Muhammad shoaib

Role of Board committee

Summarized:

Supporting an SEC Panel Report's conclusion that audit committee members need financial
sophistication, we show that the composition of a board in general and of an audit committee
more specifically, is related to the likelihood that a firm will engage in earnings management.
We conclude that board and audit committee activity and their members' financial sophistication
may be important factors in constraining the propensity of managers to engage in earnings
management.

We examine the role of the board of directors, the audit committee, and the executive
committee in preventing earnings management. Board and audit committee members with
corporate or financial backgrounds are associated with firms that have smaller discretionary
current accruals. Board and audit committee meeting frequency is also associated with reduced
levels of discretionary current accruals.

Reference

Xie, B., Davidson III, W. N., & DaDalt, P. J. (2003). Earnings management and corporate governance: the
role of the board and the audit committee. Journal of corporate finance, 9(3), 295-316.
Mehak Muzaffar

Composition and diversity in Boards

The board of directors is one of a number of internal governance mechanisms that are intended
to ensure that the interests of shareholders and managers are closely aligned, and to discipline or
remove ineffective management teams. Consequently, the importance and value of various
governance structures, including board diversity and independence, should be separately
examined in each country, and the influential factors investigated.

While board diversity and independence has been a growing area of research in recent years,
most empirical research on this topic has been restricted to US data. With the collapse of several
well-known public companies such as Ansett, OneTel and HIH, there is an increasing demand to
evaluate the corporate governance practices of Australian companies, including the composition
of boards. Among the most significant governance issues currently faced by the modern
corporation are those relating to diversity, such as gender and age, and independence of
directors. The generalizability of such findings may not extend across national boundaries due to
different regulatory and economic environments, cultural differences, the size of capital markets
and the effectiveness of governance mechanisms. Accordingly, this research provides a timely
review of the state of corporate governance in Australia so far as board composition is
concerned. This study reports on the diversity and independence of the board membership of 100
top Australian companies in 2003. Australia has one of the most developed stock markets in the
Asia-Pacific region.

Reference:

Kang, H., Cheng, M., & Gray, S. J. (2007). Corporate governance and board composition: Diversity and
independence of Australian boards. Corporate Governance: An International Review, 15(2), 194-207.
Abid Hussain

Executive Compensation
Topics discussed include the level and structure of CEO pay (including detailed analyses of
annual bonus plans, executive stock options, and option valuation), international pay differences,
the pay-setting process, the relation between CEO pay and firm performance (“pay-performance
sensitivities”), the relation between sensitivities and subsequent firm performance, relative
performance evaluation, executive turnover, and the politics of CEO pay.

This chapter summarizes the empirical and theoretical research on executive compensation
and provides a comprehensive and up-to-date description of pay practices (and trends in pay
practices) for chief executive officers (CEOs).

Reference:

Murphy, K. J. (1999). Executive compensation. Handbook of labor economics, 3, 2485-2563.

Bilal zikriya

Shareholders’ Elections

Concern about the need to address the problem of conflicts of interest between
management and shareholders has led to calls on shareholders to exercise their voting rights
at the annual general meetings. Whether the effort to participate is rewarded depends in an
unpredictable manner on the distribution of large block shareholdings, and also on the
percentage of the holders of small parcels who exercise their right to vote. It is argued here
that the distribution of shareholding in the UK companies creates a complex pattern of
incentives and disincentives for the holders of even larger blocks of shares to participate in
the voting process. A clear choice set is needed to arrive at a rational decision concerning the
exercise of franchise, but that is not available.
Refrence:
Chakravarty, S. P., Goddard, J. A., & Hodgkinson, L. (2004). Shareholders ad Corprate
Elections. Journal of Management and Governance, 8(2), 187-197.