Seven Myths of Corporate Governance

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Title:
Seven Myths of Corporate Governance
Year: 
2011
Publication: 
Stanford Closer Look Series
Volume: 
CGRP16
Issue: 
June 1, 2011
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Publisher: 
Language: 
English
URL: 
http://www.stanford.edu/group/gsb_corpgov/cgi-bin/blog/wp-content/uploads/2011/06/CGRP16-Myths4.pdf
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Abstract:

 

CGRP16 – Seven Myths of Corporate Governance (PDF) by Professor David F. Larcker and Brian Tayan, MBA '03

In recent years, there has been much discussion over how to improve governance systems broadly. In the process, certain myths have developed that continue to be accepted, despite a lack of robust supporting evidence.

These myths include the beliefs that:

1. The structure of the board always tells you something about the quality of the board

2. CEOs in the U.S. are overpaid

3. Pay for performance does not exist in CEO compensation contracts

4. Companies are prepared to replace the CEO if needed

5. Regulation improves corporate governance

6. The voting recommendations of proxy advisory firms are correct

7. Best practices are the solution to bad governance

We examine each of these myths in closer detail and explain why they are false.

So long as these myths are accepted by practitioners and the public, how can we expect managerial behavior and firm performance to improve? Read the attached Closer Look and let us know what you think!

Larcker and Tayan are the authors of recently published book: Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences, FT Press

Topics, Issues and Controversies in Corporate Governance: The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. To see the full series of  Stanford Closer Looks click here.

Tags: CEO compensation, CEO Succession, corporate governance, corporate governance research, Corporate Strategy, equity incentives executive wealth, Stanford Closer Look Series

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