Warren Buffett

A Russian roulette equation — usually win, occasionally die — may make financial sense for someone who gets a piece of a company’s upside but does not share in its downside. But that strategy would be madness for Berkshire. Rational people don’t risk what they have and need for what they don’t have and don’t need.

Ichak Adizes

Representing owners, corporate governance is not democracy. Workers who are managed have no say in who their leaders will be. The reality is that we teach that benevolent dictatorship is the most-desired leadership model of corporations. That is the reality of our management education.

Do CEOs Deserve Their Pay?

The myths that drive the CEO pay bonanza.

Bryan Hong

Corporate boards that aim to maximize shareholder value should use executive compensation not to reward managers for luck, but to pay for their abilities and the quality of their decisions. However, this poses two significant challenges: measuring management’s ability and ruling out other independent factors. First, it is very difficult to measure and assess the ability and quality of managerial decisions, which prevents boards from … [ Read more ]

How to Be a C.E.O., From a Decade’s Worth of Them

Adam Bryant has interviewed 525 chief executives through his years writing the Corner Office column. Here’s what he has learned.

Dominic Barton, Dennis Carey, and Ram Charan

The role of the board is often underplayed in discussions around talent. That’s because so many boards focus on strategy and compliance first, and limit talent discussions to the question of CEO succession and executive compensation. But CEOs running a talent-first organization must help the board see that talent is the value creator and therefore belongs at the top of its agenda. The talent-driven CEO … [ Read more ]

A Board Interview Guide for Prospective CEOs

Over the years, we’ve spoken with many clients who were preparing to be interviewed for CEO roles. We’ve also debriefed with them after the event, and we’ve spoken with corporate board members on how to structure the selection process. In the spirit of sharing helpful experiences and lessons from others, here are some of the questions that boards often ask prospective CEOs. Even if the … [ Read more ]

Knud B. Jensen

When it comes to an effective governance model, one size does not fit all. Context is paramount. Context is both endogenous and exogenous. Endogenous variables include complexity, asset base, competitive advantage, capital structure, quality of management, and board culture and leadership. Exogenous variables include industry structures, position in growth cycle, competitive force, macroeconomics (interest rate, commodity pricing), world supply and growth, political changes, and unforeseen … [ Read more ]

Paying for CSR is Good Governance

More and more firms today are including incentives for corporate social responsibility (CSR) in their executive compensation contracts. But is this a worthwhile practice? Who benefits from it? Recent research shows a link between CSR activities and better social performance and the bottom line. But is paying for CSR beneficial for shareholder interests? Accounting and stock-price performance incentives are already common in executive compensation contracts … [ Read more ]

The CEO as Activist

Duke professor Aaron Chatterji believes business leaders have social and political responsibilities they can’t afford to neglect.

Jim Collins

If your company cannot be great without you, it is not yet a great company. It is merely a group of people who happen to have a leader. The test as to whether it’s a great company is it doesn’t need you.

The Case Against Corporate Short Termism

Despite strong pressures to focus on the short term, it is possible to manage for the long term and reap considerable rewards.

Larry Jones, Joseph Duerr

Although activist investors are successful at improving margins, they struggle to drive growth. We analyzed 55 companies over the past 10 years in which shareholder activists had a significant impact on company governance and strategy, and compared their performance to that of their industry peers. (The aims of activist actions included business focus, board composition, business restructuring, director election, focus on growth, board representation, general … [ Read more ]

What Makes a CEO ‘Exceptional’?

We assessed the early moves of CEOs with outstanding track records; some valuable lessons for leadership transitions emerged.

A Deal-Making Strategy for New CEOs

New CEOs typically raise the tempo of transactions at first, then the pace slows down. Is that costly?

The Case for Stock Buybacks

If paying excessive CEO salaries is the most maligned use of corporate funds, stock buybacks may well take second place. Conventional wisdom is that CEOs buy back stock to manipulate the short-term stock price. They fund the buyback by cutting investment, and so firm value suffers in the long-term. As Senator Elizabeth Warren argued, “stock buybacks create a sugar high for the corporations. It boosts … [ Read more ]

Share Buybacks Are Corporate Suicide

When firms invest too heavily in buying back shares, there is likely to be trouble ahead.

Learning from Boardroom Perspectives on Leader Character

In May 2013, Ivey Business Journal published “Leadership Character and Corporate Governance,” which proposed that being an effective board member requires competencies, character and commitment. In that paper, which was also published by the Institute of Corporate Directors, we further noted that qualitative research indicates that character is the one fundamental requirement that poses the biggest challenge in terms of recruiting and selecting both directors … [ Read more ]

12 Questions to Determine Board Effectiveness

Long-standing directors and outliers alike could benefit from a crash course in the fundamentals of well-run boards. This was the subject of a roundtable discussion held in February 2017 as part of the INSEAD Directors Forum on the Asia campus. As discussion leader, I gave the participants a basic quiz designed to prompt reflection about how their board applies basic governance principles. It occurred to … [ Read more ]

Reconceptualizing the Board and its Metrics

Junk science has overwhelmed the thoughtful process of clarifying the role and processes of a successful board. And it has spawned more than a cottage industry. Governance has become a major sector supported by investment funds, consultants, university training programs, provincial and federal governments and institutions. Unfortunately, most of this activity is driven by a fad in management theory, which will eventually fade away like … [ Read more ]