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Abstract Outsourcing logistics to third-party logistics (3PL) providers is becoming an increasing trend for companies seeking improved customer service and competitiveness. Choosing a suitable and competitive logistics provider has become [...]

Issue 47 Autum. 2012 David Cooperrider and Ronald Fry The Fowler Center for Sustainable Value, Weatherhead School of Management, Case Western Reserve University, USA WITH THIS ISSUE, OUR TERM AS [...]

Many commentators assert that enhanced shareholder power is a promising cure for corporate governance ills. This paper empirically examines the impact of differential amounts of shareholder power on governance arrangements. When U.S. states enacted statutory antitakeover protections in the 1980s, the states differed in the power granted to shareholders to opt out of the antitakeover protections without agreement by the board of directors. These differences in shareholder power are associated with little change in governance arrangements. The results suggest that simply altering shareholder power without changing other governance mechanisms is unlikely to lead to widespread changes in corporate governance. (JEL: G 34, K 22, D 72)

I argue that, in the context of crises, the shareholder value maximisation model, the dominant form of corporate governance, may lead to decisions and behaviours that are in conflict with [...]

We analyze the incentives for a controlling shareholder to acquire silent or controlling shares in a competitor. When it occurs, the acquisition is detrimental to minority shareholders of his firm, or to the target, or even to both. The ownership structure of firms turns out to be a key variable. The possession of initial silent toeholds in rivals unambiguously encourages further partial acquisitions, both controlling and silent. However, a higher initial controlling share generally stimulates controlling acquisitions, but always discourages silent ones. Finally, indirect acquisitions through the controlled firm are always controlling and preferred when the targeted block is small. (JEL: D 23, D 43, G 32, G 34)

The impact of merger of firms and tender offers on shareholders' wealth is discussed.

We analyze the optimal trading and ownership policy of a large shareholder who must trade off diversification and monitoring incentives. Without commitment, the problem is similar to durable goods monopoly: the share price today depends on expected future trades. We show that the large shareholder ultimately trades to the competitive price-taking allocation, even though it entails inefficient monitoring. With continuous trading, the large shareholder trades immediately to this allocation if moral hazard is weak enough that her private valuation of a share is decreasing in her stake. Otherwise, the large shareholder adjusts her stake gradually. We consider implications for asset pricing, IPO underpricing, and lockup provisions.

Byline: Stephen E. Clapham (1), Robert W. Cooper (2) Keywords: boards of directors; corporate governance; ethics; employee voice; stakeholders Abstract: Traditionally, corporate governance has focused on the problem of crafting mechanisms to align the interests of owners and managers. The key characteristic has been to minimize the potential for managers to act in their own self-interest at the expense of shareholders. The purpose of this paper is to focus on employees as stakeholders in the governance process. We argue that creating an environment where employees have help in behaving ethically, in the course of their work, is the first step in encouraging them to voice observations of wrongdoing. Seven groups of professionals in the accounting and insurance fields were surveyed during a 10-year period and asked to indicate the extent to which 14 items were helpful in dealing with ethical challenges. Over 2700 responses were analyzed. The findings indicate that professionals think that their organizational culture and policy for voice was more helpful in dealing with ethical dilemmas than was their professional association. Author Affiliation: (1) Department of Management and International Business, College of Business and Public Administration Drake University, Des Moines, IA, 50311, USA (2) Employers Mutual Distinguished Professor of Insurance, College of Business and Public Administration Drake University, Des Moines, IA, 50311, USA Article History: Registration Date: 18/05/2005 Article note: *Presented at the 2004 European Academy of Management Conference in St. Andrews, Scotland

A study of the incentive effects of levered stock versus unlevered stock granted by risk-averse shareholders to risk-averse managers and the findings are presented.

In this article, we document the growing influence of non-governmental organizations (NGOs) in the realm of socially responsible investing (SRI). Drawing from ethical and economic perspectives on stakeholder management and agency theory, we develop a framework to understand how and when NGOs will be most influential in shaping the ethical and social responsibility orientations of business using the emergence of SRI as the primary influencing vehicle. We find that NGOs have opportunities to influence corporate conduct via direct, indirect, and interactive influences on the investment community, and that the overall influence of NGOs as major actors in socially responsible investment is growing, with attendant consequences for corporate strategy, governance, and social performance. KEY WORDS: corporate governance, corporate social responsibility (CSR), corporate stakeholders, non-governmental organizations (NGOs), shareholder activism, socially responsible investing (SRI), ?

This paper reviews the development of socially responsible investment (SRI) over recent years and highlights the prospects for an increasingly strong connection with the practice of corporate social responsibility. The paper argues that not only has SRI grown significantly, it has also matured. In particular, it has become an investment philosophy adopted by a growing proportion of large investment institutions. This shift in SRI from margin to mainstream and the position in which institutional investors find themselves is leading to a new form of SRI shareholder pressure. Although this bears some resemblance to lobbying campaigns which might take advantage of shareholder rights, we seek to distinguish it as an important phenomenon in its own right--one to which corporate executives are likely to be paying increasing attention in the years to come. We further argue that this approach potentially meets some of the earlier ethical criticisms of certain forms of SRI but, ironically, probably owes its existence to those pioneering approaches. We conclude with some suggestions for further research to inform discussion of the issues highlighted in the paper. KEY WORDS: corporate social responsibility (CSR), engagement, ethical investment, shareholder activism, socially responsible investment (SRI)

Proponents of the dominant contemporary model of corporate governance maintain that the shareholder is the primary constituent of the firm. The responsibility for managerial decision makers in this governance system is to maximize shareholder wealth. Neoclassical economists ethically justify this objective with their interpretation of Adam Smith's notion of the Invisible Hand. Using a famous quotation from The Wealth of Nations, they interpret the Invisible Hand as Smith's (An Inquiry into the Nature and Causes of the Wealth of Nations, Methuen & Co., London) assertion that market participants, in pursuing their own self-interests without regard to the interests of others, will collectively provide the optimal economic benefit to society. We argue that the traditional interpretation of Smith is too narrow and potentially harmful to society. In order to fully understand Smith's notion of the influence of the Invisible Hand on human behavior, one must also consider The Theory of Moral Sentiments. In that work, Smith (The Theory of Moral Sentiments, A. Millar, London) portrays the pursuit of self-interest as only one of several potential motivations for human action. He also acknowledged the existence of a 'sympathy principle,' which refers to the ability and propensity of human beings to consider the interests of others. Heilbroner (The Essential Adam Smith, W.W. Norton, New York, p. 59) suggests that Smith's sympathy principle allows one to 'determine the appropriate degree of self-interest, the proper display of benevolence, the desirable strictness of justice.' In fact, Smith indicates that (1) a society whose members pursue self-interest without a sense of justice '7 will eventually collapse; (2) a society whose members pursue self-interest checked by their sense of justice alone will survive; (3) a society whose members pursue self-interest, justice, and the interests of others will flourish. Since a more complete reading of Smith indicates that human beings, in considering their own interests, also reflexively consider the interests of others when making decisions, then the traditional corporate governance model appears to be lacking. A broader, multiple stakeholder approach to corporate governance that considers the interests of other constituencies may be more consistent with Smith's views. In particular, Smith's sympathy principle provides a theoretical foundation for a shift away from the narrow, yet dominant, shareholder-based corporate governance model and toward multiple stakeholder models of corporate governance [e.g., Business and Society: A Strategic Approach to Corporate Citizenship, Houghton Mifflin, Boston, MA] and internal decision-making [e.g., Sloan Management Review 38, (1997) 25-37]. KEY WORDS: Invisible Hand/Corps Governance Multiple Stakeholder Approach

This research investigates the impact of a firm's stakeholder focus on employee commitment to the organization. The results show that workers who believe their organization is more customer- and shareholder-focused than employee-focused are less committed than employees who believe otherwise. The findings are both theoretically important because of their implications regarding comparison groups used in assessments of antecedents to commitment, and managerially significant because of their implications regarding resource allocations among stakeholders., Today's increasingly competitive business environment requires that companies find new and improved strategies for achieving superior financial returns. In a world in which technology has driven down production costs and [...]

Shareholders value analysis is considered as a valuable technique for identifying the assets and costs, including marketing costs, and marketing maximizes shareholder value through first attending to the aspirations and need of customers and employees. Further brand equity metrics is compared with shareholder value analysis to see the extent of accuracy of the shareholder value predictions.

The link between brand equity, which is measured using the brand asset valuator (BAV) model, and shareholder value, which is measured using total shareholder return, earnings per share and the market-to-book ratio, is presented. Various indications are found that confirm the expected relationships, but a clear need is observed to develop reliable and valid indicators for shareholders value.

Domestic A-share investors do not correctly anticipate the changes in earnings and fail to adjust new earnings information quickly as most of them are individuals with short term investment. International B-share investors can predict earnings changes better than A-share investors as most of them are large institutions that trade on more detailed and accurate financial information which is not immediately given to A-share holders.

The stockholders face severe restrictions on their ability to sell their shares and diversify the risk of their personal wealth. The cost of the liquidity restrictions on stockholders using a continuous-time portfolio choice framework is examined.

ABSTRACT Using financial event study method, we examine the impact of merger announcements on shareholder wealth of Canadian companies during an exceptional worldwide merger boom. Our results show that both [...]

Byline: Wallace N. Davidson (1), Carol Nemec (2), Dan L. Worrell (3), Jun Lin (4) Keywords: CEO origin; CEO succession; Industry effects Abstract: Although scholars have studied outside executive succession for decades, there is still no clear definition of the term 'outsider'. We focus on a new dimension of outsiderness, the industrial background of executives hired from outside the firm into a CEO position. This paper examines the antecedents of boards' decisions on the industry origin of outside successors as well as the short-term stock market response. We find that firms with more independent boards and with blockholders owning large amounts of stock are more likely to hire industry unrelated successors. However, the board's decision does not strictly follow the rhetoric of stockholder's interests. The stock market reacts more positively to outside CEO succession announcements when the CEO comes from an industry related firm. These findings support our theoretical arguments that the boards of directors may use a logic or rule of appropriateness in deciding the industrial origin of outside successors. Author Affiliation: (1) Finance Department, Southern Illinois University, Mailcode 4626, Carbondale, IL, 62901, USA (2) School of Business, Southern Oregon University, 1250 Siskiyou Blvd., Ashland, OR, 97520, USA (3) Management Department and Office of the Dean, Southern Illinois University, Carbondale, IL, 62901, USA (4) Management Department, Southern Illinois University, Carbondale, IL, 62901, USA Article History: Registration Date: 05/10/2004

Stakeholder theory is a pertinent example of a framework that has been stretched over many conceptual contexts and that has been applied to a wide variety of empirical phenomena. A pressing issue involves the scope of application of stakeholder theory, however, because it is not a comprehensive ethical scheme or problem-solving algorithm. We begin our search for the boundaries of stakeholder management by identifying a presently under-acknowledged yet major underlying assumption, notably that the approach is rooted in voluntary action and association. Building on this presumption, we argue that firm--stakeholder relationships are best to be understood in contractualist terms; i.e. as voluntary arrangements between two or more parties seeking mutual benefit. This assertion subsequently allows us to identify three boundary conditions applying to stakeholder theory: (1) the parties should be sufficiently autonomous; (2) their interests need to be alignable; and (3) they should be capable of living up to their commitments. We substantiate these criteria with evidence from a collective case study of buyer--supplier relationships in the Dutch manufacturing sector, demonstrating that the stakeholder management model fails when these boundary criteria are violated. KEY WORDS: boundary criteria, collective case study, contractualist theories, interview data, manufacturing industries, stakeholder management, The Netherlands, voluntary association

The approval of the "poison pill" anti-takeover measure by Delaware courts was less influential than many observers thought it would be. Corporations have employed practices that make the poison pill more responsive to shareholders' interests.

The author critiques Marcel Kahan's and Edward B. Rock's contention that corporations can avoid the consequences of unfavorable laws regarding takeovers. She asserts that more favorable laws can increase the ability of companies to manage stock values in ways which they cannot use in the face of unfavorable laws.

Byline: Gerard Charreaux (1), Philippe Desbrieres (1) Keywords: corporate governance; shareholder value; stakeholder value; value creation; value sharing Abstract: Unsatisfied with the dominatingshareholders' point of view, that appears to betoo limited to build a relevant theory ofcorporate governance, we propose an enlargeddefinition of the value which may be called,the stakeholder value. This definition and itsassociated measure are more suitable for thestakeholder approach to the firm and morerelevant to understand the value creation andsharing mechanisms. Author Affiliation: (1) Universite de Bourgogne, IAE Dijon/LATEC 2, Boulevard Gabriel, BP 26611, 21 066, Dijon Cedex, France Article History: Registration Date: 07/10/2004

Byline: S.P. Chakravarty (1), L. Hodgkinson (1) Keywords: ciroirate giverbabce; agebct; elections Abstract: This paper addresses a question arising out ofcalls for greater shareholder participation toensure accountability of management in publiclimited companies. It is argued here that theparticipation by shareholders in corporateelections is more difficult than it isenvisaged by those who issue clarion calls forshareholders to exercise their voting power.The exercise of the right to vote as ashareholder can be formulated as a game betweenshareholders and management and also amongstgroups of shareholders. The chances of anyparticular group of shareholders being able toinfluence policy depends on how other groupsof shareholders vote. Thus the organisationaltask in the exercise of the right to franchiseis more complicated than it is realised byenthusiasts for shareholder participation. Author Affiliation: (1) School of Accounting, Banking, and Economics, University of Wales, Bangor, LL57 2DG, UK Article History: Registration Date: 07/10/2004

Issues discussed concern corporate finance, focusing on the relations between controlling and minority shareholders. Topics addressed include how corporate governance and managerial reputation influence stock prices.

A multicriteria decision-making model was proposed to enable shareholders of BC Gas to create and express their values and apprehensions about the corporation. Shareholders were asked to rate the soundness of the methods employed through a series of questions. Results reveal that a multimethod approach is ideal since no particular method was singled out as best. It is also noted that a clear multicritieria method must be used in the evaluation of the compromises in energy utility planning.