Charles Elson, director of the John L. Weinberg Center for Corporate Governance, addresses those attending a Nov. 9 symposium and awards presentation.

Future of corporate governance

Weinberg symposium addresses critical issues in corporate governance

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3:25 p.m., Nov. 29, 2012--The University of Delaware’s John L. Weinberg Center hosted a symposium, “Governance Issues of Critical Importance to Institutional Investors,” on Friday, Nov. 9, on UD’s Newark campus.

Co-sponsored by the Department of Finance in the Alfred Lerner College of Business and Economics, the symposium featured a panel of nine institutional investors who discussed the future changing dynamics of corporate governance and voiced their opinions on issues from executive compensation to the future of board composition.

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Four academic papers on critical topics related to institutional investors today were also featured during the symposium.

Panelists included Janice Hester-Amey, portfolio manager, CalSTRS; Glenn Booream, principal, Vanguard Group; Martha Carter, managing director, Global Research and ISS; Scott Goebel, senior vice president and general counsel, Fidelity Management and Research Company; Jack Jacobs, justice, Supreme Court of Delaware; Andrew Letts, vice president, compliance and governance, State Street Global Advisors; Robert McCormick, chief policy officer, Glass Lewis and Co; Eric Rosenfeld, chief executive officer, Crescendo Partners; Josh Targoff, chief operating officer and general counsel, Third Point, LLC; and Lopa Zielinski, senior counsel and director, TIAA-CREF.

According to Charles Elson, Edgar S. Woolard, Jr., Chair in Corporate Governance and director of the Weinberg Center, corporate management and stockholders are beginning to channel their concerns to how boards are comprised in addition to focusing on the issue of executive compensation.

“This conversation comes back to the same themes,” said Elson, who moderated the panel. “It’s about who is sitting on the board and how much faith you have in the job they’re doing.” 

According to the panel, the corporate governance world can expect to see changes in the way board directors are elected; the rate and quality of company disclosure; and the extent to which individual directors are evaluated. 

Investors predicted that over time the conversation will stray from executive compensation due to the relative success of “say-on-pay” and focus instead on the election of independent directors with industry expertise and other skill sets.

Panelists also discussed the increasing necessity for consistent and improved disclosure of materials related to the company to ensure investor access to clear and factual information. 

“More data doesn’t necessarily mean better information,” said one panelist. 

Another panelist predicted that while the increasing trend of individual director evaluation may be difficult to do for both investors and board members, individual director evaluation will be prominent in the future and eventually become a requirement. 

“Evaluating individual directors is one of the biggest challenges for investors,” said the panelist, who also advised there needs to be an emphasis on the director’s skill set and a greater emphasis on the abilities of directors to help advise and direct senior management to help their companies succeed.

Academic papers

The second part of the symposium focused on the four academic papers, three of which focused on various aspects of effective board composition and one that focused on proxy advisory firm performance in the recent “say-on-pay” votes.

Sheng Xiao of the Social Sciences Division at the University of Minnesota presented “Do Independent Expert Directors Matter?” coauthored with Ronald W. Masulis, Australian Business School, University of New South Wales; Christian Ruzzier, Departamento de Economia, Universidad de San Andres; and Shan Zhao, Grenoble Ecole de Management.

Sanaji Bhagat, University of Colorado at Boulder, acted as the discussant for the paper, which showed that the proportion of independent expert directors on a board is positively and significantly correlated with company performance.

“Matching Directors with Firms: Evidence from Board Structure Following Corporate Spinoffs” was presented by Diane K. Denis, University of Pittsburgh, and coauthored with David J. Denis, University of Pittsburgh, and Mark D. Walker, North Carolina State University.

Discussion of the paper, which analyzed board structure surrounding corporate spinoffs and found placement on either the parent or unit board was strongly associated with a director having expertise that was unique to that firm’s industry, was led by UD’s own Fred Bereskin of the Department of Finance.

“Who Chooses Board Members?” was presented by Lauren Cohen of Harvard Business School and NBER, who coauthored the paper with Ali Akyol of University of Melbourne.

Ken Davis of University of Wisconsin Law School acted as discussant for the paper, which focused on firms’ use of executive search firms in nominating new directors to serve on the board of directors.

“Shareholder Votes and Proxy Advisors; Evidence from Say on Pay” was presented by Fabrizio Ferri of Columbia University and coauthored with Yonca Ertimur, University of Colorado at Boulder; and David Oesch, University of St. Gallen.

Robert Thompson of Georgetown University Law Center led the discussion for the paper, which investigated the effect of proxy advisers’ recommendations on shareholder votes, stock prices and firm behavior in the context of mandatory “say-on-pay” votes.

For the first time the center presented the John L. Weinberg Center Best Paper Award.

Helen Bowers, chair of the Department of Finance, and Elson presented the tie award to presenters Ferri and Denis for their papers.

“This symposium provided these researchers with the opportunity to discuss their findings with the professionals who make the decisions in the corporate governance world,” said Bowers. “The feedback loop is invaluable to both the corporate governance professionals and the researchers. That’s why this symposium attracts the thought leaders in corporate governance.”

Article by Danielle C. DeVita

Photos by Evan Krape and Kathy F. Atkinson

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