Sylvie Berthelot

Corporate governance rating and financial performance: a Canadian study

Purpose – This paper aims to examine whether the corporate governance rankings published by a market information intermediary are reflected in the values that investors accord to firms.Design/methodology/approach – Panel data from 289 Canadian firms in the four‐year period 2002‐2005 were analyzed using a price model.Findings – The results suggest that the corporate governance rankings published by the market information intermediary are related to not only firm market value, but also to accounting results.Practical implications – This study provides empirical observations that would be useful for various organizations involved in the regulation of corporate governance practices and the standardization of relevant data elements.Originality/value – This study contributes to the literature by demonstrating that information published by an information intermediary is reflected in firm market values. Moreover, this information appears to be related to the accounting results. Thus, good governance rankings are ...

The Financial Benefits of a Firm's Affiliation with the UN Global Compact

Since it was first introduced 13 years ago in 2000, the UN Global Compact has become the worlds largest voluntary corporate responsibility initiative. The benefits for companies that have voluntarily affiliated with the UN Global Compact have been little documented from an empirical perspective, especially regarding the integration of this information by capital markets. This study attempts to address this question, drawing on a sample of French companies listed on the SBF 250 index. Results suggest that, within the French context at least, investors significantly value a firms affiliation with the UN Global Compact. In addition, the firms affiliated are those that appear to present the least risk.

Corporate governance mechanisms, accounting results and stock valuation in Canada

Purpose - The purpose of this paper is to investigate the relationship between corporate governance practices or mechanisms and firm value, as measured by accounting and market data. Design/methodology/approach - Partial least square analyses were performed on a sample of 355 observations from 199 Canadian listed companies. The greater variability allowed under the Canadian principles-based institutional setting than under the rules-based USA SOX environment is well-suited for these tests. Findings - Results suggest that some governance practices, namely the percentage of independent directors on the board, the use of stock options and the frequency of board meetings are significantly and negatively related to the firms net book value or income. However, most individual governance practices appear to have no significant impact on the firms’ market value. Research limitations/implications - The potential interrelationships between corporate governance practices and contextual variables are not specifically taken into account, except for the firms’ industrial sector. It is also possible that certain governance mechanisms jointly impact firm value. Practical implications - This study does not support the current emphasis by regulators on governance practices which mainly concern the monitoring function of the board as opposed to its strategic one. Originality/value - The paper uses Canada as a laboratory where companies are “invited” rather than “required” to follow corporate governance best practices. This greater corporate discretion in the choice of governance practices provides the variability necessary to test the effect of governance on firm value. Furthermore, in the interest of triangulation, a model seldom seen in the governance literature is used to examine the impact of governance mechanisms on firm value and performance, as measured by accounting and market data.

The Global Compact and its concrete effects

Purpose The purpose of this study is to document the concrete practices put in place by United Nations Global Compact (UNGC) affiliated firms and their application of the UNGC Communication on Progress (COP). Design/methodology/approach The paper examines the practices implemented by firms on the Fortune 500 list that have affiliated with the UNGC and issued a COP separate from their annual report or a sustainable development report. According to the UNGC, the COP policy sets out a description of practical actions the company has taken or plans to take to implement the ten principles. Findings The findings tend to show that firms affiliated with the UNGC use a variety of practices to integrate these principles. Many adopt policies based on an international standard relating to a UNGC principle. However, the reporting process supported by the UNGC does not seem to fully promote the widespread application of these practices. Originality/value The documentation of these practices will serve as a reference for any business interested in adopting the UNGC principles or for government and non-government organisations, including accounting standard setters, aiming to promote and support the universal principles on human rights, labour, the environment and anti-corruption. In addition, the study reveals weaknesses in the UNGC COP policy that could limit more extensive application of these practices.

Management Control Systems and the Presence of a Full-Time Accountant: An Empirical Study of Small- and Medium-Sized Enterprises (SMEs)

Originality/value Few studies have documented the MCSs adopted by North American SMEs, and none have considered the impact of the presence of a full-time accountant.

THE IMPACT OF DIRECTORS’ TENURE ON EXECUTIVE COMPENSATION AND CORPORATE FINANCIAL PERFORMANCE

This research examines the impact of the tenure of independent directors on senior executives’ compensation and corporate financial performance. We assume that as the term of tenure or seniority of directors usually defined as “independent” increases, their independence can become compromised because of the relationships they build with corporate executives. The results show that although the tenure of independent directors has a positive impact on senior executives’ compensation, it has no significant impact on corporate financial performance. This result tends to support the contention that seniority should be taken into account in studies using directors independence as a variable.

Shareholder Activism in Canada: The Emergence of a New Tool for Improving Corporate Governance Practices

Shareholder democracy is gaining ground the world over. This chapter analyses the emergence of shareholder activism in Canada as a tool for improving corporate governance practices and explains the reasons underlying the recent apparition of activism in this country. In addition, it describes the nature of proposals according to filer type and targeted firms, which in turn provides a complete overview of shareholder democracy since its early beginnings and from 2000 to 2009. Finally, a review of activism in other countries offers some elements of comparison.

EVALUATING THE PERFORMANCE OF BOARD MEMBERS: A PORTRAIT OF CANADIAN FIRMS

The object of this study is to examine how board members’ performance is evaluated and how they are compensated. In the last decade, the board of directors of publicly traded firms has been under strict surveillance by market participants and regulatory bodies. However, although market regulators require the full disclosure of executive and directors’ compensation plans, very few guidelines exist as to how directors should be evaluated. Hence, by thoroughly examining the information disclosed in management proxies, this study shows that publicly traded Canadian firms do indeed evaluate board members’ performance. However, the information disclosed regarding the evaluation of board members is parsimonious and mostly generic. Based on a sample of 173 Canadian firms, our findings also indicate that equity based incentive plans through differed share units (DSUs) are most often used as means to compensate directors.