We use a sample of CEO appointments at US corporations over the years 1992-2004 to test the glass cliff hypothesis, which posits that females are appointed to leadership positions at firms that are in a precarious financial condition. Our analysis utilizes three measures of stock-price-based financial performance and two distinct control samples of appointments of males to the CEO position. We find that corporate performance preceding CEO appointments tends to favor females, implying that females (males) are appointed to the CEO position largely at times when the firm is in relatively better (worse) financial health. Disaggregating the data by appointments in up versus down markets, at high-risk versus low-risk firms, and by calendar time yield similar conclusions. There appears to be no glass cliff facing female CEOs at US firms. Our findings suggest a need for additional research to identify where and for what types of positions this phenomenon is prevalent.

The adoption of special listing segments by the São Paulo Stock Exchange in the year 2000 was an important step forward for the Brazilian equity market. Bovespa's introduction of the Novo Mercado and its Special Corporate Governance Levels 1 and 2 provided concrete, standardized certification of corporate commitments to higher governance standards that could be readily observed and verified by all market participants.

The board of directors is an elite group that faces multifaceted tasks. The board needs to implement decisions on a wide variety of subject matter. These decisions are often delegated to specialized sub-committees within the board. The different objectives of each sub-committee can result in conflicting interests leading to decisions that are sub-optimal. For example, at times, the objectives of the compensation and the audit committee are not aligned. The objective of compensation committees is to grant CEOs compensation packages reflective of their performance. Yet, these compensation packages might contain incentives that could motivate CEOs to influence the financial reporting process in order to reflect better performance, increasing the risk of poor quality financials. In contrast, the objective of audit committees is to oversee the quality of the financial reports and the process that leads to them. Therefore, they would favor compensation packages that reduce the risk of earnings manipulation. We examine public companies that have overlapping compensation and audit committee members and find a higher proportion of CEO incentive compensation in companies with less overlap among audit and compensation committee members. These results suggest that separating the members within these committees might contribute to the effectiveness of board decisions.

The purpose of this paper is to examine the underlying differences in European Union (EU) country approaches to corporate governance and business ethics given the conformity imposed by the EU's recent standardization directives. The paper offers insights for policy makers interested in enhancing the efficacy of corporate governance regimes across diverse regions such as the EU such that allowing for localization may come at the expense of standardization and comparison, foreign investment, job creation and other intended benefits of such policy initiatives but may also create opportunities for improvements to governance models.

We identify a sample of 36 publicly-held companies with financial fraud in their 2003 financial statements. We use industry-specific summary corporate governance ratings (CGQ-Y) from RiskMetrics Group (formerly Institutional Investor Services), to select a sample of control firms with governance ratings similar to the fraud firms. We trace changes in CGQ-Y ratings as well as numerous governance mechanisms over the period of 2003-2006 to identify those with significant differences between the fraud firms and control firms. Specifically, we identify two corporate governance mechanisms with theoretical justification for their effects on differences due to fraud. The first is the extent of non-audit services, as proxied by the dollar magnitude of “audit-related” and “other” non-audit fees, provided by incumbent auditors. We hypothesize and find that significantly fewer fraud firms received substantial non-audit services compared to the control sample. The second governance variable is board election, where we hypothesize and find that fraud companies elect all directors annually, more often than control firms, which have more staggered terms for their directors.

The paper describes how the context for business has changed in fundamental ways in the past two decades, calling for a new approach to business that reflects rising levels of consciousness among customers and employees as well as multiple and deepening challenges facing the world today. It is imperative that business gets on the right side of society rather than continuing to add to societal burdens, as is too often the case. Conscious capitalism is not synonymous with corporate social responsibility (CSR); since society is recognized as an important, even the primary stakeholder, the core business itself must by definition be socially responsible. A conscious approach to business is based on the adoption of a higher purpose that transcends profits, a stakeholder rather than shareholder orientation, and conscious, service-oriented leadership.

We investigate, using data on US manufacturing firms, how and when corporate governance affects managers’ decisions to use discretionary accruals and thereby artificially influence company financial reports. We employ 3SLS to study the relationship between financial status, corporate governance and financial reporting discretion. The sample spans years 2001 to 2003 during a severe downturn in the US stock market. Financial status is measured with the Altman-Z score (Altman, 1968). A significant difference is found between firms not classified as healthy or failed (i.e., the mid-range group) and the two extreme categories when examining governance quotient using a well known index. A positive relationship is found between discretionary accruals and the governance index. Strong governance appears to reduce the incidence of mid-range firms engaging in accruals management. The least healthy and the most distressed companies have the weakest relationship with discretionary accruals. By contrast, mid-range firms are more likely to resort to discretionary accruals. Non-executive members of boards of directors are warned to be particularly vigilant about discretionary accruals with firms transitioning between healthy and high failure risk. The relationship between firms’ financial health and discretionary accruals reveals an agency problem in credit markets with financially stressed firms. More attention is required on firms whose financial condition is uncertain. Also, we document significant findings of importance to the earnings quality and corporate governance literature by documenting the role of corporate governance on discretionary accruals and financial status.

Debates about the ethics of executive compensation are dominated by familiar
themes. Many writers consider whether the amount of pay CEOs receive is too large –
relative to firm performance, foreign CEO pay, or employee pay. Many others consider
whether the process by which CEOs are paid is compromised by weak or self-serving
boards of directors. This paper examines the issue from a new perspective. I focus on the
duties executives themselves have with respect to their own compensation. I argue that
CEOs’ fiduciary duties place a moral limit on how much compensation they can accept,
and hence seek in negotiation, from their firms. Accepting excessive compensation leaves
the beneficiaries of their duties (e.g., shareholders) worse off, and thus is inconsistent
with observing those duties.

The purpose of this article is to call for the formulation and adoption of a declaration on the universal rights and duties of business. We do not attempt to define the specific contents of such a declaration, but rather attempt to explain why such a declaration is needed and what would be some of its general characteristics. The catalyst for this call was the recognition that even under optimal conditions, good companies sometimes are susceptible to moral lapses, and when companies undertake ventures in authoritarian countries with poor human rights records, even those with the best intentions may find themselves drawn into complicity in human rights abuses. There, market exigencies may persuade them to leave their codes of ethics and commitments to human rights at home. Pragmatism, it would seem, requires thatthey accept the ethical inconsistencies that follow from a “When in Rome, do as they Romans do” outlook. When facing the moral dilemma about whether or not to invest in human rights abusing countries, companies are offered two alternatives: they can operate in those countries and accept potential complicity or they can stay away. We suggest, however, that a preferable option is to address the underlying problem, and to this end we advocate the promulgation of a declaration for business that is comparable to the Universal Declaration of Human Rights. Our proposed name for this is the “Declaration on the Universal Rights and Duties of Business.” To be effective, such a declaration would require enforcement mechanisms. To illustrate this issue, we focus on China, not because China is unique in its human rights abuses, but because China occupies such a central place in the globalization efforts of the major companies from around the world. A robust international declaration is needed to provide a common framework for the practice of consistent and fair business competition everywhere.