Eduardo Schiehll

Boards of Directors, CEO Ownership, and the Use of Non-Financial Performance Measures in the CEO Bonus Plan

This study documents that boards choose performance measures that best reflect the CEOs contribution to firm value, taking into account the firms monitoring environment. This study therefore has policy implications regarding the need for enhanced disclosure of CEO compensation to improve investor understanding of the alignment between executive pay and firm performance. Agency theory states that any costless performance measure providing incremental information about the agents effort will improve the efficiency of the contract with the agent. In contrast with most of the literature in this area, which investigates pay-performance sensitivity and governance structure, we examine an important component of pay-for-performance plans used to align and compensate executive actions that might not be reflected in traditional financial performance measures. The results provide evidence that the use of non-financial performance measures in the CEO bonus plan varies predictably. Growth opportunities are positively associated with the firms choice to integrate non-financial information into the CEO bonus plan. The results are also sensitive to our proxy for board independence and CEO ownership in firms with high growth opportunities. This study examines the associations between the board of directors choice to integrate non-financial performance measures into the CEO bonus plan and two other governance mechanisms board independence and CEO ownership in a sample of publicly traded Canadian firms.

Determinants of Voluntary Executive Stock Option Disclosure in Brazil

This study investigates whether the governance attributes of Brazilian companies are associated with voluntary executive stock option (ESO) disclosure. Results show that Brazilian companies voluntarily disclose very little about their ESO plans, and that board size, presence of a compensation committee, and auditing by a Big 4 firm are significantly related to the degree of voluntary ESO disclosure. We also show that family-controlled companies in Brazil are associated with low voluntary ESO disclosure. Results are robust to a number of specification tests, dependent and explanatory variable measurements, and sample composition. This study has professional and regulatory implications for Brazil and other emerging capital markets. The results underscore the need for stricter rules for executive compensation reporting in Brazil, and they invite policy makers and regulators in emerging markets to consider the effects of company-level governance factors on disclosure incentives.

Cross‐National Governance Research: A Systematic Review and Assessment

Manuscript Type nReview n nResearch Question/Issue nUsing a systematic literature review approach, we survey 192 cross-national comparative studies published in 23 scholarly journals in the fields of accounting, economics, finance, and management for the period 2003 to 2014. The purpose is to synthesize and appraise the extant empirical research on the interplay between country- and firm-level governance mechanisms and the effects on firm outcomes. Particular focus is placed on studies that examine firm economic performance. n nResearch Findings/Results nWe identify and distinguish between two groups of cross-national governance studies. The first type compares macro, country-level outcomes and the second compares three different firm-level outcomes: economic performance, governance mechanisms, and strategic decisions. We compare the theoretical frameworks used and further analyze the country-level factors and firm-level governance attributes that have been combined to investigate their interplay and the effects on firm outcomes. We find substantial variation in the use and measurement of country-level factors as well as a variety of causal forms used to explain the combined effects of country- and firm-level governance mechanisms. This wide variability precludes comparison, and consequently prevents identifying consistent patterns of influence between country-level governance factors and firm-level governance mechanisms and/or performance. We identify research gaps and provide fruitful directions for future research on this topic. n nTheoretical Implications nThe cross-national governance research has been guided mainly by an economic perspective focusing on international differences in the effectiveness of specific governance mechanisms. Few comparative studies have integrated an institutional perspective or examined the external forces that drive the diffusion and use of specific governance mechanisms. Such integrative framework would improve the understanding of cross-national differences in the salient dimensions of country-level governance factors and how they mediate the effectiveness of firm-level governance mechanisms. n nPractitioner Implications nOur results reveal that firm- and country-level governance mechanisms have been interacted and combined, either to address various agency problems or to compensate for a weak national environment. This calls for regulators and investors to consider national governance factors when assessing firm-level governance practices.

Financial accounting: an epistemological research note

This research note is the result of the authors reflections on epistemological issues in respect to the financial accounting field. From an epistemological perspective, this document attempts to trace the philosophical, historical, sociological, and discursive research perspectives that have guided academic research in the field of financial accounting. In order to do so, this document explores the distinctions and connections between accounting theory and accounting practice, which we believe is the first step towards understanding accounting as a scientific discipline. We analyze the theories underpinning financial accounting research, discussing its purposes, historic evolution, and scientific methods used. This document also discuss the sociological and discursive contexts of financial accounting in order to demonstrate that, like every other social science, accounting research is based upon assumptions about the nature of it players, or social networks. This document does not have the pretension to cover or close the discussion about all the pitfalls of this complex topic. In this sense, we try to document our analysis and draw some arguments in order to offer evidence for further discussion.

RELEVÂNCIA DOS RED FLAGS NA AVALIAÇÃO DO RISCO DE FRAUDES NAS DEMONSTRAÇÕES CONTÁBEIS: A PERCEPÇÃO DE AUDITORES INDEPENDENTES BRASILEIROS

The main intention of this communication is to show that throughout the history of Humanity the disciplines of Accounting and Mathematics have had an intimate connection and a parallel development, one next to the other. Today, as well as in the past, the mathematical models are necessary and we would even say indispensable to deepen the discussion, and to be able to advance in our collective intention to formalize our accounting discipline as a science. With the development of this investigation we try to contribute to the improvement of the quality of accounting education, by studying how accounting is taught, and based on this analysis, to promote pertinent changes in the curricula of Public Accountants office, particularly regarding contents, methodologies, bibliography and evaluation . To contribute concrete tools of analyses, that allow the focus of education on mathematical issues in a local, regional and national context, and which in addition may have parameters of evaluation, analysis and synthesis, on the aspects that concern the suitable use of mathematics in the development of the Public Accountant’s daily tasks, in order to improve their processes of analysis and decision making.On the basis of the principles of a global society, a New Economy is emerging. The Corporate Social Responsibility (CSR) is an increasingly important topic in the New Economy in general, and in the European Union in particular. Thus, an important role is played by companies’ social responsibility to achieve Lisbon Summit goal “the most competitive and dynamic knowledge-based economy in the world”. The CSR reporting has a triple-bottom line approach in the assessment of a company’s performance: the economic, the environment and the social factors. Mutatis mutandis, more and more the assessment of company’s competitiveness takes into account the principles of sustainability. The link between the intangible assets and CSR is intimate and multifaceted. In order to develop company’s abilities to create future economic value, one step should consist in the expansion of the financial reporting process in order to incorporate the valuation of a company’s intangible and intellectual assets. These mentioned factors have become most important to business success and economic growth in the 21st century.This paper provides an analysis of the financial conditions and activities developed by the construction companies in The Canary Islands during the period 2000-2002. The analyzed sample is composed of 318 companies that were involved in production activities during the period considered. Firstly, a descriptive analysis of the composition of the sample is made, in reference to the age, legal status and nature and conditions of companies that have been audited or not audited. It was also considered advisable to classify the set of economic units based on turnover, assets and the number of workers, in order to obtain a better idea of the size of each company. In order to perform the economic and financial analysis of assets and the activities d carried out by the companies of the sector, we examined balance sheets and the income statements, along with profitability and solvency. In order to complete the analysis and place it in context, we conclude with a reference to the economic framework and expectations of the sector, as well as the competitive position of the Canary Islands construction sector and its future perspectives.This article provides an overall tax analysis of the complexity of the Portuguese tax system. Before discussing whether we should change the way we tax ourselves, it will be useful to compare the Portuguese tax system to other OCDE and European countries. However, the main aim of this study is to discuss the main aspects that make the Portuguese tax system complex and difficult to enforce. Then, in order to simplify the Portuguese tax system, we will focus on economic, administrative and legislative issues that have introduced some kind of complexity in the tax system.

Country‐Level Governance Quality, Ownership Concentration, and Debt Maturity: A Comparative Study of Brazil and Chile

Manuscript type nEmpirical n nResearch Question/Issue nThis study investigates the interplay between country-level governance quality and the capital structure choice at the firm level in Brazil and Chile. We examine the association between a firms ownership concentration and its debt maturity structure and whether country-level governance quality influences this association. n nResearch Findings/Insights nUsing a large firm-level dataset from Brazil and Chile for the period 2008–2013, we find a positive association between low ownership concentration and debt maturity. However, this association becomes negative when the largest shareholder has high ownership concentration. This result suggests that long-term debt and ownership concentration act as substitute monitoring mechanisms. Moreover, debt maturity is inversely related to our aggregated index of country-level governance quality, suggesting that in countries with governance systems that effectively protect debt holders, firms with high benefits of control (high ownership concentration) will use debt with shorter repayment periods in order to benefit from frequent monitoring by debt holders. Overall, our results support the view that financial markets tend to pressure firms with high benefits of control or greater agency conflict to make a tradeoff between the benefits of control and the cost and maturity structure of debt financing. n nTheoretical/Academic Implications nThis study contributes to the research on comparative corporate governance and capital structure. We also respond to recent calls to bridge the gap between under- and over-socialized views of corporate governance by examining the interplay between firm- and country-level governance variables. Our findings suggest a substitution effect between monitoring by equity holders and by debt holders, and that country-level governance quality exerts a disciplinary influence over a firms choice of debt maturity structure. n nPractitioner/Policy Implications nInvestors seeking to enter emerging markets such as Brazil and Chile can benefit from considering national governance factors that enhance debt holders’ external monitoring effectiveness. Because our findings show the importance of considering and improving the quality of country-level governance, they are also useful for policy makers aiming to reform corporate governance practices in emerging markets.

Pilot, Pivot and Advisory Boards: The Role of Governance Configurations in Innovation Commitment:

This study examines how governance configurations comprised of board capital, CEO power and the presence of large shareholders are associated with innovation commitment in organizations. We take a configurational perspective, proposing that organizational innovation commitment is contingent upon how interdependent governance attributes associated with monitoring and resource provisioning can either enhance or constrain management’s discretion to invest in research and development (R&D). Using fuzzy-set qualitative comparative analysis (fsQCA), we identify complementarities which lead to three board archetypes that foster firm innovation commitment. ‘Pilot boards’ have both board capital breadth and depth allowing for active and close participation in innovation decision-making. ‘Pivot boards’ possess the depth of industry-specific expertise and linkages required for providing resources and oversight of powerful CEOs. And ‘advisory boards’ have less power but have outside directors who have breadth of expertise and relational capital that complements the oversight provided by powerful family owners so as to effectively advise management on innovation decisions. Our findings underscore that governance mechanisms work in tandem, not in isolation, to explain significant organizational outcomes, specifically those associated with innovation commitment.

Board Composition and Governance Dilemma at Magna International

The primary subject matter of this case study is board composition and the governance roles of the board of directors in publicly traded companies. It is designed to supplement a text chapter or other material on the monitoring and advisory roles of directors and how board structure and composition impact these roles. The case is also designed to allow students to identify and assess governance issues related to firm ownership structures, family-owned or controlled companies, ethical conduct of the board of directors and conflicts between majority and minority shareholders. The case is sufficiently detailed to allow discussing the multidimensional aspects of board composition (or board diversity), including gender, ethnicity, expertise, experience and prestige. It is structured as a chronological description of the controversy generated by a proposed related party transaction (a buyout transaction) designed to dismantle a dual-share capital structure that allowed the Stronach family to control the company (Magna International Inc.) with just a fraction of its equity. The case can serve as the basis for both short case assignments and class discussions. It is appropriate for undergraduate and graduate courses in strategic management, leadership, corporate governance and financial accounting. The topic is relevant and current, as it can be related to the ongoing reforms of Canadian corporate governance practices for controlling shareholders and related party transactions.

Hydro-Québec and the Crees: the challenges of being accountable to First Nations – case and teaching notes

This case highlights various phases in four decades of relations between Hydro-Quebec, a provincial utility, and the Crees, a First Nation living mainly in northern Quebec, progressing from conflicts and impasse to accountability. It highlights two processes: 1) the stages in the relational process between a company and a community from the perspective of a social license to operate at the interorganisational level; 2) management accounting processes, which translate into corporate commitments and agreements concerning accountability and transparency. The major purpose of this case is to provide material (background) for discussion on how a company can improve its corporate social responsibility by enhancing transparency and accountability towards its stakeholders. This case illustrates how Hydro-Quebec has used accountability mechanisms such as voluntary and mandatory disclosure, environmental impact measurement and assessment, and compensation to engage with the First Nations and to build a long-term reciprocity-based relationship with them.

Viasystems Group, inc.

Viasystems Group, Inc. (Viasystems) is an international supplier of electromechanical assemblies and components. It specializes in manufacturing printed circuits and assembling electric cables and industrial metal cabinets. The case concerns the Printed Circuit Division at Viasystems and its need to adapt its costing system to the relocation of its manufacturing activities to China under its strategic planning, begun in 2001. Planning and controlling operating costs and the presentation of the financial statements have therefore become major issues. The case is set in 2006, six years after the start of progressive offshoring of manufacturing to China. It describes: 1) how external environmental pressures and the need for profitability have led to a critical strategic decision; and 2) how this new business model has changed upper managements informational needs, leading them to rethink their costing system, particularly at the Chinese plants. Setting the case in 2006, when all the plants have been relocated to China, enables discussions of the challenges that management will have to cope with in the future, after the operations transfer has been completed and the consequences on the management control system. n nResume n nViasystems Group, inc. (Viasystems) est un fournisseur mondial de composants et dassemblages electromecaniques, qui se specialise dans la fabrication de circuits imprimes ainsi que dans lassemblage de câbles electriques et de cabinets metalliques industriels. Le cas porte sur la Division des circuits imprimes (DCI) de Viasystems et son besoin dadapter son systeme de cout de revient a la delocalisation de leurs activites de fabrication en Chine, survenue suite a une reflexion strategique amorcee en 2001. La planification et le controle des couts dexploitation et la presentation de linformation financiere, deviennent des enjeux majeurs a considerer. Le cas transporte letudiant en 2006, soit six ans apres le debut dune delocalisation progressive des activites de fabrication en Chine, et decritxa0: (1) comment les pressions de lenvironnement externe et la recherche du rendement ont ete a la source dune decision strategique importante; et (2) comment ce nouveau modele daffaire a change les besoins informationnels des dirigeants et permis a ces derniers de remettre en cause la pertinence du systeme de cout de revient, notamment celui utilise dans ses usines chinoises. En situant letudiant en 2006, suite a la delocalisation complete de ses usines vers la Chine, le cas permet de discuter des defis futurs auxquels font face les dirigeants suite a la mise en œuvre dune telle transformation et des consequences observees sur le systeme de controle de gestion.