This week, our research tidbits spotlight corporate and global governance.

Do institutional investors on boards influence corporate finance?
This paper examines whether the behaviour of institutional investors representatives on boards leads to observable differences in corporate finance. The authors find that directors representing pressure-sensitive investors (i.e., banks and insurance companies) prefer lower financial leverage whereas pressure-resistant directors (i.e., mutual funds and pension funds) show no particular preference.

When analysed separately, directors appointed by banks and insurance firms have different attitudes. Bank representatives on boards increase both the financial leverage and the banking debt. This result suggests that some types of institutional directors provide financial resources to the firms on whose board they sit, supporting the view that boards manage the uncertainty associated with strategic decision making and provide firms with preferential access to resources and financial expertise.

This research has interesting academic and policy implications for the debate over the proper degree of institutional involvement in corporate governance. Different institutional investors have different agendas and incentives for corporate governance, and, therefore, both researchers and policy makers should no longer consider institutional investors as a whole.

In addition, this paper calls for new research on the causes and implications of institutional investor involvement in the corporate governance of nonfinancial firms. This new research could require new insights on the dynamics within the boards and on the interplay among the knowledge, incentives and attitudes of quite different directors.

Emma García-Meca, Felix López-Iturriaga and Fernando Tejerina-Gaite. 2017. Institutional Investors on Boards: Does Their Behavior Influence Corporate Finance?
Journal of Business Ethics, 146(2), 365–382.


CEO hubris and firm performance: Moderating roles of CEO power and board vigilance 
This study focuses on CEO hubris and its detrimental effect on corporate financial performance along with an examination of critical corporate governance contingencies (CEO power and board vigilance) that may moderate the negative effect.

From 654 observations of 164 Korean firms over the years 2001–2008, the researchers found that CEO power exacerbated the negative effect of CEO hubris on corporate financial performance, whereas board vigilance mitigated it. This study provides empirical evidence that entrenchment problems arising from CEO hubris would be exacerbated as CEOs become more powerful, but weakened as board of directors become more vigilant. Theoretical contributions and practical implications will be discussed.

Jong-Hun Park, Changsu Kim and Young Kyun Chang, Dong-Hyun Lee, Yun-Dal Sung and Jong-Hun Park. 2018. CEO Hubris and Firm Performance: Exploring the Moderating Roles of CEO Power and Board Vigilance. 
Journal of Business Ethics, 147(4), 919–933.


Board meeting attendance by outside directors
Outside directors’ regular board meeting attendance is important in improving the effectiveness of a governance system. Such attendance is evidence of their commitment to the firm as key other players in monitoring and decision making. Using a unique dataset for Korean firms, and three-level random coefficients models, the authors find that, foreign outside directors, an independent appointment process, professional knowledge of business operations and accumulated firm-specific knowledge are important factors that affect outside directors’ attendance of board meetings.

The results also confirm that both outside directors’ personal characteristics and the social context are crucial in understanding their board meeting attendance. Further analysis shows that a positive corporate environment that supports the outside director system encourages outside directors’ attendance at board meetings.

Byung S. Min and Amon Chizema. 2018.  Board Meeting Attendance by Outside Directors.
Journal of Business Ethics, 147(4), 901–917. 


The UN’s Global Compact: Engaging implicit and explicit CSR for global governance 
This article analyses the United Nations Global Compact (UNGC) under the conceptual framework of explicit versus implicit corporate social responsibility (CSR) to better understand the operational and governance challenges behind this voluntary global initiative. Using institutional logics theory, the researchers show how the UNGC is a practice that embodies seemingly competing logics. The authors suggest mechanisms to facilitate the interplay of implicit/explicit CSR and the co-existence of logics that might allow the UNGC to move forward while addressing its critics. The researchers argue that failure to conceptualise the UNGC as a combination of explicit and implicit CSR leaves the UNGC subject to criticism that might be better directed toward organisations that fail to practice explicit CSR. While viewing the UNGC through an integrated CSR framework may not immediately reconcile its critics and proponents, combining elements of both may provide opportunities to posit collaborative solutions to improve the quality, outcome, and legitimacy of UNGC initiatives.

Jill A. Brown, Cynthia Clark and Anthony F. Buono. 2018. The United Nations Global Compact: Engaging Implicit and Explicit CSR for Global Governance.
Journal of Business Ethics, 147(4), 721–734.


Religion and CSR: An Islamic “political” model of corporate governance  
This article examines the political perspective of corporate social responsibility from the standpoint of normative Islam. These authors argue that large firms within Muslim majority countries have the moral obligation to assist governments in addressing challenges related to sustainable socioeconomic development and in advancing human rights. In substantiating this argument, the writers draw upon the Islamic business ethics, stakeholder theory, and corporate governance literatures, as well as the concepts of Maqasid al Shariah (the objectives of Islamic law) and fard al ‘ayn (obligation upon all individuals within society) versus fard al kifayah (obligation upon some individuals within society) to introduce a normative model elucidating critical Islamic precepts. Finally, the authors propose an Islamic “political” corporate governance framework, which democratises firm decision making by embedding “core” stakeholders, nongovernmental organisations (NGOs), and Shariah scholars in the corporate board, thereby enhancing the ability of businesses to respond to stakeholder concerns and priorities, while mitigating interstakeholder and intraboard power asymmetries.

Maurice J. Murphy and Jan M. Smolarski. 2018. Religion and CSR: An Islamic “Political” Model of Corporate Governance.
Business & Society, online first at


Corporate governance as a key driver of corporate sustainability in France
This paper examines the relationships between corporate governance and corporate sustainability by focusing on two main components of companies’ governance structure: boards of directors (BoDs) and investor relations officers (IROs). The authors propose an original empirical strategy based on the 120 biggest French capitalisations for the year 2013, allowing us to measure boards of directors’ independence and expertise, as well as investor relations officers’ convictions and communication on corporate sustainability.

The results show that corporate governance has an ambiguous impact on corporate sustainability because of opposing forces: internal, external and intermediate forces. On the one hand, the higher the proportion of inside directors, the higher the company’s environmental and governance performance, while the higher the proportion of general experts in the board room, the lower the company’s governance performance.

On the other hand, investor relations officers’ beliefs that corporate sustainability is primarily driven by investors’ ethical values appear negatively related to companies’ governance performance. In sum, corporate sustainability appears positively related to internal forces (inside directors) and negatively related to external forces (general expert directors and investor activist engagement).

The results of this study demonstrate the need to carry out efforts to train BoDs (specifically inside directors) and IROs to respond to corporate sustainability and to take more of a leadership role in this area.

Patricia Crifo, Elena Escrig-Olmedo and Nicolas Mottis. 2018.  Corporate Governance as a Key Driver of Corporate Sustainability in France: The Role of Board Members and Investor Relations.
Journal of Business Ethics, online first at


Opportunism in principal–agent relationships 
Conventional agency theory typically focuses on a unidirectional problem, in which an agent behaves opportunistically against the interests of a principal. Yet, this conceptualisation is too limited to fully describe all aspects of principal–agent relationships.

This article presents a more comprehensive framework explaining a potential three-directional problem—that is, (i) agents behave opportunistically against the interests of principals, (ii) principals behave opportunistically against the interests of agents, and (iii) relationships between agents and principals representing confluence of interests affect the interests of third-party stakeholders.

The article provides evidence of these problems, describes their unique characteristics, and outlines implications for society. It concludes with a discussion focusing on the implications of the proposed framework for purported governance solutions, the ongoing debate between shareholder and stakeholder views of the firm, and business practices.

Asghar Zardkoohi, Joseph S. Harrison and Mathew A. Josefy. 2017. Conflict and Confluence: The Multidimensionality of Opportunism in Principal–Agent Relationships.
Journal of Business Ethics, 146(2), 405–417.