Do Boards Have Style? Evidence from Director Style Divergence and Board Turnover

A board of directors performs essential strategic and oversight roles that maximize the value of the shareholders’ residual claim. However, despite careful selection of board members, too often boards neither reach their full potential nor perform their necessary governance obligations. The role of structural characteristics such as firm size and composition have been thoroughly explored. However, evidence tying traditional board variables to board and firm performance remains contradictory or incomplete. As a result, there has been an increasing interest in the role of behavioral and cognitive traits to explain how organizations work. Beginning with the seminal work of Bertrand and … Read more

VUCA and the Management of Legal Risk

VUCA is an acronym for volatility, uncertainty, complexity, and ambiguity – four dimensions of risk – and a tool that can used to better manage legal risk. Designed by the U.S. military and reinforced by business,[1] it describes an environment that is so continuously buffeted by legal, social, and economic risks that it’s persistently at the edge of chaos. Threats are uncertain and diffuse and conflict is inherent and unpredictable.

In a new paper, available here, I show how firms can respond to legal VUCA in order to capture value and manage risk. In this post, I first … Read more

The Role of the Chief Legal Officer in Corporate Governance

Corporate governance mitigates agency costs by protecting outside investors from exploitation from insiders, as well as aligning the financial and other incentives of insiders with those of the principal. The literature remains underdeveloped, however, on those tasked with shaping and enforcing internal corporate governance. These executives, known as gatekeepers, serve as reputational intermediaries who verify and certify information to the market. The most prominent gatekeeper in the firm is the Chief Legal Officer (CLO). The CLO is responsible for monitoring for firm misconduct, supervising internal and external legal resources, and advising the CEO and the board of directors on matters … Read more