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Boosting board representation of women redresses structural unfairness and improves corporate governance and performance. The Change Our Game initiative, running over 3 years statewide in Victoria, Australia, mandated 40% representation of women on state sport boards. At the start, only 44% of state sport boards had 40% women representation; by the mandate deadline, this had increased to 93%. Using an institutional theory lens, the authors qualitatively analyzed four stakeholder groups: mandators, policy champions, operationalists, and mandate targets. Stakeholder sentiments were analyzed pre- and postmandate deadline over 3 years. Sentiments ranged from positive to equivocation to denigration. The mandate's coercive pressure, supported by institutional legitimacy and work to accelerate changes, led to institutional change and achieved a significant increase in women board members. Change was grounded in strong ethical and cognitive support from mandate champions. Microsocial expressions of denigration and change resistance did not prevent successful change. [ABSTRACT FROM AUTHOR]

Our research empirically examines the relationship between tax avoidance and the likelihood of incurring a tax-related restatement, as well as the effects tax restatements have on future tax avoidance behavior. We predict and find that the association between tax avoidance and the likelihood of a tax-related restatement is nonlinear. Specifically, both relatively high levels and relatively low levels of tax avoidance compared to peer firms increase the likelihood of incurring a tax-related restatement. We consider whether the increased likelihood for high avoiders is attributable to obfuscation necessary to escape detection of tax avoidance or weak corporate governance. For high avoiders, we find evidence that both obfuscation and weak corporate governance may contribute to the likelihood of a tax-related restatement. As low avoiders should not need to obfuscate, we focus on corporate governance and find an increased likelihood when governance is weak. In response to a tax-related restatement announcement, we document a decline in tax avoidance for firms that have relatively high tax avoidance prior to the restatement announcement. We attribute this to the increased level of Internal Revenue Service (IRS) monitoring and strengthening of corporate governance that we observe post-restatement announcement. In contrast, we do not find evidence that low avoidance firms alter their tax avoidance after a tax-related restatement announcement, consistent with our finding that corporate governance does not improve post-restatement for low avoiders. [ABSTRACT FROM AUTHOR]

We examine the association between aggressive tax planning and labor investment efficiency among U.S. firms. Labor is an important input to production that is material to many firms, and prior research suggests that inefficient labor investments can negatively affect future profitability and growth. We provide evidence that firms engaging in aggressive tax planning are associated with deviations from expected labor investments, which is indicative of labor investment inefficiency. We find that our results are concentrated in labor underinvestment, consistent with risks and uncertainties from aggressive tax planning making firms more cautious when investing. Our findings are strongest among firms with greater tax risk, higher labor costs, and weaker corporate governance. Our study contributes to the literature examining tax planning consequences by providing evidence that a tradeoff exists between aggressive tax planning and investments in labor. Therefore, our results suggest that managers should carefully consider the cash flow benefits of tax planning in conjunction with the potential effects of lower labor investments to ensure that the overall long-term effect of the tax strategy is value-increasing. [ABSTRACT FROM AUTHOR]

Executives trade more profitably and opportunistically over the course of the tenure of independent directors (IDs). IDs' increased connections with and hence allegiance to executives are likely the channel through which ID tenure can affect executive trading. Executive opportunism is mitigated by disciplinary factors that include the presence of a firm's internal trading policy, blockholders, and IDs with legal expertise as well as the risk of shareholder-initiated derivative lawsuits. These results point to an association between long-tenured IDs and weakened corporate governance. [ABSTRACT FROM AUTHOR]

Exploiting two quasi-natural experiments, we find that firms increase emissions of toxic pollution following decreases in analyst coverage. The effects are stronger for firms with low initial analyst coverage, poor corporate governance, and firms subject to less stringent monitoring by environmental regulators. Decreases in environmental-related questions raised in conference calls, an increased cost of monitoring to institutional shareholders, reductions in pollution abatement investment, and the weakening of internal governance related to environmental performance are channels through which reduced analyst coverage contributes to increases in firm pollution. Our study highlights the monitoring role analysts play in shaping corporate environmental policies. [ABSTRACT FROM AUTHOR]

Hybrid organizations must sustainably attend to multiple goals embedded in different institutional spheres. Past research has highlighted the value for hybrids in recruiting board members representing different logics to avoid attentional drifts; yet, diverse boards have also been prone to conflicts that occasion attentional lapses, thereby jeopardizing these organizations' pursuit of multiple goals. We draw on a longitudinal comparative case study of five work integration social enterprises with institutionally diverse boards to uncover an integrative model of hybrid governance consisting of a protective board structure and relational leadership processes that, together, prevent distracting cognitive and emotional conflicts and foster attentional engagement of both the board and senior managers to multiple goals. The protective board structure prevents shifts in board composition and ensures the enshrined representation of the organization's logics. Relational leadership processes—which help board members relate to each other, with the organization's mission, and with senior managers—include enculturation processes (i.e., interventions to reduce the cognitive and emotional gap between institutionally diverse board members) and bridging processes (i.e., interventions to facilitate communication and alignment between the board and senior managers in the decision-making process). These findings contribute to research on hybrid organizations, board governance, and organizational attention. [ABSTRACT FROM AUTHOR]

Diversity training is situated in a cultural context characterized by sociopolitical polarization, complex and fluid social identities, social movements, and debates over its appropriateness. Yet, we lack theories on the drivers of diversity learning and transfer that consider both unique workforce composition characteristics and contextual changes. Diversity training researchers have focused primarily on static aspects of training design and content while largely ignoring the role of the learner. Because these oversights have fueled persistent questions about the effectiveness of diversity training, we offer a learner-centric, process-based model of diversity training that acknowledges the broader context in which it is situated and its influence on trainee motivation, learning, and transfer. We consider the interplay among the design factors, learning context, and learner characteristics in the pre-training, training, and post-training environments, and explore the self-regulatory mechanisms through which trainees can guide their learning. We close by discussing how our process model of diversity training changes our understanding of past research and redirects future research, and we apply the model to several prototypical diversity learner personas to demonstrate how it can be used in practice to personalize diversity training and address barriers to its effectiveness. [ABSTRACT FROM AUTHOR]

We present the first comprehensive study of mutual fund voting in proxy contests. Among contests where voting takes place, passive funds are 10 percentage points less likely than active funds to vote for dissidents. The gap shrinks significantly when accounting for votes withheld from management nominees, settled contests, and votes by non-"Big-Three" fund families. Passive and active funds are equally informed about firm fundamentals, although passive funds view contest-related SEC filings more often than active funds during contests, in absolute levels and incrementally relative to noncontest periods. We conclude that passive funds are engaged shareholders in high-stakes voting events. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online [ABSTRACT FROM AUTHOR]

We develop a stakeholder theory of corporate governance grounded in classical property rights theory, adopting the view that governance should help free individuals to maximize their collective welfare. In contrast to the agency view of corporate governance, we submit that the central problem in corporate governance is to devise coalitional contracting solutions to the collective action problems inherent in team production and team innovation. Agency problems and other contracting problems resulting from shirking, hold-up, market power, and externalities are best understood in this context. We develop design principles for the allocation of property rights to mitigate each of these contracting problems by reducing stakeholders' vulnerabilities to opportunistic behaviors. We extend earlier efforts to build a stakeholder theory of corporate governance by considering a more comprehensive set of transaction problems and analyzing the comparative efficiency of different governance arrangements for different types of firm–stakeholder relationships and different economic contexts. One conclusion from our theory is that giving primacy to shareholders, or any other group of stakeholders, is a comparatively inefficient solution to governing the modern global and knowledge-driven corporation. We discuss the implications of our theorizing for the debate about the purpose of the firm. [ABSTRACT FROM AUTHOR]

Organizations often involve collaboration such that when they function well, their members engage in purposive coordination and cooperation with others. Previous research has focused on the role of shared, organizational-level goals and supportive governance mechanisms in promoting collaboration. But this research has not adequately addressed the question of the role of moral legitimacy in sustaining commitment to organizational goals and in facilitating good governance. In this article, we identify novel ethical microfoundations of collaborative organizations, explaining the role of organizational ethics in supporting organization-level goals and good governance. We draw upon virtue ethics, adopting a practice perspective on joint production to explain how standards of professional excellence and the virtues function so as to sustain commitment to organizational goals within collaborative organizations. We also draw upon goal-framing theory to articulate the reciprocal and mutually supportive relationship between governance and virtue, where governance requires virtue to function well, and virtue is sustained by governance mechanisms. [ABSTRACT FROM AUTHOR]

Throughout their business life cycle, firms may experience financial distress. Successful emergence from such distress is important to their multiple stakeholders. Using a sample of publicly listed firms in China that emerged from Special Treatment (an indicator of delisting risk), we focus on the key actions such firms take prior to emergence, namely, fixing the core of the business and earnings management. We examine how these actions are associated with sustainable emergence, which we define as emergence from Special Treatment without reentry in the next 5 years. Consistent with the expectation that shortcut fixes to problems do not yield a long-term solution, we find that repairing the core of the business by improving operating efficiency is positively associated with sustainable emergence, whereas earnings management is negatively associated with it. We also find that the positive (negative) association between fixing the core (earnings management) and sustainable emergence is pronounced only for state-owned enterprises. Our article adds to the limited literature that examines issues related to distressed firms' sustainable turnaround. [ABSTRACT FROM AUTHOR]

We examine the impact of the failure of Satyam Computer Services Ltd. ("Satyam"), a major corporate governance related event in India, on related party loans of Indian public companies. Using data from a balanced panel of 794 firms for the years 2006–2012, we find that the Satyam failure had a significant negative impact on related party loans given by Indian firms. The average of net related party loans (as a proportion of total assets) declined from 2.37% in 2008 to 0.23% in 2010. Furthermore, the reduction in related party loans was more prominent in firms with lower levels of external monitoring. Finally, since prior research suggests that there was no significant Satyam effect on the frequency or attendance at audit committee meetings, our results suggest that there can be substantive changes in operational decisions without observable changes in governance. [ABSTRACT FROM AUTHOR]

This article examines the impact of business-to-business (B2B) buying groups on buyer–supplier relationships. The authors outline two distinct initiatives—monitoring and community building—through which buying groups govern buyer–supplier exchange and impact supplier performance toward buyers. Two boundary conditions are identified for the performance efficacy of the buying group's governance efforts: the buyer's own governance of the supplier and the dependence relations among the focal parties. Analyses using two-wave primary data collected from the U.S. health care sector and replications using secondary outcomes indicate support for the proposed framework. The authors conduct a conjoint experiment to further enhance the generalizability of the findings and report that a buying group's monitoring of suppliers enhances supplier performance both by itself and with increasing supplier monitoring by the buyer firm. Further, the supplier's dependence on the buying group and the buyer's dependence on the supplier both sharpen the efficacy of the buying group's monitoring program. However, the performance effects of community building are weakened as the buyer–supplier relationship becomes stronger and as the buyer grows more dependent on the supplier. The authors thus uncover novel interplays between B2B buying groups and B2B dyads and document their consequences for firm performance. [ABSTRACT FROM AUTHOR]

Though recent waves of large-scale street protests have not directly targeted the business sector, they can still represent a major development in a company's external environment. Building on the literature on community embeddedness, this study extends activism-as-information theory to understand how and when companies respond to street protests that take place in their communities. We argue that for business leaders, the scale of protests serves as an information update regarding the changing relevance of the protested social issue in a community. Using data from 2017 to 2020 on Women's March protests in the United States, we show that the scale of street protests in local communities is associated with the likelihood of subsequent female director appointments for corporations headquartered in those communities: larger-scale protests are associated with a higher likelihood of such appointments. Further, we show that this response to proximal protests is heightened for protests that occur in local communities least aligned with the protest movement and for companies least internally aligned with the protest goals. Our theory and findings extend research on social movements in markets, showing how and why organizations respond to diffuse community protests, and they enrich corporate governance research on the roles of communities and stakeholders in shaping board composition. [ABSTRACT FROM AUTHOR]

This article examines the effect of board governance on investment efficiency. I use the staggered enactment of board reforms in 41 countries as a shock to board structure that exogenously improves the quality of board oversight of managers. I find that investment-Q sensitivity improves by roughly half post-reform. This effect is more pronounced for firms that are more exposed to the reforms or when external governance mechanisms are less likely to discipline managers. These findings suggest that increased board oversight strengthens managers' incentives to make investment decisions that are more in line with their firms' growth opportunities. [ABSTRACT FROM AUTHOR]

We examine the role of non-venture private equity (PE) firms as intermediaries in the market for corporate assets. We argue that, in order to create and capture value by acquiring established businesses and selling them to corporate buyers, PE firms must possess at least one of three potential advantages: (a) they must be able to identify businesses that are currently undervalued (valuation advantage), (b) they must be able to enhance the intrinsic value of the business (governance advantage), or (c) they must be able to match the business to a more synergistic corporate owner than is immediately available (timing advantage). We discuss why, and under what conditions, PE firms may thus have an advantage in buying, owning, and selling businesses, and derive a set of propositions predicting which targets PE firms are most likely to pursue. Our study thus offers a comprehensive yet contingent theory of non-venture PE, developing an integrated value-based framework to explain this important and growing phenomenon. In doing so, we also offer new insights into the role of intermediaries in strategic factor markets, especially the market for the buying and selling of businesses. [ABSTRACT FROM AUTHOR]

Management incentives for engaging and excelling in corporate social responsibility (CSR) performance is an important theme as business sustainability gains momentum. We examine the role of tournament incentives, which are created by competition among non-CEO (chief executive officer) senior executives (vice presidents [VPs]) for promotion to the CEO position, in firms' CSR performance. Using a sample of U.S. Standard & Poor (S&P) 1500 firms from 1993 to 2014, we find that tournament incentives proxied by pay gaps between CEOs and VPs are negatively associated with CSR performance, suggesting that competition for promotion could be detrimental for CSR performance. We further show that such association is more pronounced when the perceived probability of promotion increases prior to CEO turnover. This article provides policy, practical, and education implications and contribute to the literature on the integration of CSR into the business culture and strategic management processes. [ABSTRACT FROM AUTHOR]

This article investigates the link between board members' past professional experiences and the terms and conditions of the debt contracts of their current firms. In particular, we examine whether directors' past bankruptcy experience affects the pricing and nonpricing terms of public debt contracts. Using a sample of 8,142 bond issues in the United States in the period 1995 to 2015, we document higher credit spreads and smaller bond sizes for firms with such directors, suggesting that bondholders are concerned about past bankruptcy experience. Our results remain robust to different model specifications. This effect is moderated for bankruptcies that are likely driven by macroeconomic shocks such as the dotcom bubble and the global financial crisis. We also show that our findings are not explained by bond issuers with an elevated risk of default and seem instead to be driven by directors serving on key monitoring committees, indicating that prior bankruptcy experience raises concerns about the company's corporate governance. Finally, mediation analysis offers some evidence of a limited negative indirect effect of prior bankruptcy experience on the terms of debt contracts through the firm's financial and investment policies. Overall, our findings suggest that lenders incorporate information about past professional experiences of directors into public debt contracting. [ABSTRACT FROM AUTHOR]