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NABE Corporate Governance Roundtable
Proposal
A new NABE Corporate Governance Roundtable has been proposed by Perry D. Quick, Charles River Associates.
The proposed roundtable would serve as a forum in which economists could discuss the corporate governance issues and solutions they see as most important, and, if appropriate, start a dialogue with organizations such as the National Association of Corporate Directors, and with regulators, Quick said. Business economists can help to define the critical issues and bring rigor to the consideration of alternative solutions, he said.
Below is information about the organization of a new NABE Roundtable. At the end, is a form for you to indicate your interest.
Details about the Roundtable
Enron and other recent financial reporting frauds, coming in an environment of the bursting of the high-tech “bubble” and the destruction of trillions of dollars in paper wealth, have focused significant public attention on corporate governance and the makeup and operation of corporate boards. The reforms to date have centered around board independence and ensuring that board membership include a certain level of financial literacy/expertise, with an emphasis on being able to understand financial statements. Such reforms can be quite useful, but they are not sufficient to address the increasing complexity of the world today.
For example, there is plenty of evidence that companies with independent boards adopted bad business models and suffered huge losses. And, the frauds and restated financial statements can account for only a small fraction of the trillions lost through bad business models and unwise investments.
The fact is that today’s business dynamics and the underlying economics are extremely complex. And a corporate board needs a higher level of economic literacy and expertise to monitor, evaluate and act in the best interest of the shareholders.
The major responsibilities of corporate boards of directors include:
a. selecting, evaluating, and compensating the CEO and overseeing CEO
succession planning; incentives
b. providing counsel and oversight on the selection, evaluation, development,
and compensation of senior management; incentives
c. reviewing, approving and monitoring fundamental financial and business
strategies and major corporate actions; risk, market dynamics
d. assessing major risks facing the company - and reviewing options for
their mitigation; and risks, market dynamics
e. ensuring processes are in place for maintaining the integrity of the
company - the integrity of the financial statements, the integrity of
compliance with law and ethics, the integrity of relationships with customers
and suppliers, and the integrity of relationships with other stakeholders
- In looking for candidates for CEO, what are best economic criteria to judge a CEO’s performance at another institution? (Profitability? Rising stock price? Absolute/Relative? What comparisons? Risk Adjusted?….)
- What (practical) alternative incentive structures best align CEO interests with those of the shareholders?
- What information should a board require to get a picture of the overall risk of the enterprise? How can a board judge the value of optionality in the company?
Business economists can help to define the critical issues and bring
rigor to the consideration of alternative solutions.
Response form
Are you interested? What issues would you like to see addressed? Please respond below
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