CGRP-32

Where Experts Get It Wrong: Independence vs. Leadership in Corporate Governance

There is no evidence that having an independent chairman benefits companies, but there is evidence that CEOs with different personalities require different levels of oversight.  Why isn’t more attention paid to context in corporate governance?

Keywords: corporate governance, CEO and executive leadership, CEO personality, CEO-Chairman duality

David Larcker; Brian Tayan

CGRP-31

And then a Miracle Happens!: How Do Proxy Advisory Firms Develop Their Voting Recommendations?

Keywords: corporate governance, proxy advisors, proxy voting, proxy advisory services

David Larcker; Allan L. McCall; Brian Tayan

CGRP-30

Union Activism: Do Union Pension Funds Act Solely in the Interest of Beneficiaries?

Union pension funds are active in the proxy process, sponsoring approximately one-third of shareholder proposals each year.  How do union pension funds determine which positions to advocate and which companies to target?  Are their proposals made solely in the interest of pension beneficiaries? 

Keywords: corporate governance, shareholder lawsuits, shareholder litigation, proxy voting, say-on-pay, executive compensation 

• Response from Brandon Rees, Acting Director, AFL-CIO Office of Investment

David F. Larcker; Brian Tayan

CGRP-29

Shareholder Lawsuits: Where Is the Line Between Legitimate and Frivolous? 

Recently, shareholder groups have sued companies for inadequate disclosure in the annual proxy.  They allege that companies provide insufficient disclosure to determine how to vote on “say on pay.”  If a company follows SEC guidelines, why is this not sufficient? 

Keywords: corporate governance, shareholder lawsuits, shareholder litigation, proxy voting, say-on-pay, executive compensation 

David F. Larcker; Brian Tayan

CGRP-28

Is a Powerful CEO Good or Bad for Shareholders?

Americans tend to admire powerful leaders. However, it is not clear the extent to which having a powerful CEO is beneficial to an organization. How much power is too much power?

Keywords: Corporate Governance, CEO, leadership, executive power, power dynamics

David F. Larcker; Brian Tayan

CGRP-27

David F. Larcker; Brian Tayan

CGRP-26

Ten Myths of 'Say on Pay'

The public believes that “say on pay” reduces executive compensation and leads to improved compensation practices.  The research evidence, however, shows this is not the case.  Is it time to rethink say on pay?

Keywords: Corporate Governance, Say-on-Pay, Executive Compensation, Equity Compensation, Executive Pay, Shareholder voting

David F. Larcker; Allan McCall; Gaizka Ormazabal; Brian Tayan

CGRP-25

Monitoring Risks Before They Go Viral: Is it Time for the Board to Embrace Social Media?

Given the pervasiveness of social media, should the board of directors pay closer attention to the information exchanged on these sites?  Can this information be used to improve oversight and risk management?

Keywords: social media, corporate governance, board of directors, reputational damage

David F. Larcker; Sarah M. Larcker; Brian Tayan

CGRP-24

Sudden Death of a CEO: Are Companies Prepared When Lightning Strikes?

The sudden death of a CEO can provide insight into the quality of succession planning at a company.  Why don’t more companies have a truly operational plan in place?

Keywords: CEO succession planning, corporate governance, boards role in succession planning

David F. Larcker; Brian Tayan

CGRP-23

What Is CEO Talent Worth?

The topic of executive compensation elicits strong emotions but somewhat less critical analysis.  How much value creation should be attributable to the efforts of the CEO?  What percent of this value should be fairly offered as compensation?

Keywords: executive compensation, CEO pay, pay for performance, incentives

David F. Larcker; Usman Liaqat; Brian Tayan

CGRP-22

What Does It Mean for an Executive To Make A Million? 

Executive compensation figures are not what they seem.  Executive pay packages contain a diverse mix of incentives whose ultimate value is often quite different from their expected value.  Why don't companies clearly differentiate between expected, earned and realized pay?

Related Quick Guide for learning and teaching purposes: What Does It Mean for an Executive To “Make” $1 Million? 

Keywords: corporate governance, executive compensation, earned versus realized pay, Black Scholes

David F. Larcker; Allan McCall; Brian Tayan

CGRP-21

Leadership Challenges at Hewlett-Packard: Through the Looking Glass 

Hewlett-Packard has faced numerous leadership and strategic changes over the last twelve years.  It has also been involved in more than its fair share of controversies.

Are these signs of governance failure at the board level?

Keywords: corporate governance, CEO Succession planning, strategy & risk, board of directors decision-making

David F. Larcker; Brian Tayan

CGRP-20

The NCAA Adopts “Dodd-Frank”: A Fable 

In this fictitious tale, we apply the governance provisions of Dodd-Frank to the world of college football.  If they would not work in that setting, should we expect them to work in business?

Keywords: Dodd-Frank, NCAA, governance provisions

David F. Larcker; Brian Tayan

CGRP-19

Scarlet Letter: Are the CEOs and Directors of Failed Companies “Tainted”?

Recent experience suggests that many CEOs and directors of failed companies are able to obtain or retain directorships at other companies after their departure.  Should this be a concern for shareholders?

Keywords: CEOs, board of directors, failed companies

David F. Larcker; Brian Tayan

CGRP18

Are Current CEOs the Best Board Members?

By many measures, current CEOs should be the best candidates to serve on the board of directors.  However, recent survey evidence suggests this may not be the case.  Should companies reassess the importance of this criteria when looking for new board members?

Keywords: active CEOs as board members, board of directors survey

David F. Larcker; Brian Tayan

CGRP-17

Seven Myths of Executive Compensation 

The public perception is that executives are overpaid and that compensation contracts are not structured in the best interest of shareholders. Why don’t experts rely on research to arrive at informed and fact-based solutions?

Keywords: corporate governance, executive compensation, pay-for-performance, say-on-pay, pay equity, incentives, corporate governance research, corporate governance practices

David F. Larcker; Brian Tayan

CGRP-16

Seven Myths of Corporate Governance 

This case examines seven commonly accepted myths about corporate governance. How can we expect managerial behavior and firm performance to improve, if practitioners continue to rely on myths rather than facts to guide their decisions?

Keywords: corporate governance, board of directors, governance structure, executive compensation, pay-for-performance, say-on-pay, CEO succession, corporate governance regulations, corporate governance research, corporate governance best practices

David F. Larcker; Brian Tayan

CGRP-15

Tesla Motors: The Evolution of Governance from Inception to IPO 

We examine prominent features of the governance system of Tesla Motors, as it has evolved from inception to IPO. Now that Tesla is public, how is its governance likely to change in the future?

Keywords: Tesla, corporate governance, IPO, governance structure, board of directors, antitakeover protections, executive compensation

David F. Larcker; Brian Tayan

CGRP-14

The Resignation of David Sokol: Mountain or Molehill for Berkshire Hathaway?

In 2011, David Sokol, CEO of Berkshire Hathaway’s energy subsidiary, purchased $10 million of Lubrizol stock days before recommending that Berkshire Hathaway acquire the firm. Did Sokol’s actions reflect a broad governance failure for the firm?

Additional related information:
-Berkshire Hathaway Audit Committee Report
-Questions and Answers From 2011 Annual Shareholders Meeting

Keywords: Berkshire Hathaway, Warren Buffet, David Sokol, corporate governance, insider trading

David F. Larcker; Brian Tayan

CGRP-13

Do ISS Voting Recommendations Create Shareholder Value? 

The recommendations of Institutional Shareholder Services are influential in the proxy voting process, particularly in matters relating to equity compensation and exchange offers. What evidence is there that these recommendations increase shareholder value?

Related research paper: The Role of Proxy Advisory Firms in Stock Option Exchanges by David F. Larcker, Gaizka Ormazabal and Allan McCall

Keywords: proxy advisory firms; stock option exchanges; institutional shareholder voting, proxy voting

David F. Larcker; Brian Tayan

CGRP-12

 CEO Health Disclosure at Apple: A Public or Private Matter?

In recent years, much attention has been paid to CEO succession planning as a risk management issue, particularly at companies whose CEOs are experiencing health issues. How much information should the company disclose on the health of the CEO?

Keywords: CEO succession, enterprise risk, disclosure & transparency

David F. Larcker; Brian Tayan

CGRP-11

Pledge (and Hedge) Allegiance to the Company 

Some executives who accumulate a substantial ownership position in the company hedge or pledge their shares to limit their financial risk. Should the board of directors allow this to occur?

Keywords: executive compensation, equity hedging, equity pledging, hedging, pledging 

David F. Larcker; Brian Tayan

CGRP-10

Sensitivity of CEO Wealth to Stock Price: A New Tool for Assessing Pay for Performance

In recent years, there has been considerable debate as to whether CEO compensation is actually correlated with performance in U.S. companies. Why don’t shareholders and stakeholders examine the relation between CEO wealth and stock price to measure pay for performance and detect the potential for “excessive” risk taking?

The authors would like to thank Equilar Inc. for providing access to the raw executive compensation and equity ownership data in this Closer Look.

Keywords: pay for performance, compensation, risk management, corporate governance

David F. Larcker; Brian Tayan

CGRP-09

Pro Forma Earnings: What’s Wrong with GAAP? 

In recent years, there has been a proliferation of non-GAAP metrics to supplement audited financial statements. Are these adjustments being made for the benefit of shareholders, or to distort financial results?

Keywords: GAAP, non-GAAP accounting, transparency, financial statements, financial reporting, corporate governance

David F. Larcker; Brian Tayan

CGRP-08

Related Research: 

Boardroom Centrality and Stock Returns 
Working paper dated: July 24, 2010
Authors: David F. Larcker, Stanford University - Graduate School of Business; Eric C. So, Stanford Graduate School of Business,
Charles C. Y. Wang, Stanford University

Keywords: interlocking directorates, board networks, board of directors, corporate governance

David F. Larcker; Brian Tayan

CGRP-07

Financial Manipulation: Words Don't Lie 

Linguists and psychologists have developed techniques to identify deceptive language and behavior. Why don’t shareholders use these same techniques to evaluate the truthfulness of management and detect financial manipulation?

Related GSB News coverage: Is That CEO Telling the Truth?

How do you tell if CEOs are not being truthful during quarterly earnings conference calls? Stanford Graduate School of Business researchers have developed a model to analyze the words and phrases used during these calls and found some specific speech patterns that give clues.

Keywords: transparency, disclosure, accounting restatements, corporate governance, linguistic studies

David F. Larcker; Brian Tayan

CGRP-06

Proxy Access: A Sheep, or Wolf in Sheep's Clothing? 

In recent years, there has been considerable controversy about whether shareholders should be able to nominate candidates to serve on the board of directors. What impact would proxy access have on director elections? Would it improve or impair governance quality?

Keywords: proxy access, shareholder democracy, corporate governance

David F. Larcker; Brian Tayan

CGRP-05

CEO Succession Planning: Who’s Behind Door Number One? 

One of the most important decisions that a board of directors must make is the selection of the CEO. What type of disclosure can provide shareholders with insight into succession planning?

Related teaching case ($):
Multimillionaire Matchmaker: An Inside Look at CEO Succession Planning 

Keywords: succession planning, disclosure, board of directors, corporate governance

David F. Larcker; Brian Tayan

CGRP-04

A Historical Look At Compensation and Disclosure: Cool and Refreshing! 

Compensation and disclosure have grown very complex over time. Is this complexity necessary? Should it be simplified?

Keywords: compensation, disclosure, proxy statements, corporate governance

David F. Larcker; Brian Tayan

CGRP-03

Lehman Brothers: Peeking Under the Board Facade

Experts place considerable emphasis on the board structure. Many boards now look indistinguishable, and yet can differ very much in terms of oversight quality. Has an emphasis on board structure led to a decrease in board quality? 

Keywords: board of directors, board structure, corporate governance, regulatory oversight

David F. Larcker; Brian Tayan

CGRP-02

Berkshire Hathaway: The Role of Trust in Governance 

The governance structure of Berkshire Hathaway is remarkably different from that of other corporations, and most of its features do not conform to the “best practices” recommended by experts. Why is this an important exception, and what can it teach us about best practices in governance?

Related Teaching Case ($):
The Management of Berkshire Hathaway; Case Number: CG-16; Publication Year: 2009

Keywords: corporate governance, governance structure, management integrity, risk management

David F. Larcker; Brian Tayan

CGRP-01

Institutional Shareholder Services: The Uninvited Guest at the Equity Table 

In recent years, RiskMetrics has played an influential role in the proxy voting process. Several companies, however, are critical of the methodology it uses to inform its recommendations, particularly with regards to equity compensation. Is it appropriate that they have this much influence?

Related Teaching Case ($):
There's a New Sheriff in Town: Institutional Shareholder Services Case Number: CG-07 Publication Year: 2007 

Keywords: corporate governance, proxy voting, proxy access, ratings

David F. Larcker;
Brian Tayan