Sky Blog
Among the many goals of the Sarbanes-Oxley legislation was to increase CEOs’ accountability for the veracity of financial statements by requiring that they personally certify financial disclosures. Although that provision has not led to successful prosecutions of offending executives, our …
One of management’s many important roles is to provide information to market participants. However, this information may be self-serving rather than beneficial to the market, especially in the case of voluntary disclosure. To curb this possibility, boards of directors are …
The benefits and drawbacks of generalist CEOs – those with the talent and skill to manage companies in various industries – have been fiercely debated in contemporary research. Some research touts generalist CEOs’ varied professional experiences and ability to launch …
The ever-evolving challenges facing corporate boards prompt periodic updates to a snapshot of what is expected from the board of directors of a public company—not just the legal rules, or the principles published by institutional investors and various corporate and …
Two decades ago, Congress repealed the Glass-Steagall Act’s Depression-era separation between commercial banking and other financial activities, paving the way for bank holding companies (BHCs) to expand into investment banking and insurance. At the time, some critics – most notably, …
The emphasis on the contribution of local knowledge to economic growth is a key tenet of classical economic theory. The Hayekian worldview, for example, sees the dispersion of local pockets of knowledge across the economy as the primary reason why …
A common dilemma for people who seek advice is that good advice sometimes comes at the cost of revealing negative information about the persons seeking it. In the world of corporate decision making, a CEO who seeks the counsel of …
A recent report by KPMG [1] on the behavior of chief executive officers (CEOs) suggests that 67 percent of UK CEOs trust their intuition over data. The impact of intuition may become problematic if it is driven by biased perception. …
CEO outside directorships and their value to companies have been a topic of debate among a wide range of stakeholders, particularly investors, boards, and policy makers. Some argue that CEO outside directorships benefit a CEO’s own firm by opening valuable …
Shareholder lawsuits have long prompted intense debate. Despite increased corporate democracy and shareholder rights, some commentators argue that shareholder litigation is still a shareholder’s best option to bring about changes. Shareholder litigation can impose personal liability on corporate managers and …
CEOs have increasingly been speaking out on social issues that are not directly related to their core businesses. Why are they doing so, and what are the consequences for their companies?
In a new paper, I examine the phenomenon of …
A large stream of literature in economics, finance, and accounting suggests that managers’ decisions are influenced by their labor market prospects. Absent perfect information about managers’ ability, the labor market often takes a firm’s current and past performance as a …
Academics, notably in sociology and economics, have long understood that social settings are primary drivers of information transmission and economic outcomes, from hiring decisions to product adoption to resource allocation. However, only recently has there been large-sample empirical evidence to …
In a recent opinion piece in the Financial Times[1], Harvard Law School Professor Jesse Fried makes a strong case that the Business Roundtable’s CEOs statement, in which they committed to “lead their companies for the benefit of all …
Regulators and policymakers have asserted that the public was “blindsided” by the “perfect storm” that caused the 2007-2009 global financial crisis (GFC, e.g., Financial Crisis Inquiry Commission [FCIC] 2011; Appelbaum 2015). Academic research has similarly found that market participants, including …
The economic crisis of 2008 put a bright spotlight on executive compensation and its effects on the behavior of top management. The critics have pointed to the unprecedented escalation in executive compensation, drawing a direct link to deteriorating business ethics, …
Earnings management is the use of managerial discretion to apply accounting standards or construct business transactions in a way that alters reports on the financial health of an organisation [1]. Earnings management can include both legitimate and illegitimate methods “to …
For chief executive officers, communication is essential. It allows them to help stakeholders understand a company’s strategies and form opinions about the company’s prospects as well as the CEO’s ability to create value. While effective communication is important at every …
In a 2010 article in the Texas Law Review entitled “Embattled CEOs”, Professors Marcel Kahan and Ed Rock argued that, over the past decade or so, CEOs of US public companies have gradually been losing power to their boards and …