing passengers to hop from city to city via rail.

Many passengers prefer taking trains over flying. One steps out at the city centre directly, wastes no time […]

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    Why are some executives paid mostly in salary, while others in bonus?

Why are some executives paid mostly in salary, while others in bonus?

In 2016 Dave Barnes, chief information and global business services officer of UPS, received a salary of $491,000 and a bonus payment of $251,000, while Pawan Verma, chief information and customer experience officer at Foot Locker, had a salary of $216,000 and a bonus of $664,000. Why in one case did the CIO receive the majority of his compensation in salary, […]

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    A dose of democracy in corporate governance may help save social media

A dose of democracy in corporate governance may help save social media

Hardly a day goes by without the national or international press publishing negative stories about social networks. Facebook has once more got problems in keeping the data of its more than two billion users under lock and key, or Mark Zuckerberg stands up another parliament in favour of a personal statement. YouTube, acting to protect children, disables the comment […]

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    CEOs’ political ideology influences firms’ internal resource allocation

CEOs’ political ideology influences firms’ internal resource allocation

CEOs in multi-business companies act as internal investors for business units. Our research suggests that they approach resource allocation in one of two very different ways. Liberal-leaning CEOs, seeking collaboration among units, are more likely to favour an even-handed approach when allocating resources. Conservative-leaning CEOs, seeking to spur competition, tend to favour merit-based allocations that may create large disparities […]

Why overpaying chief executives is a bad idea

An economy where the highest paid business leader pockets £265 million for one year’s work, while the number of working families in poverty rises to a 20-year high, is one that needs to address its income gaps.

Denise Coates, the chief executive of gambling group Bet365, has been paid £265 million in 2017 at a time when many of those in […]

Good corporate governance requires diversity

A hallmark of our era of disruption, populism and apparent de-globalisation is the erosion of trust in organisations and institutional systems. Trust is gained through better governance, which in turn is built on transparency, accountability and openness to diversity.

It is no coincidence that both Singapore and the UK issued new codes of corporate governance this year. Reinforcing systems of […]

Who stays longer, male or female CEOs?

Only 5 per cent of major North American firms had a female CEO as of January 2018. (Catalyst)

Clearly women are underrepresented at the top level of corporations, but the reasons for this are less clear. In a recent article, we investigate two different paths to the scarcity of female CEOs:

Women are appointed as CEO less often; and/or
Women are […]

Should companies reward CEOs for being lucky?

A puzzling feature of chief executive officer (CEO) compensation is “pay for luck”. Why are CEOs often rewarded when their firms perform well for reasons that are beyond their control? The dominant advice from academia is to do just the opposite: pay CEOs based on corporate outcomes they can substantially influence, which gives them incentives to make the good […]

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    The antitrust case against Android as viewed by a company insider

The antitrust case against Android as viewed by a company insider

In a recent Vox column, six antitrust consultants describe the European Commission’s case against Android, hailing it as a “milestone” of antitrust for the telecommunications industry (Caffarra et al., 2018).  In fact, it is more of a millstone than a milestone.

The colloquial definition of “millstone” is a “heavy burden”, and of course the case is a burden for Google. But it is […]

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    Board directors are supposed to have broad knowledge, but are they also narrow experts?

Board directors are supposed to have broad knowledge, but are they also narrow experts?

We all know about the experts who know so much about so little, and so little about so much. Scientists and artists are prime examples of specialised occupations whose members are suspected of being impractical in daily life.

Managers, on the other hand, are supposed to have broad and practical knowledge, and to be flexible in what they do. These […]

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    Two wrongs make a right: Why the trans-Atlantic antitrust rift is necessary in the global economy

Two wrongs make a right: Why the trans-Atlantic antitrust rift is necessary in the global economy

Less than week after the European Commission hit Google with a record £3.9 billion fine for abusing its dominant position in Android, Google’s quarterly earnings report came in: a noticeable dip in profits — down to $2.8 billion from the expected $7.8 billion—but a rise in share price—up almost 6 per cent.

Investors seemed to shrug off the giant fine […]

Gun control activism reaches the corporate boardroom

It was the first meeting of a publicly traded gun company following the Feb. 14 school shooting in Parkland, Fla., that left 17 dead and sparked a wave of anti-gun activism. And the shareholders of Sturm Ruger delivered a surprise.

A coalition of Catholic nuns backed by the giant asset management firm BlackRock pushed through a proposal – over management […]

Why CEOs misbehave

Sometimes CEOs misbehave. This misbehaviour has terrible consequences for the CEO, the organisation and society, yet still – they do it. Recent estimates suggest that fraud, a specific type of wrongdoing, results in a loss of 5 per cent of sales for a typical company every year and a global loss of about $3.7 trillion. With such clear consequences, […]

How the WPP board bungled Martin Sorrell’s departure

At first sight, Martin Sorrel’s departure from Wire and Plastic Products (WPP) — the company he founded and grew into an industry-changing and defining global force — underlines the importance and significance of independent-minded supervision of executive boards by non-executive directors. To many it appeared that the WPP board behaved impeccably when they appointed external legal advisors to investigate […]

Facebook’s light approach to corporate governance

Amongst the regular challenges of modern governance are the corporate scandals. These have affected almost every business sector, most recently of course the so-called disruptive Big Tech companies. It seems none of these social media technology companies are exempt from scandal. Google have been accused of abusing the dominance of its Android smart phone operating system and Apple were […]

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    What do business executives think about distributive justice?

What do business executives think about distributive justice?

This is the story of two cups of coffee, or at least that is where the story begins. The first, between me, Sandy Pepper, a Professor of Practice in the Department of Management at LSE, and Dr Susanne Burri of the Department of Philosophy, Logic & Scientific Discovery, took place in March 2016 in the Lundenwic coffee shop on […]

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    Unpicking complex incentive mechanisms that reward top managers handsomely

Unpicking complex incentive mechanisms that reward top managers handsomely

One distinct feature of the rise in income inequality over recent decades is the surging incomes of the working rich, particularly the pay of a class of top managers. A popular view stresses the role of performance-related pay in generating this feature. According to this view, the pay of many top managers is high-powered (i.e., with incentives tied to firm […]

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    Financial crises, corporate scandals and blind spots: who is responsible?

Financial crises, corporate scandals and blind spots: who is responsible?

According to the U.S. Financial Crisis Inquiry Commission, the main causes of the financial crisis of 2007-2009 were failures of corporate governance and policy, including widespread failures in financial regulation and supervision, lack of transparency, poor preparation by the government, and systemic breakdown in accountability. The Commission concluded that the crisis was avoidable.

In their book This Time is Different: Eight Centuries of […]

Second-generation family CEOs: are they up to the task?

Family firms are the most prevalent type of firm in the world. This is especially true in emerging economies, where they account for over half of medium-sized firms in the manufacturing sector. In particular, dynastic family firms – that is, where the founding family owns a controlling share and have appointed a second-generation (or later) family member as the […]

The case for ending shareholder monopoly

The UK is about to stop shareholders monopolising votes for company boards, with worker voice. Currently, asset managers control most shareholder votes in public companies. They have systemic conflicts of interest, because shareholder votes can influence companies to buy asset managers’ financial products (e.g. defined contribution pensions). But now this is changing. One small step, following government consultation, is that the Financial […]