Archive for September, 2011

• The NCAA Adopts “Dodd-Frank”: A Fable  (PDF)
  Stanford Graduate School of Business – Corporate Governance Research Program, Professor David F. Larcker and researcher Brian Tayan, MBA 2003

 In recent years, NCAA football has been rocked by a string of high-profile violations, including those at USC, Ohio State, the University of Miami, and Auburn.  In many ways, these violations were similar to the governance breakdowns at financial and other corporations leading up to the financial crisis of 2008 and 2009.

In the corporate world, Congress responded to the financial crisis by enacting the Dodd-Frank Wall Street Reform Act, which among other things imposed various governance requirements on all publicly traded companies.

What would happen were the NCAA to adopt these same provisions and require them of all universities and their football programs?

In this fictitious tale, we explore what such a set of rules would look like.

We ask:

* If these requirements would not work in an athletic setting, should we expect them to work in business? 
* Why are the governance provisions of Dodd-Frank legally required, rather than voluntarily adopted by individual companies?
* Why does Dodd-Frank place such emphasis on executive compensation and disclosure?  Will its compensation requirements reduce governance failures?

Read the Closer Look and let us know what you think!

To receive monthly alerts about the Closer Look series, please email the Stanford Corporate Governance Research Program at corpgovernance@gsb.stanford.edu. You can also follow more corporate governance news on Twitter: @StanfordCorpGov .

To view the entire collection of  Stanford Closer Looks please click here.

• Scarlet Letter: Are the CEOs and Directors of Failed Companies “Tainted”? (PDF) Stanford Graduate School of Business – Corporate Governance Research Program, Professor David F. Larcker and researcher Brian Tayan, MBA 2003

There is a consistent pattern that emerges when a company suffers from a major governance failure: the stock price falls, the company faces lawsuits, and there is elevated turnover in both the executive suite and the boardroom.  

The impact on the careers of the former executives and directors of these companies is less clear.  Recent experience suggests that many CEOs and directors of failed companies are able to retain outside directorships–and even obtain new ones–following their forced departures.

1. Should this be a concern for shareholders?

2. What is the standard by which the culpability of an executive or director should be measured?  When are they “too tainted” by their experience to serve at other companies?

3. Is it plausible that officers and directors involved in an accounting or ethical problem can “learn valuable lessons” from the experience?

Read the attached Closer Look and let us know what you think!

To receive monthly alerts about the Closer Look series, please email the Stanford Corporate Governance Research Program at corpgovernance@gsb.stanford.edu. You can also follow more corporate governance news at http://twitter.com/#!/StanfordCorpGov. To see the entire collection of the Stanford Closer Look series, please click here.