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Has Sarbanes-Oxley Made Insurance Riskier?

Popular Media The Sarbanes-Oxley Act of 2002 (SOX)—named for its chief sponsors, former Sen. Paul Sarbanes (D–Md.) and former Rep. Mike Oxley (R–Ohio)—was intended to restore trust . . .

The Sarbanes-Oxley Act of 2002 (SOX)—named for its chief sponsors, former Sen. Paul Sarbanes (D–Md.) and former Rep. Mike Oxley (R–Ohio)—was intended to restore trust in the transparency of publicly traded companies after the collapses of WorldCom and Enron Corp. revealed that their auditors had certified financial reports that overstated the firms’ assets and massively understated their liabilities.

But, of course, “transparency” isn’t quite the same thing as prudential safety and soundness. In the insurance space, more specifically, transparency doesn’t necessarily equal solvency.

Read the full piece here.

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Financial Regulation & Corporate Governance

‘Why Managers Matter’ as Applied Organization (Design) Theory

Scholarship Abstract Core organization design issues have emerged in recent popular and influential discussions of managers and organizations, specifically in a genre of writing—the “bossless company . . .

Abstract

Core organization design issues have emerged in recent popular and influential discussions of managers and organizations, specifically in a genre of writing—the “bossless company narrative”—that declares that the classic managerial hierarchy is dead. In this article, we review our critical discussion of this genre in our book, Why Managers Still Matter, arguing that the narrative manifests bad empiricism and half-baked organization theory. However, we also raise the possibility of a charitable reading of the genre: it points to themes in organization design theory that are currently underdeveloped, notably with respect to, for example, the impact of organizational structure and control on employee motivations and the importance of contingencies such as the characteristics of knowledge for organization design.

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Financial Regulation & Corporate Governance

Why Do Companies Go Woke?

Scholarship Abstract “Woke” companies are those that are committed to socially progressive causes, with a particular focus on diversity, equity, and inclusion as these terms are . . .

Abstract

“Woke” companies are those that are committed to socially progressive causes, with a particular focus on diversity, equity, and inclusion as these terms are understood through the lens of critical theory. There is little evidence of systematic support for woke ideas among executives and the population at large, and going woke does not appear to improve company performance. Why, then are so many firms embracing woke policies and attitudes? We suggest that going woke is an emergent strategy that is largely shaped by middle managers rather than owners, top managers, or employees. We build on theories from agency theory, institutional theory, and intra-organizational ecology to argue that wokeness arises from middle managers and support personnel using their delegated responsibility and specialist status to engage in woke internal advocacy, which may increase their influence and job security. Broader social and cultural trends tend to reinforce this process. We discuss implications for organizational behavior and performance including perceived corporate hypocrisy (“woke-washing”), the potential loss of creativity from restricting viewpoint diversity, and the need for companies to keep up with a constantly changing cultural landscape.

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Financial Regulation & Corporate Governance

Ch. 11 Isn’t Twitter Creditors’ Only Hope Of Getting Paid

Popular Media On Nov.10, new Twitter Inc. owner Elon Musk reportedly told employees that bankruptcy was a possibility unless Twitter’s cash flow improved. But that cash flow . . .

On Nov.10, new Twitter Inc. owner Elon Musk reportedly told employees that bankruptcy was a possibility unless Twitter’s cash flow improved. But that cash flow already has been reduced considerably because advertisers are pulling away from Twitter.

Read the full piece here.

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Financial Regulation & Corporate Governance

The Economy Doesn’t Need a Reset, and Neither Does Management Theory

Scholarship Abstract Policymakers, commentators, and academics have called for a Great Reset, a deepseated overhaul of the organization of the global economy. Some suggest that management . . .

Abstract

Policymakers, commentators, and academics have called for a Great Reset, a deepseated overhaul of the organization of the global economy. Some suggest that management theory needs a reset of its own. We argue that Great Reset proponents fail to appreciate the power of markets to bring about desirable social outcomes and are overly sanguine about what governments can do to alleviate alleged market failures. These views also drive the increasing enthusiasm for stakeholder governance, an increased government role in innovation, and the call for new metrics for assessing outcomes, all part of the Great Reset narrative. And yet, concentrating more decision power in the hands of governments, implementing diffuse metrics, and diluting effective ownership can hamper the functioning of markets, encourage crony capitalism, and reduce the resources that are available for dealing with grand challenges. Existing management theory provides powerful tools for understanding the benefits and costs of alternative institutional arrangements; abandoning these tools will push management theory to the sideline in policy debates.

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Financial Regulation & Corporate Governance

Behavioural Economics and ISDS Reform: A Response to Marceddu and Ortolani

Scholarship Abstract Academic investigators have used behavioural economics, a method developed originally to study consumers and their sentiments towards products, to study matters of public policy. . . .

Abstract

Academic investigators have used behavioural economics, a method developed originally to study consumers and their sentiments towards products, to study matters of public policy. A recent article in the European Journal of International Law – ‘What Is Wrong with Investment Arbitration? Evidence from a Set of Behavioural Experiments’ – gives a detailed summary of a series of experiments performed in order to study public sentiment towards investment arbitration. The investigators, Maria Laura Marceddu and Pietro Ortolani observe that public sentiment improves towards the outcome of a dispute settlement procedure when survey respondents are told that the procedure was a ‘court’ with tenured judges, and it worsens when they are told that it was ‘arbitration’ with temporary appointees. From their observations, Marceddu and Ortolani conclude that an international investment court, such as that which the European Union promotes, is a good idea. We suggest, however, that a further inquiry should investigate in greater detail public understanding of what qualities the individuals who serve as judges or arbitrators ought to display, as distinct from the institutional format in which dispute settlement takes place.

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Financial Regulation & Corporate Governance

Ken Griffin, Wealth Inequality, and the Politics of Envy

Popular Media When campaigning for his progressive income tax, Illinois Gov. J.B. Pritzker argued it was needed to address “income inequality” and fund education and social services. . . .

When campaigning for his progressive income tax, Illinois Gov. J.B. Pritzker argued it was needed to address “income inequality” and fund education and social services.

Although voters rejected the tax hike, Pritzker has succeeded in reducing income inequality without it. He did so by driving away the state’s wealthiest person.

Billionaire investor Ken Griffin and his family are moving to Florida.

Read the full piece here.

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Financial Regulation & Corporate Governance

Should There Be Corporate Governance Police?

Scholarship Abstract If a company misbehaves, lawsuits are one way of providing a remedy and encouraging that company and others to behave in the future. If . . .

Abstract

If a company misbehaves, lawsuits are one way of providing a remedy and encouraging that company and others to behave in the future. If the misbehavior is securities fraud, there are two potential plaintiffs—traders allegedly injured by the fraud may bring a private suit, and the government (through the SEC or DOJ) may sue to enforce the public interest in truthful disclosures of corporate information. If the misbehavior is violations of corporate governance rules, however, only private suits are available. Despite the parallel rationales for marrying private and public attorneys general, the toolkit for protecting the public interest in corporate governance is not as well stocked. This essay imagines what a government cause of action might look like for alleged corporate governance wrongdoing. Many of the pathologies of current corporate governance litigation may be ameliorated by a state-based, public cause of action for breaches of fiduciary duty. Although not without downsides, putting Delaware’s Corporate Governance Police on the beat may improve the governance of American companies, while reducing the amount of vexatious litigation.

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Financial Regulation & Corporate Governance

R.J. Lehmann on Elon Musk’s Twitter Acquisition

Presentations & Interviews ICLE Editor-in-Chief R.J. Lehmann joined the Heard Tell Show to discuss Elon Musk’s bid to buy Twitter, shareholder rights, platform moderation, and regulatory review of . . .

ICLE Editor-in-Chief R.J. Lehmann joined the Heard Tell Show to discuss Elon Musk’s bid to buy Twitter, shareholder rights, platform moderation, and regulatory review of the transaction. The full episode is embedded below.

https://youtu.be/6uhTJL6g9uY?t=835

 

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Financial Regulation & Corporate Governance