Information Outlook, June 1997

Volume 1, Issue 6https://scholarworks.sjsu.edu/sla_io_1997/1005/thumbnail.jp

Rebuilding Corporate Leadership: How Directors Can Link Long-Term Performance with Public Goals

This report examines how efforts to build public trust and long-term value have coalesced to encourage many large, global corporations to pay greater attention to their longer-term interests by striking a balance between short-term commercial pursuits and such societal concerns as the environment, labor standards, and human rights. Many companies have also found ways to turn such concerns as the effects of climate change and other environmental damage into profitable commercial opportunities. This report also explores how all corporate boards could take a more active part in considering such issues and improving the reporting of financial and non-financial measures of corporate performance broadly conceived. In our view, directors could do more with their current authority to motivate managements to greater innovation, and to support managements in finding long-term value solutions to the numerous economic and societal pressures they face

Financial Analysis and Valuation of Regis Corporation.

A financial analysis of Regis Corporation covering the period of October 28, 2018, to October 31, 2019

Count on Your Subordinates: Young Managers and Innovation Efficiency

We investigate the relationship between executives’ horizons and firms’ innovation efficiency. Motivated by Acharya, Myers, and Rajan’s (2011, JF) theory, we devise a measure of internal governance based on the difference in expected horizons between a CEO and her subordinates. Consistent with our conjecture, we find robust evidence that subordinate managers with longer horizon compared to the CEO can improve firm’s innovation efficiency. Internal governance has a stronger effect on innovation efficiency for firms with elder, generalist CEOs and when the number of subordinates on the board is higher. However, while the presence of powerful CEOs attenuates the effect, overconfident CEOs do not negate the internal governance effect. Our proposed internal governance mechanism seems to be able to address the managerial myopia issue in corporate settings

The Duty of Corporate Directors to Tie Executive Compensation to the Long-Term Sustainability of the Firm

Executive compensation is said to be for performance and, in liberal market economies, the board of directors along with compensation committees have largely been in charge of safeguarding pay for performance. This executive compensation system is legally protected by the business judgment rule (a strong judicial deference) and has recently been supplemented with shareholders’ ‘say on pay’. Further legal or government intervention has been deemed unnecessary. However, such system has resulted in extremely excessive executive compensation, outrageous pay disparities between executives and workers, poor or short-term performance, recurrent corporate failures and economic recession. This paper explores the need for a stronger legal intervention and argues that directors, in exercising their fiduciary duties, should be legally required to tie executive compensation to the long-term sustainability of the firm that in turn requires the use of executive pay to promote not only sustained growth and long-term shareholder value but also steady improvements in the interests of multiple stakeholders involved in the long-term success of the company, notably employees. It is further argued that, in liberal market economies, employees’ ‘say on pay’ should be considered as it is crucial to allow employees to communicate their interests in order both to incorporate them in the metric of long-term firm sustainability and to counter the likely opposition from short-term oriented shareholders and self-serving directors and officers. This proposal will contribute to avoiding excessive pay and short-termism and to promoting long-term firm performance, which will ultimately protect shareholders and employees’ interest in job security, fair and sustainable wages and secured pension while creating more stable economies and avoiding citizens subsidizing periodic corporate failures, excessive executive pay and the wealth accumulation plans of an elite shareholder class. The paper briefly analyzes whether directors have a duty to tie executive pay to long-term performance in the US and Canada and develops the argument building on the lessons that can be drawn from the 2009 German VorstAG (the Act on the Appropriateness of Management Board Remuneration) and the 2015 German Corporate Governance Code

HR Executive Perspectives on Alignment with Executive Strategy: Conclusions from Six Conversational Interviews

Human Resources (HR) scholarship often frames aligning and supporting firm strategy as a foundational goal for HR executives. Strategic alignment is heralded with enabling better decision making and increasing companies’ chances of success. Yet the literature on HR executives’ alignment with executive strategies often lacks input from the most important source: HR leaders themselves. Drawing conclusions from interviews with six HR executives, this paper illustrates how HR executives view their role within executive leadership, how they attempt to align with firm strategy, and how they cooperate with and challenge other executives as they attempt to work on behalf of employees. While cooperation with executive leadership and alignment with firm strategy is central to HR leadership, this paper reveals the importance of effectively challenging other executives’ notions of success and employee needs. Working as representatives of employees, effectively shaping firm strategy to represent the needs of employees emerges as a vital goal for HR executives, on par with strategy alignment. Often as the sole people-focused voice in the executive team, HR leaders must work not only to align with firm strategy but to challenge cutthroat executive decision making to include and prioritize employee concerns

Do CEO’s Long-Term Performance Incentives Induce IT Investments? Theory, Evidence, and Industry Contingencies

Understanding the antecedents of IT investment decisions is a significant line of enquiry in the IT business value literature. Although previous research has shown a positive link between long-term performance plans and corporate decision making, the association between the use of long-term performance plans and IT investment is understudied in the extant literature. Drawing on agency theory, we posit that the existence of a long-term performance plan and a greater percentage of compensation based on long-term measures are associated with a greater percentage of IT investments to sales. We further propose that these relationships are contingent upon the nature of the industry and the IT role within the industry. Specifically, we assert that high-tech industries witness stronger associations between long-term performance plans and IT investments, while industries where IT plays a transformative role witness weaker relationships. Our empirical analysis of 173 firms in the Unites States supports our theoretical propositions

Ownership structure, board characteristics, and tax aggressiveness

Tax aggressiveness, as commonly proxied by the effective tax rate (ETR), measures a firm’s effort spent on minimizing its tax payments. It is suggested that more tax aggressive firms have greater incentives to allocate resources to minimize taxes and thus have lower ETRs. Corporate governance has been continuously receiving attention in literature across different fields and can affect a firm’s tax strategy through its control mechanism. This thesis investigates how corporate governance influences a firm’s tax aggressiveness. The main hypothesis of this thesis is whether firms with good corporate governance will have less incentives and opportunities to manage tax aggressively. Specifically, I take advantages of the distinct institutional settings in China to study whether the Chinese firm’s tax aggressiveness is affected by ownership structure and the characteristics of board of directors. Using all non-financial listed companies in the Chinese A-share market during 2003 and 2009 period, I find that firms with state-controlled nature and lower proportion of controlling shares pursue less aggressive tax strategies and maintain higher ETRs. In addition, my finding is consistent with prior literature that a higher percentage of the boards’ shareholdings and dual service duties performed by the board chairman result in lower ETRs. However, I do not find a significant relationship between the percentage of independent directors and tax aggressiveness which may suggest the ineffective role of independent directors in China

Toward a Strategic Perspective of Human Resource Management

[Excerpt] The current decade has brought yet another transformation in the practice and study of human resource management (HRM). The field, for better or for worse, has discovered, and indeed begun to embrace, a strategic perspective. The intellectual energy currently being invested in discussions of the nature, extent, and desirability of this development is a clear indication that something of significance is afoot. Understand it or not, believe in it or not, like it or not, strategy is well on its way to becoming an important paradigm behind much of what HR professionals do and think