Topic Lister
.odt
School
London School of Economics**We aren't endorsed by this school
Course
AC 101
Subject
Management
Date
Jan 11, 2025
Pages
3
Uploaded by anonymoous89238492384
Topic Lister – corporate governance Top level management discourse Why top level management need to do the right thing What is corporate governanceWho is responsible to ensure top level management align their actions with interests of shareholders – board of directors How firms enforce corporate governanceoRegulations around them Slides on power of proxy advisory firms and ESG rating inconsistency Complimetntary and substitutive effects of CG mechanisms Path dependency of CG Mechanisms Determinants of board structures Bad governance – why mechanism was chosen qouteoLinear relationship between performance and board sizeoOptimisation problem graph – why you cant alter specific mechanismsPower of shareholders – eg after 2007 crisis oDon’t step in practice so they make right decisions ex ante ?What are shareholder proposals What is say on pay and when it has failedNew corporate governance oShareholder value maximations vs shareholder welfare maximisation Principles behind shareholder value maxisaionSlides on shareholders caring about ESG oFirms efficiency in including social perspectives not just financial How shareholders can pressure firms to take in their social considerations
Explanation of slides Proxy advisory firms facilitate corporate governance through bringing clarity to decisions discussed in shareholder meetingsStudy found that they have great influence on them – a negative ISS recommendation on say-on-proposals leads to a 25 percentage point reduction in say-on-pay voting support -> strong influence on shareholder votesAligning shareholder interests with corporate decisions like executive compensationThere seems to be a divergence in ESG ratings from ESG rating companies Study found that many differ in the measurement, scope and weight of factors to give ESG ratings.There is also a rater effect where the rater’s overall view of the firm influences their rating of certain categories.Inconsistency in ratings lead to variability in ESG ratings which make it difficult to asses true ESG penetration for stakeholders relying on them for decision making.Board structure is a key mechanism in enforcing corporate governance but structures differ based on factors. They are consitnet with the costs and benefits of monitoring and advising roles as well as the size of firm -Large firms have shrunk the size of their boards-Medium to small firms have remained flat -High growth, high r and d expending firms -> smaller and less independent boards -Bigger companies have larger and more independent boards-Boards tend to be smaller when insiders have greater opportunities to extract private benefits and ceo have greater influence over the boardThe study suggests that when there is a higher risk of insiders (such as executives or controlling shareholders) exploiting private benefits—such as using company resources for personal gain—firms may intentionally opt
for smaller boards. Smaller boards can provide more cohesive decision-making, allowing for quicker responses to prevent abuse. However, they might also signal a lack of strong oversight if dominated by insiders.Additionally, when CEOs have significant influence over the board, either due to their position, tenure, or role as both CEO and Chairman, boards may remain smaller to reflect the CEO's control. This setup allows the CEO to consolidate power and reduce external oversight, potentially making it easier for them to influence decisions in their favor.In both cases, the structure of the board reflects a tradeoff between governance needs and managerial control, potentially favoring efficiency or insider interests over robust monitoring mechanisms like larger, more independent boardShareholders nowadays do not just care about money as the shareholder value maximisation may suggest Two thirds of participants in pension funds shareholders would be willing to expand sustainable investments even if it meant foregoing some financial return.-Shareholder social interests