Research by the Corporate Governance Research Initiative

The SEC adopted Rule 10b5-1 to provide an affirmative defense against allegations of insider trading to executives whose jobs regularly expose them to material nonpublic information. In this Closer Look, we present evidence on the trading…

Environmental costs are a legal obligation of companies and proper corporate governance requires that they be dealt with responsibly. Unfortunately, disturbing examples exist where companies have taken aggressive action to separate their…

Other organizational structures exist besides public corporations. Examples include family-controlled businesses, venture-backed companies, private equity-owned businesses, and nonprofit organizations. Each of these faces their own issues…

Scrutiny of CEO pay increases during times of economic stress, when it is not clear how much pay CEOs should receive when corporate profitability suffers due to an unforeseen decline in the operating environment. On the one hand, the board might…

We analyze the trading of corporate insiders at leading financial institutions during the 2007 to 2009 financial crisis. We find strong evidence of a relation between political connections and informed trading during the period in which Troubled…

Our concept of risk continues to broaden and now includes instances in which representatives of a company make statements, actions, or decisions that damage the firm by inviting public scrutiny, sparking a reaction among customers, employees,…

Investors rely on corporate disclosure to make informed decisions about the value of companies they invest in. The COVID-19 pandemic provides a unique opportunity to examine disclosure practices of companies relative to peers in real time about a…

This Research Spotlight provides a summary of the academic literature on board composition, quality, and turnover. It reviews the evidence of:

• The appointment of outside CEOs as directors
• The importance of industry expertise…

There has been a broad push in recent years to increase diversity at the board and CEO levels of public corporations. Despite this effort, diversity on boards and in senior leadership positions has not reached the levels to which advocates aspire…

Little is known about the process by which pre-IPO companies select independent, outside board members — directors unaffiliated with the company or its investors. Private companies are not required to disclose their selection criteria or process…

Corporate executives receive a considerable portion of their compensation in the form of equity and, from time to time, sell a portion of their holdings in the open market. Executives nearly always have access to nonpublic information about the…

The board of directors plays a central role in the corporate governance system. All countries require that publicly listed companies have a board. While their attributes vary across nations, they universally share common responsibilities.

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A board of directors requires professionals with a diverse mix of managerial, functional, and other specialized knowledge in order to properly advise and oversee management. This Quick Guide reviews the process by which companies select,…

The board of directors is generally described in terms of its prominent structural attributes, including size, composition, and independence. This Quick Guide examines the importance of these, and whether they contribute to board effectiveness…

A company offer a competitive compensation arrangement in order to attract, retain, and motivate a qualified CEO to manage the organization.

This quick guide examines the elements of executive compensation and the process by which the…

The board of directors is responsible for ensuring that correct management is in place to run the organization. This includes hiring, evaluating, and — when circumstances merit — removing or replacing the chief executive officer.

This…

There has been tremendous pressure on companies to satisfy stakeholder considerations as part of their long-term planning and governance. This activity is broadly categorized as ESG (environmental, social, and governance). 

This Quick…

A company offers equity incentives to encourage CEOs to take actions that are in the interest of shareholders. At the same time, equity incentives have the potential to encourage undesirable behaviors.

This Quick Guide examines the effects…

The board of directors is responsible for ensuring the integrity of published financial statements. This includes working with management to set the parameters for accounting quality and internal controls, and retaining an external auditor to…

The governance system that a company adopts is not independent of its environment. Instead, it is shaped by a variety of factors inherent to the business setting. This Quick Guide explains the factors that shape governance systems around the…

Shareholders exert influence over the corporation through the board of directors and the proxy voting process. While indirect, this influence can be powerful in shaping corporate policy.

This Quick Guide examines the relation between…

One of the primary responsibilities of the board of directors is to monitor the strategy and risk of the corporation. This Quick Guide provides a concise introduction to corporate strategy, key performance measures, and risk management. It…

The board of directors might decide it is in the best interest of shareholders to sell the corporation to new owners. In theory, a change in control only makes sense when the value of the firm to new owners, minus transaction costs, is greater…