Center News, Scholarship
More Exciting Scholarship from Professor Mahmud
The Weinberg Center is pleased to congratulate our distinguished Lerner College colleague, Hamed Mahmudi, on his latest paper, soon to be published in the Journal of Law and Economics, a leading publication from the University of Chicago. Hamed, a prolific and influential scholar, has made significant contributions to the study of corporate governance practices and debates.
In his latest, Hamed, along with co-authors Tor-Erik Bakke (University of Illinois) and Aazam Virani (University of Arizona), delves into the far-reaching implications of the SEC’s 2022 mandate requiring companies to adopt clawback provisions for executive compensation. This research rigorously examines how such provisions—designed to enable firms to recover performance-based compensation when financial misstatements occur—impact firm value and whether regulatory mandates of this nature benefit shareholders.
The study contributes to the ongoing debate over whether governance measures should be left to firms to decide (the “private ordering” view) or enforced through regulation (the “agency problem” view). This discussion is central to some of the most prominent voices in the field, including scholars such as Lucian Bebchuk and Jesse Fried (Harvard), Sanjai Baghat (Colorado), Paul Gompers (Harvard), and David Larcker (Stanford).
Focusing on the SEC’s 2015 announcement of proposed rules under the Dodd-Frank Act—just prior to the 2022 mandate—this paper investigates how market participants responded to the uncertainty surrounding these provisions.
Key findings include:
- Firms without a clawback provision in place before the SEC’s announcement saw a positive boost in firm value, with an average increase of $38.6 million, suggesting that mandatory clawbacks can enhance shareholder value.
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The evidence indicates that firms most likely to benefit from mandatory clawbacks include those with powerful management and weak boards, higher CEO compensation tied to bonuses, and lower audit quality. On the other hand, high-growth firms with volatile cash flows or substantial R&D investments may be less likely to benefit, as such measures could reduce risk-taking or innovation.
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Overall, these findings support the notion that governance regulations can increase firm value in certain cases. The study suggests that mandatory clawbacks could lead to better financial reporting and improve corporate governance.
For those interested in the broader debate around corporate governance and regulation, Professor Mahmudi’s study emphasizes the importance of not only considering voluntary governance reforms but also the role that regulatory measures can play in improving corporate practices for the benefit of investors and the broader economy.
Congratulations Hamed!
Read his other scholarly papers here.
Center News
For the fifth year in a row, the Weinberg Center collaborated with The Conference Board on its annual (2024) review of board composition, along with KPMG, Russell Reynolds Associates and ESGAUGE. This year’s report documents record levels of demographic (racial, gender) diversity on boards, which has plateaued, as well as the emergence of substantive diversity (business backgrounds). The Center contributes both editorial assistance and financial support through its IRRCi.
Study: Corporate Boards Are More Diverse Than Ever, But Growth in Racial Diversity Among New Directors Is Slowing
2024-12-03 | The Conference Board
Corporate America’s boards are more diverse than ever. But racial diversity has recently undergone a marked slowdown. From 2022 to 2024, the share of new Russell 3000 directors who are non-White dropped from 48% to 31%. Moreover, the share of new directors who are Black fell from 26% to 12%.When it comes to gender diversity, there’s a complex picture: While women hold a record level of overall board seats (29%), they hold just 8% of board chair positions.
These findings and others come from a new report by The Conference Board, ESGAUGE, KPMG, Russell Reynolds Associates, and The John L. Weinberg Center for Corporate Governance at the University of Delaware. In addition to providing the latest data and insights on racial and gender diversity, the study also analyzes board skills, qualifications, and evaluations.
Read Full Article Here
Center News
Speaking Out on Hot Button Topics: How Boards Can Steer CEOs and Companies in Choppy Waters
October 31 at 12:00 pm – 2:30 pm EDT
Director Speaking at the Zicklin Center for Corporate Integrity
The Weinberg Center’s Director, Larry Cunningham, will be speaking at Baruch College’s Zicklin Center for Corporate Integrity in New York City on October 31, 2024 at 12:00 pm.
The topic will be “How Boards Can Steer CEOs and Companies in Choppy Waters.”
For more information and to register for the program, visit this webpage.
Center News, Homepage News
Lawrence “Larry” Cunningham named director of UD’s Weinberg Center for Corporate Governance
The University of Delaware is pleased to announce the appointment of alumnus Lawrence “Larry” Cunningham as the new director of its John L. Weinberg Center for Corporate Governance. Cunningham will officially assume the role on September 23, 2024.
Founded in 2000 within the Alfred Lerner College of Business and Economics, the Weinberg Center is the only corporate governance center in Delaware and one of the longest-standing academic centers dedicated to corporate governance.
Cunningham, a distinguished UD alumnus with a bachelor of arts in economics, is a leading authority on corporate governance, corporate culture and corporate law. Cunningham served for a decade as a member of the Lerner College Dean’s NYC Advisory Council, and has participated in many UD and Weinberg Center events over the years, including delivering the 2024 Weinberg Distinguished Lecture.
“We are thrilled to welcome Larry Cunningham back to UD as the new director of the Weinberg Center,” said Oliver Yao, Dean of the Lerner College. “Larry’s extensive expertise as an author, researcher, board member, lawyer, and speaker will be invaluable in advancing the Center’s mission. His remarkable achievements in corporate governance make him an ideal leader for this esteemed institution.”
A Delaware native, Cunningham is a leading expert on corporate governance who has held diverse roles as a university professor, program director and dean, author and commentator, public company board member, and corporate lawyer.
Currently a professor emeritus at George Washington University, Cunningham also holds directorships at Markel Group (New York Stock Exchange), Constellation Software (Toronto Stock Exchange), and Kelly Partners Group Holdings (Australian Stock Exchange). For the past two years, he served as special counsel at Mayer Brown, advising clients on corporate governance and providing thought leadership in the field.
“I am honored to give back to my alma mater through my role at the Weinberg Center,” Cunningham said. “The University and the Center are central institutions in sustaining Delaware’s national leadership in the field of corporate governance, particularly as the field has become increasingly complex in recent years. I look forward to adding value in those roles.”
Widely cited in the press, Cunningham has twice testified before Congress on corporate governance matters. Cunningham’s influential works include the international bestseller The Essays of Warren Buffett: Lessons for Corporate America and the award-winning books Contracts in the Real World and Berkshire Beyond Buffett. He received the Lifetime Achievement Award in Corporate Governance from the National Association of Corporate Directors (NACD) in 2018 and has been honored by NACD as among the “most influential people in corporate governance and in the boardroom.”
Cunningham is succeeding Justin Klein, who is completing a three-year term of successful leadership of the Weinberg Center. “We extend our deepest gratitude to Justin Klein for his exemplary service as director,” Dean Yao said. “Under Justin’s leadership, the Weinberg Center has significantly advanced the field of corporate governance.”
The search committee, chaired by Donald J. Puglisi Professor of Finance Laura Field, included Weinberg Advisory Board Chair Andre Bouchard and Members Carol Ward, Mary Francis, and Tammy Mercer, as well as Lerner Professors Fei Xie, Carolyn Levine and John D’Arcy. The Committee conducted a thorough national search and will continue to provide mentorship as Cunningham transitions into his new role.
Link to article on UDaily | Link to Mr. Cunninhgam’s Bio
Center News
The Weinberg Center wants to congratulate Greg Toye from Rivel, Inc., in being recognized by NIRI (National Investor Relations Institute) as a 2024 Rising Leader under 40.
Greg is a graduate of the Alfred Lerner College of Business & Economics and during his time in Lerner, served as an intern with the Weinberg Center for two years.
Visit the NIRI: The Association for Investor Relations page to view the full listing.
(image source NIRI: The Association for Investor Relations)
Center News, Homepage News
The three John L. Weinberg/IRRCi research paper competition winners were announced at the 2024 Corporate Governance Symposium on March 15, 2024. The other eight finalist papers were also presented.
Congratulations to the winning papers:
- Do board connections between product market peers impede competition?
Authors: Radhakrishnan Gopalan (Washington University in St. Louis, deceased), Renping Li (Washington University in St. Louis), Alminas Zaldoka (Hong Kong University of Science and Technology)
Read the Paper
- The Social Cost of Liquidity Disclosure: Evidence from Hospitals
Authors: Thomas Bourveau (Columbia University), Xavier Giroud (Columbia University, Yifan Ji (University of South Carolina), Xuelin Li (Columbia University)
Read the Paper
- Specialist Directors
Authors: Yaron Nili (University of Wisconsin Law School) and Roy Shapira (Reichman University)
Read the Paper
Read more on the symposium.
