Paul Dunn

The Impact of Insider Power on Fraudulent Financial Reporting

This study examines the relationship between top management team duality and the decision to release false financial information. Using a matched sample of 103 firms that were convicted of issuing fraudulent financial statements in the period from 1992 to 1996, the results show that this form of illegal corporate behavior is more likely to occur when there is a concentration of power in the hands of insiders. For these firms, insiders control the top management team and the Board of Directors by simultaneously occupying the key managerial positions of clout within the firm while also sitting on the Board (duality), and through their ownership interest in the firm.

Corporate Public Affairs: Commitment, Resources, and Structure:

Using resource dependency and institutional theories, we create and test a model examining the relationships among senior management commitment, resource allocations, and the structure of public affairs departments. Using a large sample of U.S.-based firms, we find a positive relationship between senior management commitment to the public affairs function and the level of human and monetary resources allocated to the public affairs department. Furthermore, firms structure their public affairs responsibilities into three common activity sets: communications, collaborations, and local activities. These common activities are, in turn, positively associated with senior management commitment and resources allocated to the public affairs department.

The relationship among board of director characteristics, corporate social performance and corporate financial performance

Purpose - The purpose of this paper is to investigate the link between qualitative measures of a firms Board of Directors and its corporate social performance (CSP). Design/methodology/approach - CSP is a function of qualitative measures of a firms Board of Directors, as well as firm risk and financial performance. A longitudinal sample of 104 Canadian firms is used. Findings - Board independence is positively related to social performance but shareholder orientation is not. In addition, a positive relationship between social performance with both financial performance and debt is found. Research limitations/implications - Although the sample is small and restricted to Canadian firms, the results are quite robust. Future studies should consider using qualitative measures on a larger international sample of firms. Originality/value - This paper uses qualitative measures – the degree of independence of the Board and the Boards level of shareholder orientation – to examine the interrelationship between a firms Board of Directors and its CSP.

The importance of consistency in establishing cognitive-based trust : A laboratory experiment

This paper reports the results of two experiments onthe importance of three trust cues on establishinginterpersonal trust within a business setting. Theliterature (Lewis and Weigert, 1985; Ring, 1996) hasidentified two aspects to trust: a cognitive elementin which trust is the result of a rational calculationby the trustor about how the trustee will behave inthe future, and an emotional element in which trust isthe product of a strong positive affection between thetwo individuals. Most social relations, includingeconomic ones, are based on cognitive trust, whereasemotional trust is the basis for intense personalrelationships, such as love and friendship. Thisstudy focuses on three cognitive-based cues thatengender trust within a dyadic relationship: thefrequency with which the trustee and trustor interact,the competence of the trustee, and the consistency ofthe trustee’s previous behavior. In two experiments,using a budget setting, trust is measured as theperceived reliability of the trustee’s budgetinformation and the estimated time for the trustor tocomplete the budget task. The results reveal that theconsistency of the trustee’s previous behavior is themost important element in engendering cognitive-basedtrust within a dyad.

Strategic Responses by a Nonprofit When a Donor Becomes Tainted

What should a not-for-profit do when a benefactor whom the not-for-profit has voluntarily and publicly honored becomes tainted as a result of a scandal? This article outlines a typology of donors and donations and using stakeholder theory and resource dependency identifies three external pressures (value incongruence, coalescence, and visibility) and two internal constraints (economic need and organizational commitment) that would entice a not-for-profit to adopt any one of three strategies: return the money and remove the public acknowledgment, keep the money but remove the acknowledgment, or keep the money and continue to honor the donor.

Professional Corporate Donation Programs in Canada: An Exploratory Study

This article reports the results of an exploratory study on corporate philanthropy using a sample of 206 Canadian companies. The results show that a corporation is more likely to have a professional donation program if it is large, privately owned, and the manager of the corporation acts as a volunteer fundraiser for a charitable organization. The second part of the study finds that the level of contributions made is positively related to the size of the organization and whether it has a professional donation program. However, economic constraints, imposed by debt covenant restrictions, reduce the amount donated. Finally, the results indicate a reciprocal relationship between the existence of a professional donation program and the level of philanthropic contributions.

Executive Compensation and Compensation Risk: Evidence from Technology Firms

The purpose of this research is to investigate factors that contribute to technology firms paying higher compensation than non-technology firms, and why the mix of compensation at technology firms is different than the compensation packages at non-technology firms. Using a sample of 1,009 firm-year observations for the five-year period from 2001 to 2005, we find that the total compensation paid to the CEOs of technology firms is higher than the total compensation paid to the CEOs of non-technology firms, and that the value of the stock options granted to the former is greater than the value of the stock options granted to the latter. This difference can be explained by the risk premium that technology CEOs have in their compensation packages. The implications of this finding are discussed in the conclusion of the paper.

Social and environmental shareholder resolutions: Investor activism and corporate compromises

Abstract Purpose – Investor activism is the attempt by a dissident shareholder to alter firm behavior by filing a shareholder resolution with the firm. Faced with a shareholder resolution, management can either oppose it or attempt to negotiate a settlement. This study examines the factors that would cause a firm to adopt a compromise position with a dissent investor. Methodology – A logistic regression is run in which the result of the shareholder resolution (whether or not a compromise has been researched) is a function of the topic of the resolution, the proposer of the resolution, and the firm’s history of compromising on previous shareholder resolutions. The model is tested using a sample of 762 shareholder resolutions filed in Canada over an eleven-year period from 2000 to 2010. Results – The results indicate that compromise is more likely to occur when the shareholder resolution addresses an environmental or social responsibility issue, and when the dissident shareholder is an investment or mutual fund. Practical implications – Institutional and mutual funds control the financial resources necessary for the firm’s survival. As such, firms are more likely to compromise when these powerful investors put forward shareholder resolutions. Furthermore, firms are more likely to compromise when the resolution does not address the core activities of the firm. Originality – This study examines the factors that encourage Canadian firms to adopt a compromising strategy when confronted by dissident shareholders.