Business students’ perceptions of corporate governance best practices

• Pages: 361-376
• Published date: 04 April 2016
• Date: 04 April 2016
• DOI: https://doi.org/10.1108/CG-08-2015-0117
• Author: Kathryn M. Zuckweiler,Kirsten M. Rosacker,Suzanne K. Hayes
• Subject Matter: Strategy,Corporate governance

Business students’ perceptions of

corporate governance best practices

Kathryn M. Zuckweiler, Kirsten M. Rosacker and Suzanne K. Hayes

Kathryn M. Zuckweiler is

an Associate Professor of

Management at the

University of Nebraska at

Kearney, Kearney,

Nebraska, USA.

Kirsten M. Rosacker is

Assistant Professor of

Accounting at the

Department of

Accounting and Business

Law, Minnesota State

University, Mankato,

Minnesota, USA.

Suzanne K. Hayes is

Associate Professor at

the Department of

Accounting and Finance,

University of Nebraska at

Kearney, Kearney,

Nebraska, USA.

Abstract

Purpose –This paper aims to develop a better understanding of business students’ perceptions of the

relative importance of corporate governance best practices within the context of major area of study and

compare student rankings of corporate governance best practices to those of working professionals.

Design/methodology/approach –Using a previously published survey, data were collected from

business students at two Midwestern US universities and analyzed using factor analysis.

Findings –This research demonstrated that students rank strategic human resource management as

the most important corporate governance practice, matching the perceptions of professionals.

Accounting majors report significantly greater understanding of corporate governance, the importance

of corporate governance to business and the role of understanding corporate governance in their

careers as compared to management majors.

Research limitations/implications –This study is limited by the inclusion of business students at only

two US universities. Further studies should be conducted to better understand the similarities and

differences between students and professionals and accounting and management majors in their

perceptions of corporate governance best practices.

Practical implications –Managers can use these findings to enhance the training recent college

graduates receive on corporate governance topics. Business schools can use these findings to

evaluate ways to embed corporate governance throughout the curriculum.

Originality/Value –This research highlights gaps in current business school curriculum coverage of

corporate governance best practices. It compares and contrasts students’ and professionals’

perceptions of best practices and offers suggestions for managers and educators.

Keywords Business education, Corporate governance

Paper type Research paper

Introduction

Corporate governance (CG) is described as the portfolio of processes that guide and

control an organization in a manner that permits the enterprise to satisfy its responsibilities

as a citizen. These processes are cross-functional in nature, intersecting with all facets of

business operations, including accounting, economics, finance, management and strategy

(Bisoux, 2004). The need for, or more accurately the purpose of, CG has been a

controversial subject since the inception of contemporary corporations. The general topic

of CG has continued to garner increasing scrutiny in recent decades. A number of factors

have speared this additional examination, including increased privatization of

organizations, pension fund reform, the considerable number of corporate takeovers and

mergers in the 1980s, a changing composition of world-wide capital markets, corporate

malfeasance in the early 2000s and the global economic downturn in 2008 (Adams et al.,

2008;Khongmalai et al., 2010; and Shleifer and Vishny, 1997).

A quick review of business media sources yields a list of fundamental concepts that

provide a common foundation surrounding the term “corporate governance”. This list

includes developing a long-term perspective on decision-making, creating shareholder

Received 27 August 2015

Revised 3 January 2016

Accepted 5 January 2016

DOI 10.1108/CG-08-2015-0117 VOL. 16 NO. 2 2016, pp. 361-376, © Emerald Group Publishing Limited, ISSN 1472-0701 CORPORATE GOVERNANCE PAGE 361

value and positive financial results, aligning managerial actions with stakeholder interests,

complying with applicable laws and regulations and electing an engaged, active board of

directors or equivalent body. It is difficult to argue against any of these goals and therefore

equally difficult to contend that CG is not an integral part of capitalism.

Several authors have claimed that business schools’ failure to teach fundamental CG

concepts is a primary factor in the recent financial scandals (Curtis, 2008;Gempesaw,

2009). A reasonable extension is to assert that such a continued omission will likely result

in future scandals of this type (Jacobs, 2009). The current state of education surrounding

the topic of CG, as reported by the Association to Advance Collegiate Schools of Business

(AACSB) International, reveals that some elements of governance are mentioned in a

number of business school curricula; however, few business schools have specifically

designed curricula that overtly discuss each element (AACSB International, 2004).

“Knowing the principles and practices of sound, responsible CG can [. . .] be an important

deterrent to unethical behavior. Moreover, understanding the complex interdependencies

between CG and other institutions, such as stock exchanges and regulatory bodies, can be

an important factor in managing risk and reputation” (AACSB International, 2004).

This paper examines the current state of business students’ understanding of CG best

practices. Specifically, we seek to evaluate the extent to which students’ perceptions of CG

best practices match those of business people and whether students perceive

understanding CG as important to their future careers. To achieve these goals, we first offer

an expanded description for the term CG and a review of its legislative history in the USA.

Second, a review of corporate governance education (CGE) and prior research in this

regard is offered. Third, a summary of the project research methodology is presented.

Fourth, the results of a survey of business school majors regarding CG are described.

Finally, a discussion of this research effort and implications for educators and managers

are provided.

Corporate governance description and brief US legislative history

CG refers to the “process affected by a set of legislative, regulatory, legal, market

mechanisms, listing standards, best practices, and efforts of all corporate governance

participants, including the company’s directors, officers, auditors, legal counsel, and

financial advisers, which creates a sustainable shareholder value, while protecting the

interests of other stakeholders” (Rezaee, 2009, p. 30). Appropriate CG supports

accountability, enhances the reliability of financial information and reinforces the

effectiveness of the capital market, thereby improving investor confidence (Gompers and

Metrick, 2003).

The factors that determine and define CG vary by country and organizational structure,

making a broadly accepted, comprehensive definition nearly impossible and the issue

more complex (Doidge et al., 2007). As a result, a single, far-reaching definition of CG does

not currently exist. While the UK Corporate Governance Code and the South Africa King

Report III offer guidance in a “comply or explain” approach, the USA generally mandates

certain aspects of CG through legislation. Indeed, CG within the USA has been

implemented not as a planned, systematic inquiry, but rather as a response to observed

problems in corporations (Murphy and Topyan, 2005).

Congress responded to the stock market crash of 1929 by implementing Securities Acts of

1933 and 1934. The primary purpose of the Securities Act of 1933 was twofold. First, the

Act requires that investors receive relevant information concerning securities offered for

sale to the public. Second, it prohibits fraud in the sale of securities. The Securities Act of

1934 created the Securities and Exchange Commission, the regulatory mechanism

underlying corporate financial requirements for listed companies, which has broad

authority over all aspects of the securities industry.

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