Weinberg Corporate Governance Symposium Highlights Research Presentations

The ideas came from all around the globe.

The John L. Weinberg Center for Corporate Governance makes it a point to spearhead conversations about corporate governance issues, and that mission was on full display on Friday, March 15, when leading academics in the field traveled from around the country — and the world — to share research on timely topics in the field.

They converged on Clayton Hall at the University of Delaware for the annual Corporate Governance Symposium, where selected research papers competed for $10,000 prizes. About 50 people attended in person, with an additional 200 tuned in online.

Subjects ran the gamut from ESG, to artificial intelligence, CEO compensation, specialist directors and much more.

“This is a wonderful program. The papers are terrific and it’s really become one of the signature programs of the center,” said Justin Klein, Weinberg’s director. He noted its high-impact speakers and discussants.

Not only do audience members get to hear authors talk about the nuances of their research, but each paper is then analyzed by a discussant, who is another expert in the field. These experts highlight significant contributions, point to ways to strengthen the research, and offer other feedback. It’s cordial, but the experts don’t hesitate to raise questions if needed.

Oliver Yao, dean of the Alfred Lerner College of Business and Economics, of which the Weinberg Center is part, alluded to that give and take in his opening remarks. “I’m sure that this … will be a very engaging conference for all of you to exchange ideas,” he said, adding to laughter, “Just be nice to each other.”

He also mentioned Delaware’s suitability as a setting for discussing corporate governance, as a state with a court system known for its expertise and prominence in business law.

Author Syrena Shirley, an assistant professor of accounting at Columbia University, liked how the expert input came not just from academics but from people who work in a given field, like when Tara Bhandari, a financial economist with the Securities and Exchange Commission, analyzed a paper on the impact of an SEC rule relating to executive compensation.

“That’s different,” Shirley said. “… I thought that was really cool.”

Researchers compete to have their papers included in the symposium and a chance at the prize money, and the symposium’s lineup has a track record of quality.

“Half of the papers (in) the first two years of the program have already been accepted by top finance journals,” said Fei Xie, Chapin Tyler Professor of Finance at the Lerner College, who helped organize the symposium.

It was difficult to choose among the submissions for inclusion in the symposium, and beyond that, a struggle to pick the winners, said Laura Field, the Donald J. Puglisi Professor of Finance and chair of Lerner’s finance department, and another event organizer.

These were the winning papers:

Do Board Connections between Product Market Peers Impede Competition?

Renping Li, of Washington University in St. Louis, presented research on board connections and product market actions.

The Department of Justice has taken a renewed interest in whether board members also sit on the boards of their competitors, which potentially raises some legal issues. The idea is that these connected board members can help coordinate business between competitors, potentially driving up prices for consumers.

Research on whether this kind of board connection harms competitiveness is rare, Li noted. But the connections aren’t – he and his fellow researchers found nearly 1,500 direct connections between boards from 1999 to 2018. They identified more than 4,000 more indirect connections, such as, for example, if members from two competing companies both have a spot on the board of a third company and thus interact.

In their paper, they found that profits rose nearly a percentage point after company directors make this kind of direct board connection. Profits also increased, though not as dramatically, after indirect connections. At the same time, evidence from bar-code level data suggests companies tended to raise prices and separate their sales areas more, competing less.

Specialist Directors

One presenter had a particularly long flight to attend the conference, but one of the shortest paper titles. Roy Shapira, of Reichman University, traveled from the area of Tel Aviv, Israel.

Shapira’s research focused on the trend of companies coming under pressure to add directors who are specialists in a given topic, like diversity or climate change. This kind of pressure has increased amid the ESG movement.

Shapira and his co-author (Yaron Nili, from the University of Wisconsin) found some potential drawbacks to focusing on these kinds of expertise as a board requirement, like board members suddenly listing more areas of expertise when they may or may not have deep knowledge of those subjects, to meet new requirements and expectations. There are also concerns that boards may defer too much to these experts in discussions of these topics.

They concluded that regulators might want to avoid focusing on specific kinds of skill sets for individual directors.

The Social Cost of Liquidity Disclosure: Evidence from Hospitals

Columbia University’s Thomas Bourveau collaborated in research on what happens when accounting standards are revised to force nonprofit organizations, including hospitals, to release more detailed information about their liquidity — how much money they have available to meet short-term financial needs. Transparency requirements, he noted, are becoming more widespread in many sectors, and it’s important to understand their effects.

In a paper they are still developing, Bourveau and his colleagues find that nonprofit hospitals with low liquidity before the changes faced difficulties in raising financing after being forced to to show more information on liquidity. This, in turn, created an incentive to change their operations. They found that those hospitals increased their cash holdings by increasing operating revenues. To do that, they increased the amount charged per patient and admitted more patients. They also increased invasive (and more expensive) diagnostic procedures, especially for patients with private insurance.

Independent or Informed? How Combining the Roles of Corporate Secretary and Chief Legal Officer Impacts Legal Risk

In addition to the presentations from the research paper competition, the event also featured a special presentation of the winning paper of the Association of Corporate Counsel (ACC)/Weinberg Center Carl Liggio Paper Competition.

Syrena Shirley, from Columbia Business School, was the winner of a $20,000 prize jointly awarded by the Weinberg Center and the ACC. This award, separate from the main symposium competition, came with the opportunity to present at the event.

This research examined what happens when companies take the common step of combining the roles of corporate secretaries and chief legal officers. These roles have distinct functions and sometimes conflicting motivations, and the researchers probed whether combining the two roles influences corporations’ legal risks.

Shirley referenced the case of a corporate legal officer who was complicit in changing board minutes to cover up wrongdoing, a step that was possible because the legal officer held both roles.

Despite cases like these, their research findings were consistent with the idea that such shared roles can have benefits that outweigh the risks, with such firms facing fewer legal issues and penalties.

Other participants:

Jean-Marie Meier, University of Pennsylvania. Do Consumers Care About ESG? Evidence from Barcode-Level Sales Data

Daniel Ferreira, London School of Economics. Polarization, Purpose and Profit

Simon Glossner, Federal Reserve Board. Diversity, Equity, and Inclusion

Irene Yi, University of Toronto. Voting Rationales

Jialin Qian, Georgia State. ChatGPT and Corporate Policies

Chelsea Yang, University of British Columbia. Dissecting Corporate Culture Using Generative AI – Insights from Analyst Reports 

Enshuai Yu, Boston College. Regulatory Costs and Vertical Integration: Evidence from Supply Chain Disclosure Regulations

Austin Starkweather, University of South Carolina. Pay for Performance? CEO Compensation Alignment Post-SEC Rule Change

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