Tom Kirchmaier

Strategies for superior performance under adverse conditions: A focus on small and medium-sized high-growth firms

This article explores the strategies pursued by small and medium-sized firms to actively sustain growth within declining markets. A critical analysis of relevant growth theories informs the development of a semi-structured interview schedule; findings drawn from 20 case studies indicate that firms adopt a multiple-strategy approach in which they simultaneously pursue an innovative differentiation and product or service-customisation strategy. Following this strategy, it was found that firms make an intentional search for high-margin products, avoid aggressive price competition and maintain tight control of costs. The article demonstrates that an adverse environment does not necessarily inhibit firm growth and that individual firm-specific strategies can be invoked to overcome volatile market conditions.

Financial Tunnelling and the Mandatory Bid Rule

In this paper, we use case studies to document how dominant shareholders have circumvented mandatory bid rules to appropriate wealth from minority shareholders. Dominant shareholders are numerous in Continental Europe. Creative compliance with mandatory bid rules reveals the failure of boards and regulators to protect minority shareholders and the difficulties of legislating in this area. We propose enhanced means for protecting their interests.

Barriers to Boardrooms

The list of barriers to female representation in management is analogous to the list of barriers to female labor force participation. Accordingly, we examine whether low female labor force participation is the main reason few women hold seats on corporate boards using data from 22 countries over the 2001-2010 period. Using a novel country-level measure of female participation on corporate boards, we show first that the representation of women on boards across countries is actually worse than most surveys suggest. We then examine the extent to which female labor force participation and institutional and country-level characteristics are related to boardroom diversity. We find that labor force participation is significantly related to the representation of women on boards when part-time and unemployed workers are excluded. However, cultural norms, the presence of boardroom quotas and codes promoting gender diversity are also correlated with female representation. This suggests that economic and cultural factors may be important barriers to female career advancement, but that preferences may be less important. While quotas may overcome problems of discrimination, they may be too narrow a policy tool to address other causes of female underrepresentation in management.Boardroom diversity policies link societal and corporate governance objectives. To understand whether they can meet both objectives, we argue one must understand why female directors are relatively underrepresented. We document that boardroom diversity is lower than most surveys suggest. We then show that across countries and US states there are more women in the director pool when more women work full time. However, working full-time may not be sufficient for women to make it to the top because of economic and cultural barriers. Our evidence suggests current boardroom diversity policies may be less effective when barriers to boardrooms are bigger.

Corporate Boards in Europe: Size, Independence and Gender Diversity

The board of directors is one of the most important governance mechanisms in modern corporations. In principle, the board is responsible for approving major strategic and financial decisions. It has access to privileged and timely information about the firm, meets regularly to discuss this information and has a fiduciary duty towards the shareholders it represents. The role of the board is to advise and monitor management, and for that purpose the board is typically staffed with distinguished individuals who have the required skills to fulfil this role. As Adams and Ferreira (2007) point out, the degree to which a board can fulfil its function also depends on the quality of information provided by management. Some observers believe that the board is the first line of defence in corporate governance. The importance of corporate boards is reflected in an ample academic literature on this topic and in the regulatory focus that they attract. For reasons of data availability and comparability, much of the academic literature on boards concentrates on US firms. This chapter provides comparable board data for many European countries. It is the first study to provide a comprehensive analysis of the determinants of board structure variables in European countries. The chapter focuses on the determinants of board characteristics, rather than on the consequences of these characteristics for firm policies and performance. Thus, this study fits into the literature that shows that the composition of boards is related to a number of firm characteristics such as size, growth opportunities, leverage and proxies for information asymmetry, amongst others (Boone et al. 2007; Coles et al. 2008; Linck, Netter and

The Changing Role of the Chairman: Impact of Corporate Governance Reform in the United Kingdom 1995-2005

Based on twenty-five semi-structured interviews with company chairmen, we were able to establish that there is resounding support for the split of the positions of chairman and CEO. In addition, chairmen play a key role in making the board a success, partly by establishing the right tone and procedure at the top. The chairmen we interviewed believe that the quality of boards has improved over the last ten years and that directors take their responsibilities more seriously. However, the drive for better corporate governance, though generally welcome, has in some respects become counterproductive.

Women in Finance

Across countries, banks have less gender diverse boards than other firms. Bank board diversity is particularly low in countries with greater gender gaps in PISA math scores and lower average math scores. We find similar results using state-level NAEP math scores in the United States. The influence of math scores appears to transcend standard cultural explanations. Female directors are more likely to have an MBA in banks, especially in countries with greater gender gaps in math scores. Our evidence suggests that differences in educational outcomes for boys and girls may have long-lasting implications for their career development.

The role of prestige and networks in outside director appointment

We study the role of prestige and social networks in the selection of outside directors, and the subsequent effect on firm value. Both prestige and social networks may act as barriers to good corporate governance, as merit based candidates might be disadvantaged when compared to candidates with a similar social background to the incumbent board. Using a unique database of U.K. directors, Lord or Sir titles (one of the proxies we use for prestige) and networks, we find evidence of such self-selection amongst outside directors that hold the same title. Contrary to popular suspicion, appointments of prestigious outside directors have no effect on firm value, with the exception of appointments to very large boards. We find that titled directors are more likely to hold more directorships, and retire later from their positions. In addition to prestige, a directors professional qualifications and higher education are positively related to the number of directorships they hold. We find no evidence that a shared social network or prestige of outside directors is contrary to shareholder interests.

Kevin J. Murphy on Executive Compensation: Is Europe Catching Up with the US, and Should it Do So?

Executive compensation has risen sharply over the last few years in both Europe and the US, although the level of compensation in the US is still considerably higher than in Europe. The steep rise in compensation is driven in part by the ratchet effect induced by more stringent disclosure rules, and in part by inefficiencies in, and governance failure of, the CEO hiring process.

Face-to-Face Communication in Organisations

Communication is integral to organisations and yet field evidence on the relation between communication and worker productivity remains scarce. We argue that a core role of communication is to transmit information that helps co-workers do their job better. We build a simple model in which workers choose the amount of communication by trading off this benefit against the time cost incurred by the sender, and use it to derive a set of empirical predictions. We then exploit a natural experiment in an organisation where problems arrive and must be sequentially dealt with by two workers. For exogenous reasons, the first worker can sometimes communicate face- to-face with their colleague. Consistently with the predictions of our model we find that: (a) the second worker works faster (at the cost of the first worker having less time to deal with incoming problems) when face-to-face communication is possible, (b) this effect is stronger when the second worker is busier and for homogenous and closely-located teams, and (c) the (career) incentives of workers determine how much they communicate with their colleagues. We also find that workers partially internalise social outcomes in their communication decisions. Our findings illustrate how workers in teams adjust the amount of mutual communication to its costs and benefits.

Turning on the Light: Assessing the Impact of Brexit Using Electricity Demand as a Proxy

In this short paper we are developing an empirical model that allows us to assess the economic impact of Brexit nearly in real-time. For this we use the electricity demand in England and Wales as a proxy of economic activity. We control for a large variety of external influencing factors like varies weather indicators, calendar and time variables, as well as public holidays and other events (e.g. Olympics). The resulting residuals allow us to make inferences on the economic, and here in particular manufacturing activity, in the country.