The case for robust academic research on corporate governance

• Published date: 01 May 2023
• Author: Konstantinos Stathopoulos,Till Talaulicar
• Date: 01 May 2023
• DOI: http://doi.org/10.1111/corg.12531

EDITORIAL

The case for robust academic research on corporate

governance

1|INTRODUCTION

This editorial reports on Corporate Governance: An International

Review's content and editorial performance during 2022. It also makes

the case that, in this era of renewed focus by policymakers and practi-

tioners on corporate governance matters, the rigorous and relevant

academic research we publish in the journal is more needed than ever.

In particular, capital markets and corporate boards are asked to

reconfigure their decision-making in light of new standards dictated

by considerations relating to emerging Environmental, Social, and

Governance (ESG) frameworks. In recent years, investors have poured

significant resources into ESG-friendly asset management vehicles.

This has put pressure on regulators and policymakers to establish

appropriate standards to protect these investments against misinfor-

mation (e.g., greenwashing), create a competitive landscape, and, in

general, enhance the positive externalities of ESG initiatives for share-

holders and stakeholders alike. The sheer pace of developments in

this arena has policymakers playing catch-up, which on occasion leads

to suboptimal outcomes. At the same time, market participants, for

example, corporate boards, consultants, and so forth, end up adopting

practices that are primarily driven by herding behavior and are not

informed by sound theoretical and empirical evidence. There are

numerous examples we could use to illustrate this point. In order to

be succinct, we focus on the recent and immensely popular practice

of ESG contracting, that is, the use of ESG performance measures in

executive remuneration. Several jurisdictions are encouraging firms,

predominantly public ones, to utilize non-financial, ESG-related mea-

sures when setting executive compensation, particularly, long-term

incentive plans. A clear frontrunner has been France, where the

French Corporate Governance Code stipulates since 2018 that “The

compensation of these directors must be competitive, adapted to the

company's strategy and context and must aim, in particular, to improve

its performance and competitiveness over the medium and long term,

notably by incorporating one or more criteria related to social and envi-

ronmental responsibility”(p. 19).

1

In response, most large firms listed in

France now use ESG performance measures in executive contracts.

The most popular ones seem to be indicators about reductions in

greenhouse gas (GHG) emissions and board (gender) diversity tar-

gets.

2

Some of these practices appear to fly in the face of 30 years of

corporate governance research on executive compensation. Prior aca-

demic research identifies several properties for performance measures

that are helpful in achieving optimal contracting. For example, perfor-

mance measures need to be verifiable, affected by the actions of the

managers but not directly under their control to avoid manipulation,

and primarily related to easy-to-measure outputs of the production

function rather than noisy inputs. In contrast, information on GHG

emissions is rarely audited, thus rather open to managerial manipula-

tion. This is particularly true for Scope 3 emissions that tend to have

an outsized influence on the overall reported firm-level emissions. At

the same time, board diversity is an input to the production function

not an output. There are both well performing and poorly performing

diverse boards. Clearly, both shareholders and stakeholders prefer the

former rather than the latter but current performance measures on

board diversity fail to make this distinction. Nonetheless, these prac-

tices are now becoming dominant across the world and their use goes

unquestioned.

Against this backdrop, the need for rigorous and relevant aca-

demic work on corporate governance issues remains high. Thus, it is

very pleasing that 2022 was again another busy year in terms of sub-

missions to Corporate Governance: An International Review (CGIR),

which totaled 633 manuscripts, an 18% increase relative to 2021.

Despite this increased load, the global community of corporate gover-

nance scholars supporting the journal helped sustain the efficient,

timely and friendly manner of our reviewing process. We are grateful

to our Editors, Editorial Board members and reviewers for their excel-

lent service to corporate governance scholarship. We provide more

details on key turnaround times in Section 4of this editorial.

We ended up publishing six issues including two special issues in

volume 30. The first one of our 30-year anniversary volume was dedi-

cated to the special issue on “21

st

Century Challenges for Corporate

Governance.”The last one included articles on “Ownership and Cor-

porate Governance across Institutional Contexts.”Overall, the 32 orig-

inal articles published in volume 30 covered a range of issues and

examined a variety of contexts consistent with the mission of our

journal.

We have established an “Editor's Pick”category since volume 29.

So, in every issue, we highlight the contributions of a particular article

that we feel are pertinent to the journal's aims. We briefly present

these articles from volume 30 in Section 2.

It is a long CGIR tradition to recognize the best papers published

in a particular volume as well as the most dedicated referees in a spe-

cific year. Section 3offers details on these awards and the selection

processes behind them. We are indebted to the members of our Advi-

sory Board for their continuous support of the journal in general and

the best paper selection process in particular. Above all, we are grate-

ful to all authors for submitting their academic work to CGIR.

DOI: 10.1111/corg.12531

400 © 2023 John Wiley & Sons Ltd. Corp Govern Int Rev. 2023;31:400–404.wileyonlinelibrary.com/journal/corg