Latest #corpgov research sounds great—until you read it

For some months now, I have been wrestling with the possibility that corporate governance might not be a structure or a process, but rather a mechanism that is activated by boards in some way. I've been beavering away on this, without seeing much other research activity in the same area—until today, when this release from Penn State arrived. The article referred to corporate governance and mechanisms in the same sentence. Wow! Could this article point to some research along the same lines as my attempts to get to the bottom of what actually happens in boardrooms? Here's the first three paragraphs:

UNIVERSITY PARK, Pa. -- The most effective corporate governance occurs when a mix of complementary mechanisms that include CEO incentive alignment and both internal and external monitoring mechanisms are present, according to a new study from Penn State Smeal College of Business faculty member Vilmos Misangyi and his colleague from the Singapore Management University.

Corporate governance refers to the collection of activities meant to help ensure that executives make the best decisions for shareholder profitability. While much past research has attempted to evaluate the effectiveness of each governance mechanism individually, Misangyi’s study of the S&P 1500 firms instead takes a holistic view of how these activities work in concert to achieve profitability.

The two primary categories of governance mechanisms include incentive alignment and monitoring. Alignment mechanisms incentivize executives to act in the best interest of shareholders through, for example, CEO stock ownership and compensation contingent upon firm performance. Monitoring can occur from both internal and external sources, such as boards of directors and shareholders owning large blocks of equity, respectively.

By the time I got this far—three paragraphs into a nine paragraph release—the wind was gone from my sails. My hopes were dashed. Misangyi and Acharya seem to suggest that effective corporate governance occurs when CEO incentive alignment and monitoring mechanisms are in place. They evaluated two variables (they call them mechanisms) in 1500 firms and described their research as holistic. Interesting. There is a growing body of research that suggests that board's involvement in the development of strategy and in the making of decisions is what matters. Misangyi and Acharya's release makes no mention of anything along these lines, nor is there any suggestion that the researchers directly observed any of the 1500 boards in their study. 

I'm looking forward to reading the full research report when it is published, to see whether this is another study based on secondary data and hypothetico-deductive science, or whether Misangyi and Acharya have discovered a whole new paradigm.