EIASM'16: Day two summary

The 13th edition of the Corporate Governance Workshop convened by the European Institute of Advanced Studies in Management (EIASM) was hosted by SDA Bocconi in Milano, Italy. Approximately 50 leading thinkers and researchers from over 20 countries gathered to explore emerging trends in the fields of board practice and corporate governance. Nearly 50 presentations were accepted onto the two-day programme. Highlights from the second day follow, together with some overall reflections (highlights from the first day are posted in a separate summary):

• Emmanuel Zenou (Burgundy, France) discussed the relationship between board capital (i.e., director expertise, experience, reputation and ties with other firms) and innovation. This presentation was of special interest to me, given my long-standing view that boards need to be involved in strategic management if they are to have influence on firm performance. Zenou asserted that innovation is a key element for helping firms gain competitive advantage and expand market share and, therefore, the intensity of (commitment to) innovation is an important predictor of future firm performance. This is intuitively attractive at a management level, but what of the board's contribution to innovation? Does that matter? Zenou discussed this, saying that firms with high innovation intensity have appointed directors with specific skills, and that different forms of innovation require different profiles of directors. More specifically, advanced education (especially a doctoral degree or an education in law); experience in manufacturing, marketing, international business and people management; and, extensive networks with directors and leaders in other firms were all identified as being helpful. Interesting, experience in finance was negative, suggesting that the propensity to appoint accountants and finance experts might be counterproductive if innovation is a important priority. Zenou's paper suggests that board expertise a more important indicator of performance than structure or composition per se. This is consistent with my research findings
  
• Several people spoke about the roles of the chief financial officer and executive compensation in business, especially in the context of international business (Frederic Altfeld, France) and 'say on pay' (Will Mackay, Australia) and board compensation committees (Hugh Grove, USA). The general theme to emerge from this group of speakers was that the chief financial officer has an important role to play as an enabler (but explicitly as a leader) and that executive compensation perceptions of often (and unfortunately) uncoupled from reality. Expanding this second point, Mackay said that the problem with published executive compensation details was the lag between when the package and associated key performance indicators were negotiated and when the results (the pay) was reported. The primary problem is that the media has no memory. This point places a crucial responsibility on boards, to ensure that appropriate context is provided for payments made to executives—especially in the case where the executive has been paid well great historical performance but the company has entered a period of tougher trading conditions when the pay is reported in the annual report.

Overall, the conference provided a wonderful forum for leading board and corporate governance researchers from around the world (especially Europe, but also North America and Asia) to get together to share ideas and discuss emerging trends. The collaboration produced some wonderful debates; strong agreement that less is known about corporate governance than what most researchers and consultants (especially) claim to know; and, an invitation to return in 2017 (which I will probably accept). However, there was one notable disappointment: mine was the only presentation informed by observations of what boards actually do. Researchers and consultants need to get off their backsides and get inside boardrooms if they are to truly understand corporate governance and provide credible recommendations of what boards should do in practice.

​More personally, I was approached by three different people to collaborate on a few different projects, which was gratifying. Two approaches in particular led to further exchanges over lunch and dinner: one to synthesise the learning from my board observation studies (the board's influence on firm performance) with research into psychological factors and group decision-making, and the other to dig into the performance of local government councils (this second project is of special relevance given an independent assessment project I'm currently involved with). Where these will lead remains to be determined. However the fact that people around the world are starting to realise that we need to understand how boards can be a source of value creation (because this relationship is simply not understood now, despite what most consultants claim) was heartening. I look forward to the journey in the coming months, including return visits to UK, Finland, The Netherlands and Italy in early 2017.

If you wish to know more about the conference; receive papers on topics of interest; or, pose a question or commission some applied research, please get in touch. I'd be delighted to hear from you and to serve you.