Corporate governance transparency

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2013 MBAA/NAMS presentation, "Corporate Governance and Transparency: A Research Study Investigating CEO Duality in Fortune Ranked Companies" Patricia B. Abels, University of Findlay and Joseph T. Martelli, University of Findlay

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Corporate governance transparency

  1. 1. Corporate Governance & Transparency Presented By: Patricia Abels & Joseph Martelli
  2. 2. hat is CEO Duality?▪  When a CEO also serves as the Chairman of the Board of Directors▪  Splitting CEO duality is gaining acceptance within large US companies▪  Corporate disclosure and transparency are heightened when the role of CEO and Chairman are split▪  Prevalent topic due to the turbulence of the American economy▪  80% of large US corporations have governance policies that permit CEO duality, while large foreign corporations in Europe do not.
  3. 3. Legislation ▪  Sarbanes-Oxley Act (SOX) – Ø Regulates the financial activity and corporate governance of public corporations Ø Securities and Exchange Commission (SEC) regulates corporate compliance with SOX
  4. 4. Legislation ▪  Exchange Act – Ø Amendment to the Securities Exchange Act of 1934 to forbid a dual CEO role (Release No. 34-48745) Ø Requires board membership of listed public companies to be predominately composed of independent directors, not management
  5. 5. Legislation ▪  Exchange Act – Ø Amendment to Regulation S-K to enhance corporate governance and disclosure policies (Release No. 34-60280) Ø Restricts CEOs from dually serving as Chairman of the Board unless companies can justify and disclose its reasoning
  6. 6. Theory ▪  Agency Theory Ø Defines the relationship existing between a stockholder (principal) and management (agent) Ø Assumes an agent will select the best option to enhance their own personal benefit
  7. 7. Theory ▪  Perspectives Ø Advocates and Agency theorists believe the CEO duality position hinders firm performance Ø Proponents of duality believe one central authority figure reduces confusion
  8. 8. ethodology, Analysis, and Results ▪  This study seeks to reveal the degree to which CEO duality roles exist today in large US publicly traded corporations ▪  Analysis incorporated the top 500 revenue-generating firms for 2008 and 2010 ▪  432 companies remained on the Fortune 500 in 2010 ▪  86 companies appointed a new CEO ▪  Supplementary analysis focuses on the 86 new CEOs
  9. 9. onclusion § A fiduciary duty exists with boards of directors to protect the interests of the shareholders § Dual CEOs have additional company insight and insiders have greater firm knowledge that can permit efficiency in decisions § Weak board independence can promote moral hazard
  10. 10. onclusion § Large US companies are changing governance structures § Splitting the duality role is becoming more widely accepted in order to increase corporate disclosure and transparency
  11. 11. Corporate Governance & Transparency Thank You for Attending Patricia Abels & Joseph Martelli

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