Posts Tagged ‘stanford corporate governance research program’

• Are Current CEOs the Best Board Members? (PDF)

• Related: 2011 Corporate Board Survey from Stanford Rock Center and Heidrick & Struggles

By many measures, current CEOs should be the best candidates to serve on boards of directors.  They have extensive strategic, operational, and risk management expertise, as well as experiences and leadership attributes that are important for a firm’s long-term success.

 However, there is currently no widely accepted, rigorous study that demonstrates that current CEOs are better board members or that companies with CEO directors benefit in terms of improved advice or monitoring.  In fact, recent survey data suggests that active CEOs might not always be the best board members because of the time constraints of their full time job and personality attributes that may make it difficult for them to contribute constructively to a boardroom environment.

 We examine this issue in closer detail and ask:

 1.       Should companies reassess the importance of this criteria when looking for new board members?

2.       Does the requirement for CEO-level experience limit the pool of available directors, particularly diversity candidates who may be less likely to have this experience?

3.       If the availability of CEO directors is low, should professional directors be recruited to fill the gap?

4.       Do the positive qualities of a retired CEO deteriorate, or do they never become outdated?

 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 all of the Stanford Closer Look series, click here.

Institutional Shareholders and Activist Investors Authored by Professor David F. Larcker and Brian Tayan, Researcher, GSB Corporate Governance Research Program/MBA ’03.

• CGRP15 – Tesla (PDF) by Authors: Professor David F. Larcker and Brian Tayan, MBA ’03

In June 2010, Tesla Motors raised over $225 million in an initial public offering that valued the electric car manufacturer at $2 billion.  It was the first time a U.S. automobile company went public since Ford Motor in 1956.

The evolution of Tesla—first incorporated in 2003 by engineers Martin Eberhard and Marc Tarpenning—in some ways has been unique, given the nature of its business.  At the same time, Tesla has faced organizational challenges that are common to most public and private corporations.

We examine the prominent features of the company’s governance system as it has evolved from inception to IPO, including the board of directors, antitakeover protections, and executive compensation program.  In each case, the system changed to match the current needs of the company.

We ask:

• Many experts prescribe a one-size-fits-all approach to governance.   Why don’t they do a better job of taking into account the company’s specific situation and needs?
• Now that Tesla is public, how might we expect its governance system to change in the future?

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

Topics, Issues and Controversies in Corporate Governance: The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. To see the full series of  Stanford Closer Looks go here.