Is there an optimal board size?

This research quantitatively examines the determinants of board size and the consequence it has on the performance of large companies in Australia. In line with international and the prevalent United States research the results suggest that there is no significant relationship between board size and their subsequent performance. In examining whether more complex operations require larger boards it was found that larger firms or firms with more lines of business tended to have more directors. Data analysis from the research supports the proposition that blockholders could affect management practices and that they enhances performance as measured by shareholder return.

Are East Asian companies benefiting from western board practices?

Since the Asian crisis, East Asian nations have strived to introduce corporate governance codes, directing companies how to best improve their corporate governance practices. However, these codes have not been universally accepted by East Asian companies. This study examines the adoption of major board-related corporate governance recommendations by large nonfinancial companies in seven East Asian nations and investigates whether improvements in these board governance mechanisms have been associated with increased operating performance and market value. The results indicate that family-owned companies started with worse board governance and have been least likely to improve their board governance since the crisis. Overall, bigger, faster growing, non-family-owned companies with less concentrated ownership have been more likely to improve their board governance. Splitting of the positions of Chairman and CEO, creation of audit and nomination committees and improvements in overall board governance were found to have a positive relationship with subsequent operating performance and/or market value.

Building a successful partnership to increase affordable rental housing supply in Queensland

Accessibility to housing for low to moderate income groups in Australia has been experiencing a severe decline since 2001. On the supply side, the public sector has been reducing its commitment to the direct provision of public housing. Despite high demand for affordable housing, there has been limited supply generated by non-government housing providers. One possible solution to promote an increase in affordable housing supply, like other infrastructure, is through the development of multi-stakeholder partnerships and private financing. This research aims to identify current issues underlying decision-making criteria for building multi-stakeholder partnerships to deliver affordable housing projects. It also investigates strategies for minimising risk and ensuring the financial outcomes of these partnership arrangements. A mix of qualitative in-depth interviews and quantitative surveys has been used as the main method to explore stakeholder experiences regarding their involvement in partnership arrangements in the affordable housing sector in Queensland. Two sets of interviews were conducted following an exploratory pilot study: one set in 2003-2004 and the other in 2007-2008. There were nineteen respondents representing government, private and not-for-profit organisations in the first stage interviews and surveys. The second stage interviews were focussed on twenty-two housing providers in South East Queensland. Initial analyses have been conducted using thematic and statistical analyses. This study extends the use of existing decision making tools and combines the use of a Soft System Framework to analyse the ideal state questionnaires using qualitative thematic analysis. Soft System Methodology (SSM) has been used to analyse this unstructured complex problem by using systematic thinking to develop a conceptual model and carrying it to the real world situations to solve the problem. This research found that the diversity of stakeholder capability and their level of risk acceptance will allow partnerships to develop the best synergies and a degree of collaboration which achieves the required financial return within acceptable risk parameters. However, some of the negativity attached to future commitment to such partnerships has been found to be the anticipation of a worse outcome than that expected from independent action. Many interviewees agree that housing providers' fear of financial risk and community rejection has been central to dampening their enthusiasm for entering such investment projects. The creation of a mixed-use development structure will mitigate both risk and return as the commercial income will subsidise the affordable housing development and will normalise concentration of marginalised low-income people who live in a prime location with an award winning design. In addition, tenant support schemes and rent-to-buy incentive programs will encourage them to secure their tenancies and significantly reduce the risk of rent arrears and property damage. There is also a breakthrough investment vehicle offered by the social developer which sells the non-physical but financial product to individual and institutional investors to mitigate further financial risk. Finally, this study recommends modification of the current value-for-money framework in favour of broader partnership arrangements which are more closely aligned with risk minimisation strategies.

Do board contacts matter? : an analysis of the relationship between boards of directors’ ties and the performance of Australia’s largest companies.

Boards of directors are thought to provide access to a wealth of knowledge and resources for the companies they serve, and are considered important to corporate governance. Under the Resource Based View (RBV) of the firm (Wernerfelt, 1984) boards are viewed as a strategic resource available to firms. As a consequence there has been a significant research effort aimed at establishing a link between board attributes and company performance. In this thesis I explore and extend the study of interlocking directorships (Mizruchi, 1996; Scott 1991a) by examining the links between directors’ opportunity networks and firm performance. Specifically, I use resource dependence theory (Pfeffer & Salancik, 1978) and social capital theory (Burt, 1980b; Coleman, 1988) as the basis for a new measure of a board’s opportunity network. I contend that both directors’ formal company ties and their social ties determine a director’s opportunity network through which they are able to access and mobilise resources for their firms. This approach is based on recent studies that suggest the measurement of interlocks at the director level, rather than at the firm level, may be a more reliable indicator of this phenomenon. This research uses publicly available data drawn from Australia’s top-105 listed companies and their directors in 1999. I employ Social Network Analysis (SNA) (Scott, 1991b) using the UCINET software to analyse the individual director’s formal and social networks. SNA is used to measure a the number of ties a director has to other directors in the top-105 company director network at both one and two degrees of separation, that is, direct ties and indirect (or ‘friend of a friend’) ties. These individual measures of director connectedness are aggregated to produce a board-level network metric for comparison with measures of a firm’s performance using multiple regression analysis. Performance is measured with accounting-based and market-based measures. Findings indicate that better-connected boards are associated with higher market-based company performance (measured by Tobin’s q). However, weaker and mostly unreliable associations were found for accounting-based performance measure ROA. Furthermore, formal (or corporate) network ties are a stronger predictor of market performance than total network ties (comprising social and corporate ties). Similarly, strong ties (connectedness at degree-1) are better predictors of performance than weak ties (connectedness at degree-2). My research makes four contributions to the literature on director interlocks. First, it extends a new way of measuring a board’s opportunity network based on the director rather than the company as the unit of interlock. Second, it establishes evidence of a relationship between market-based measures of firm performance and the connectedness of that firm’s board. Third, it establishes that director’s formal corporate ties matter more to market-based firm performance than their social ties. Fourth, it establishes that director’s strong direct ties are more important to market-based performance than weak ties. The thesis concludes with implications for research and practice, including a more speculative interpretation of these results. In particular, I raise the possibility of reverse causality – that is networked directors seek to join high-performing companies. Thus, the relationship may be a result of symbolic action by companies seeking to increase the legitimacy of their firms rather than a reflection of the social capital available to the companies. This is an important consideration worthy of future investigation.

The role of the board of directors : perceptions of managerial elites

We highlight how directors and senior managers perceive the roles of a board to involve overseeing risk and compliance, strategy, governance, developing the CEO and senior management and managing stakeholders. We find that managers and directors perceive board effectiveness as linked to different combinations of these roles and that there appear to be differences in perceptions between different types of firms. We conclude that clarity around the board’s role set is critical to furthering the corporate governance research agenda, and that the relationship between board roles and perceived board effectiveness differs between managers and directors.

The appropriateness of default investment options in defined contribution plans : Australian evidence

For participants in defined contribution (DC) plans who refrain from exercising investment choice, plan contributions are invested following the default investment option of their respective plans. Since default investment options of different plans vary widely in terms of their benchmark asset allocation, the most important determinant of investment performance, participants enrolled in these options face significantly different wealth outcomes at retirement. This paper simulates the terminal wealth outcomes under different static asset allocation strategies to evaluate their relative appeal as default investment choice in DC plans. We find that strategies with low or moderate allocation to stocks are consistently outperformed in terms of upside potential of exceeding the participant’s wealth accumulation target at retirement as well as downside risk of falling below that target outcome by aggressive strategies whose allocation to stocks approach 100%. The risk of extremely adverse wealth outcomes for plan participants also does not appear to be very sensitive to asset allocation. Our evidence suggests the appropriateness of strategies heavily tilted towards stocks to be nominated as default investment options in DC plans unless plan providers emphasize predictability of wealth outcomes over adequacy of retirement wealth.

Incorporating sustainability measures in life-cycle financial decision making for highway construction

Public awareness and the nature of highway construction works demand that sustainability measures are first on the development agenda. However, in the current economic climate, individual volition and enthusiasm for such high capital investments do not present as strong cases for decision making as the financial pictures of pursuing sustainability. Some stakeholders consider sustainability to be extra work that costs additional money. Though, stakeholders realised its importance in infrastructure development. They are keen to identify the available alternatives and financial implications on a lifecycle basis. Highway infrastructure development is a complex rocess which requires expertise and tools to evaluate investment options, such as environmentally sustainable features for road and highway development. Life-cycle cost analysis (LCCA) is a valuable approach for investment decision making for construction works. However, LCCA applications in highway development are still limited. Current models, for example focus on economic issues alone and do not deal with sustainability factors, which are more difficult to quantify and encapsulate in estimation modules. This paper reports the research which identifies sustainability related factors in highway construction projects, in quantitative and qualitative forms of a multi-criteria analysis. These factors are then incorporated into past and proven LCCA models to produce a new long term decision support model. The research via questionnaire, model building, analytical hierarchy processes (AHP) and case studies have identified, evaluated and then processed highway sustainability related cost elements. These cost elements need to be verified by industry before being integrated for further development of the model. Then the Australian construction industry will have a practical tool to evaluate investment decisions which provide an optimum balance between financial viability and sustainability deliverables.

Dynamic analysis of on-board mass data to determine tampering in heavy vehicle on-board mass systems

Transport Certification Australia Limited, jointly with the National Transport Commission, has undertaken a project to investigate the feasibility of on-board mass monitoring (OBM) devices for regulatory purposes. OBM increases jurisdictional confidence in operational heavy vehicle compliance. This paper covers technical issues regarding potential use of dynamic data from OBM systems to indicate that tampering has occurred. Tamper-evidence and accuracy of current OBM systems needed to be determined before any regulatory schemes were put in place for its use. Tests performed to determine potential for, and ease of, tampering. An algorithm was developed to detect tamper events. Its results are detailed.

Static accuracy and precision of heavy vehicle on-board mass systems

Objective • Feasibility programme for on-board mass (OBM) monitoring of heavy vehicles (HVs) • Australian road authorities through Transport Certification Australia (TCA) • Accuracy of contemporary, commercially-available OBM units in Australia • Results need to be addressed/incorporated into specifications for Stage 2 of Intelligent Access Program (IAP) by Transport Certification Australia

Theorizing about board governance of nonprofit organizations : surveying the landscape

Leading scholars on nonprofit governance have urged that future research be more informed by theory in order to promote more rigorous analysis. The aim of this paper is to survey the major theories on board governance, including those based in the disciplines of economics, management, sociology, psychology, politics, history and theology, in order to respond to this challenge. In addition, the relevance of these theories to a critical set of board behaviors - that is, how boards monitor, judge and influence organizational performance - is examined. Gaps in the theoretical literature are identified, and implications for public policy are explored. We conclude that a multi-theory and multi-disciplinary perspective is needed if research on governance of nonprofit organizations is to be complete in scope, rich in content, and relevant.

Socially responsible investment in market downturns : implications for the fiduciary responsibilities of investment fund trustees

This paper investigates whether Socially Responsible Investment (SRI) is more or less sensitive to market downturns than conventional investment, and examines the legal implications for fund managers and trustees. Using a market model methodology, we find that over the past 15 years, the beta risk of SRI, both in Australia and internationally, increased more than that of conventional investment during economic downturns. This implies that companies acting as fund trustees, managed investment schemes and traditional institutional fund managers risk breaching their fiduciary or statutory duties if they go long - or remain long - in SRI funds during market downturns, unless perhaps relevant legislation is reformed. If reform is viewed as desirable, possible reforms could include explicitly overriding the common law to allow all traditional funds to invest in SRI; granting immunity to directors of trustee companies from potential personal liability under sections 197 or 588G et seq of the Corporations Act; allowing companies acting as trustees, managed investment schemes and traditional institutional fund managers and trustees to invest in SRI without triggering a substantial capital gains tax liability through trust resettlement; tax concessions for SRI (eg. introducing a 150% tax deduction or investment allowance for SRI); and allowing SRI sub-funds to obtain “deductible gift recipient” status or the equivalent from relevant taxation authorities. The research is important and original insofar as the assessment of risk in SRIs during market downturns is an area which has hitherto not been subjected to rigorous empirical investigation, despite its serious legal implications.

Don’t judge a superannuation default investment option by its name

With the massive decline in savings arising from the Global Financial Crisis (GFC), it is timely to review superannuation fund investment and disclosure strategies in the lead-up to the crisis. Accordingly, this study examines differences among superannuation funds’ default investment options in terms of naming and framing over three years from 2005 to 2007, as presented in product disclosure statements (PDSs). The findings indicate that default options are becoming more alike regardless of their name, and consequently, members may face increasing difficulties in distinguishing between balanced and growth-named default options when comparing them across superannuation funds. Comparability is also likely to be constrained by variations in the framing of default options presented in investment option menus in PDSs. These findings highlight the need for standardisation of default option definitions and disclosures to ensure descriptive accuracy, transparency and comparability.