Tag: board effectiveness

What we need to know about corporate governance—but don’t

In this paper, Seven Gaping Holes in Our Knowledge of Corporate Governance, from the Rock Center for Corporate Governance at Stanford, the authors observe that it “is extremely difficult to produce high-quality, fundamental insights into corporate governance.”  Why is that? Well there are lots of reasons.  According to the authors, instead of the theory, measurement and analysis that you might expect—given that corporate governance is a social science—the “dialogue about corporate governance is dominated by rhetoric, assertions, and opinions that—while strongly held—are not necessarily supported by either applicable theory or empirical evidence.” And even empirical work from academics has serious shortcomings, often detecting a pattern that is not amenable to specific application or making findings that are too specific to generalize.  Or, studies might find correlation but not permit attribution of causation; or it may be hard to suss out key variables that may not be publicly observable. As a result, there remain “central issues where insufficient or inadequate study has left us unable to answer basic questions, and where key assumptions relied upon by experts have not been verified or validated.” The paper attempts to identify some of them and home in on potential further areas of study.