Archive for August, 2014

Independence in the board: benefits but also costs

It has passed a long time since independent directors started to be required in public firms` boards by legislators, regulators, and stock exchanges norms. A certain number of independent directors need to be appointed, and certain committees need to be composed by independents also, (at least the Audit Committee, but sometimes also the Nomination or Compensation Committees, etc).

Some firms try nevertheless to push the model to its own limit, when the only insider is the Ceo, the rest of directors being independents, (let`s call these boards full independent boards, or FIB). Would you say this is a reasonable structure? Although it might seem clear the answer is not, there have been no rigorous studies in the matter until recently.

In July 2014, Olubunmi Faleye from NorthEastern University at Boston, published an article on the matter, (1), and we will try to expose his main conclusions in what follows. As an advance, Faleye recommends boards to include some additional managers, and not only the Ceo. Let`s see why. Read more…

Symbolic Corporate Governance politics: what is activism about?

August 16, 2014 1 comment

There are a number of Corporate Governance controversies that seem more an intellectual or theoretical “amusement” that an actually relevant matter for shareholder value, or whatever firm goals can be defined. But instead of remaining in the academic debate, those topics appear as the main activist or shareholder concerns, if the shareholder proposals are to be considered.

In “Symbolic Corporate Governance Politics”(1), Marcel Kahan & Edward Rock devote their efforts to understand what the significance of this range of themes is, after they assume the economic stake is not the key factor for the controversy.

  Read more…