Overcoming Resistance to Diversity in the Executive Suite: Grease, Grit, and the Corporate Tournament

Once we open the corporate governance/human resources nexus to deeper inquiry, mutual scholarly interest in diversity and discrimination follows naturally. Firms have complex motives to take nondiscrimination and the promotion of diversity seriously. First, at least certain forms of discrimination are both unlawful and socially illegitimate and hence present threats of potential liability and injury to reputation. Second, human resources demands are such that attracting and motivating a diverse workforce is a competitive imperative. At the same time, however, offsetting economic forces may exist that favor subtle forms of discrimination and hostility to diversity, even if intentional and overt racial or gender-based bias is mostly outdated. In sum, the process of promoting diversity and ending discrimination, whether to avoid liability or simply to remain competitive, is a difficult challenge faced by many firms. It demands a close look at the efficacy of the internal decisionmaking and authority structures of the firm

Multiple agency perspective, family control, and private information abuse in an emerging economy

Using a comprehensive sample of listed companies in Hong Kong this paper investigates how family control affects private information abuses and firm performance in emerging economies. We combine research on stock market microstructure with more recent studies of multiple agency perspectives and argue that family ownership and control over the board increases the risk of private information abuse. This, in turn, has a negative impact on stock market performance. Family control is associated with an incentive to distort information disclosure to minority shareholders and obtain private benefits of control. However, the multiple agency roles of controlling families may have different governance properties in terms of investors’ perceptions of private information abuse. These findings contribute to our understanding of the conflicting evidence on the governance role of family control within a multiple agency perspectiv

Gatekeepers, Cultural Captives, or Knaves? Corporate Lawyers Through Different Lenses

Studying the behavior of high-status corporate lawyers is challenging. Much writing (including some of my own) addresses the risk of lawyer enabling of client misconduct by drawing from work in behavioral ethics suggesting that at least some apparent complicity is without full awareness of the impropriety. Is this naïve? The first part of this essay pushes harder on consciousness by looking more closely at the lengthy continuum—not a binary yes/no—in the awareness of wrongdoing risk as heavily influenced by the “slippery slope.” Looking at corporate lawyers’ professional responsibility through this lens has some interesting, and as far as I can tell, under-explored implications that help us understand ethical apathy as a distinctive state of mind. The essay’s second part is more hopeful: that such ethical apathy among private practitioners might be offset by greater embrace of the possibility by in-house lawyers. There has emerged in recent years a different lens for the empirical examination of corporate general counsel, using the tools of financial economics to seek correlations (and maybe causation) between identifiable lawyer characteristics and outcomes for the company in terms of (for example) its legal exposure. There is some hopeful news in this research, albeit heavily contingent on the company’s governance structure. The essay ends by suggesting that, while the effort in normative legal ethics to enlist corporate lawyers in more than a legalistic conception of gatekeeping has failed, corporate governance and corporate ethics—surprisingly, perhaps—have some potential to enable gatekeeping general counsels in a way that filters down to the demand for more ethically-sensitive outside counsel as well

Markets Institutions as Communicating Vessels Deregulation and Changes between Economic Coordination Principles

economic policy; competition policy; institutions; regulation

Anti-Primacy: Sharing Power in American Corporations

Prominent theories of corporate governance frequently adopt primacy as an organizing theme. Shareholder primacy is the oldest and most used of this genre. Director primacy has grown dramatically, presenting in at least two distinct versions. A variety of alternatives have followed—primacy for CEOs, employees, creditors. All of these theories can’t be right. This article asserts that none of them are. The alternative developed here is one of shared power among the three actors named in corporations statutes with judges tasked to keep all players in the game. The debunking part of the article demonstrates how the suggested parties lack legal or economic characteristics necessary for primacy. The prescriptive part of the article suggests that we can better understand the multiple uses of primacy if we recognize that law is not prescribing first principles for governance of firms, but rather providing a structure that works given the economic and business environment in place for modern corporations where there is separation of function and efficiencies of managers as a starting point. Thus the familiar statutory language putting all power in the board must be read against the reality of the discontinuous nature of the board (and shareholder) involvement in governance. Corporate governance documents of the largest American corporations, as discussed in the article, are consistent with this reality, assigning management to officers and using verbs like oversee, review and counsel as the director functions. The last part examines dispute resolution and the role of judges in such a world, with a particular focus on the shareholder/director boundary. At this boundary there are two distinct judicial roles, the traditional role focusing on use of fiduciary duty to check conflict and other director incapacity and the less-recognized role of protecting shareholder self-help. In this more modern context shareholders, because of market and economic developments, are able to effectively participate in governance in a way that wasn’t practical three decades ago, when the key Delaware legal doctrines were taking root. What is particularly interesting here is how courts, commentators and institutional investors act in a way that is consistent with a shared approach to power, as opposed to the primacy of any of the theories initially suggested

Encryption and the Loss of Patient Data

Fast-paced IT advances have made it increasingly possible and useful for firms to collect data on their customers on an unprecedented scale. One downside of this is that firms can experience negative publicity and financial damage if their data are breached. This is particularly the case in the medical sector, where we find empirical evidence that increased digitization of patient data is associated with more data breaches. The encryption of customer data is often presented as a potential solution, because encryption acts as a disincentive for potential malicious hackers, and can minimize the risk of breached data being put to malicious use. However, encryption both requires careful data management policies to be successful and does not ward off the insider threat. Indeed, we find no empirical evidence of a decrease in publicized instances of data loss associated with the use of encryption. Instead, there are actually increases in the cases of publicized data loss due to internal fraud or loss of computer equipment.National Science Foundation (U.S.) (Grant 1053398

Futures Market: Contractual Arrangement to Restrain Moral Hazard in Teams

Holmstrom (1982) argues that a principal is required to restrain moral hazard in a team: wasting output in a certain state is required to enforce efficient effort, and the principal is a commitment device for such enforcement. Under competition in commodity and team-formation markets, I extend his model a la Prescott and Townsend (1984) to show that competitive contracts can exploit the futures market to transfer output across states instead of wasting it. Thus, the futures market replaces the role of principals. An important feature of such contracts is exclusiveness: private access to the the futures market by team members is not allowed. The duality of linear programming is exploited to characterize a market environment and the contractual agreements for efficiency.

The Social Construction of Sarbanes-Oxley

The closer one looks at SOX and its origins in the financial scandals of the early 2000s, the blurrier the picture, which lets commentators see what they want to see and draw inferences accordingly. That is why social construction is so crucial. My aim in this paper is to illuminate the social nature of SOX\u27s diffusion into practice. I will leave to the reader the judgment about whether this has been or will be good or bad, and for whom. If I seem to challenge SOX\u27s critics more than its supporters, it is because the critics have been more venomous than is fair. Venom aside, the bite still deserves attention