Greasing the wheels? The impact of regulations and corruption on firm entry

This paper investigates the question of whether corruption might ‘grease the wheels’ of an economy. We investigate whether and to what extent the impact of regulations on entrepreneurship is dependent on corruption. We first test whether regulations robustly deter firm entry into markets. Our results show that the existence of a larger number of procedures required to start a business, as well as larger minimum capital requirements are detrimental to entrepreneurship. Second, we test whether corruption reduces the negative impact of regulations on entrepreneurship in highly regulated economies. Our empirical analysis, covering a maximum of 43 countries over the 2003–2005 period, shows that corruption facilitates firm entry in highly regulated economies. For example, the ‘greasing’ effect of corruption kicks in at around 50 days required to start a new business. Our results thus provide support for the ‘grease the wheels’ hypothesis.

The role of serviced offices in the corporate real estate supply chain

The paper analyses the evolving corporate real estate supply chain and the interaction of this evolution with emerging business models in the serviced office sector. An enhanced model of the corporate real estate portfolio is first presented incorporating vacant, alienated and transitory space. It is argued that the serviced office sector has evolved in response to an increasingly diverse corporate real estate portfolio. For the peripheral corporate real estate portfolio, the core serviced workspace product provides the ability to rapidly acquire high-quality workspace and associated support services on very flexible bases. Whilst it is arguably a beta product, the core workspace offer is now being augmented by managed office or back-to-back leases which enables clients to complement the advantages of serviced offices with a wider choice of premises. Joint venture business models are aligned with solutions to problems of vacant space.

The effects of corporate social performance on the cost of corporate debt and credit ratings

This study investigates the differential impact that various dimensions of corporate social performance have on the pricing of corporate debt as well as the assessment of the credit quality of specific bond issues. The empirical analysis, based on an extensive longitudinal data set, suggests that overall, good performance is rewarded and corporate social transgressions are penalized through lower and higher corporate bond yield spreads, respectively. Similar conclusions can be drawn when focusing on either the bond rating assigned to a specific debt issue or the probability of it being considered to be an asset of speculative grade.

Income differentials and corporate performance

Purpose – This paper seeks to make the case for new research into the perceived fairness and impact of executive pay. Design/methodology/approach – The paper reviews the literature regarding executive compensation and corporate performance and examines the evidence that a more egalitarian approach to pay could be justified in terms of long-term shareholder value. Findings – There would appear to be no evidence to suggest that the growing gap between the pay of executives and that of the average employee generates long-term enterprise value, and it may even be detrimental to firms, if not the liberal capitalist consensus on which the corporate licence to operate is based. Research limitations/implications – The paper outlines a new approach to tracking income differentials with corporate performance through the development of a corporate Gini coefficient “league table”. Social implications – The proposed research is expected to point towards better practice in executive remuneration, and support the growing momentum for a sustainable and enlightened approach to business, in which the key goal is long-term enterprise value based on a fair distribution of the rewards of business. Originality/value – In producing a deeper understanding of the impact of widening income differentials, the paper should be of interest to senior executives in publicly quoted companies as well as press commentators, government officials and academics.

The four pillars of corporate responsibility: ethics, leadership, personal responsibility and trust

Purpose – This paper aims to examine how to further embed CSR thinking and practice into corporations, particularly in emerging markets, by reviewing and drawing similarities between key issues faced by all senior managers, namely ethics, leadership, personal responsibility and trust. Design/methodology/approach – This paper presents a conceptual exploration of global CSR practices using social psychology and overlays this concept with strategic and institutional theory in order to encourage new ways of thinking about CSR adoption, especially in emerging markets. Findings – The paper reveals the importance of shareholder needs on global corporate decision making and applies alternative conceptual models to help businesses to devise better CSR practices and individuals to align their actions to their own values. Originality/value – This paper strongly argues for blending different theoretical foundations from the management and organization literature in order to draw comparisons between current global CSR practice and the potential for its further adoption in emerging markets.

Corporate governance: quo vadis?

Purpose – This paper aims to examine current research trends into corporate governance and to propose a different dynamic, humanistic approach based on individual purpose, values and psychology. Design/methodology/approach – The paper reviews selected literature to analyse the assumptions behind research into corporate governance and uses a multi-disciplinary body of literature to present a different theoretical approach based at the level of the individual rather than the organisation. Findings – The paper shows how the current recommendations of the corporate governance research models could backfire and lead to individual actions that are destructive when implemented in practice. This claim is based on identifying the hidden assumptions behind the principal-agent model in corporate governance, such as the Hobbesian view and the Homo Economicus approach. It argues against the axiomatic view that shareholders are the owners of the company, and it questions the way in which managers are assessed based either on the corporate share price (the shareholder view) or on a confusing set of measures which include more stakeholders (the stakeholder view), and shows how such a yardstick can be demotivating and put the corporation in danger. The paper proposes a humanistic, psychological approach that uses the individual manager as a unit of analysis instead of the corporation and illustrates how such an approach can help to build better governance. Research limitations/implications – The paper's limited scope can only outline a conceptual framework, but does not enter into detailed operationalisation. Practical implications – The paper illustrates the challenges in applying the proposed framework into practice. Originality/value – The paper calls for the use of an alternative unit of analysis, the manager, and for a dynamic and humanistic approach which encompasses the entirety of a person's cognition, including emotional and spiritual values, and which is as of yet usually not to be found in the corporate governance literature.

The Corporate Gini Index (CGI) determinants and advantages: lessons from a multinational retail company case study

This article identifies and compares the determinants of CEO compensation to median employee earnings with those of the Corporate Gini Index (CGI). Using a multinational retail company, the article posits that the CGI is an advantageous corporate alternative pay inequality measure that concerns CEO pay multiples to median employee earnings, which regulators should consider using and disclosing in proxy statements. Although CGI and the official measure of multiples of CEO pay to median employee earnings share some of the challenges, the advantages of CGI as an alternative measure are greater. Our findings suggest that the CGI is a much better measure of corporate income inequality bringing clear benefits at both micro and macro levels of intervention.

The post-financial crisis challenges for corporate governance and banking reform in China

The purpose of this paper is to review the impact of the global financial crisis on banking reform in China. The significant doubt concerning the efficiencies of Anglo-American model of corporate governance has raised a critical political question amongst scholars and practitioners as to whether China should continue to follow the U.K.-U.S. path in relation to financial reform. This conceptual paper provides an insightful review of the corporate governance literature and regulatory reports. After examining the fundamental limitations of the laissez-faire philosophy that underpins the neo-liberal model of capitalism, which promotes greater liberalization and less control, the paper considers the risks in opening China’s financial markets and relaxing monetary and fiscal policies. A critique of shareholder-capitalism is outlined in relation to the German’s “social market economy” styled capitalism. Through such analysis the paper explores a number of implications for China to consider in terms of developing a new and sustainable corporate governance model applicable to the Chinese context.

Global financial crisis: implications for Chinese corporate governance

This paper analyses the role of corporate governance failures and weaknesses in the global financial crisis with reference to the evolution of post-crisis corporate governance arrangements in China. The current crisis presents China with an opportunity to analyse its governance problems, reflect on its weaknesses and implement a strategy to address areas which need attention. This paper opens with a description of China’s exposure to the current global financial crisis and continues to critically evaluate the effectiveness of a free market system on corporate governance. Bratton (2002) maintains that incentive structures that motivate the self-regulatory systems generate less powerful checks against abuse than scholars and practitioners have believed. The paper highlights the need for corporate regulatory bodies and policy makers to revise and re-develop financial services sector regulations. Finally, the paper discusses the need of ethics in organizations - an issue that is beyond legislation. In an increasingly interconnected global economy, it is imperative to increase our understanding of what constitutes an effective corporate governance system. The paper contributes to the corporate governance body of literature within the Chinese context by providing insights into the contributing factors to corporate governance failure that led to the global financial crisis. It also provides policy recommendations for China’s policy makers to seriously consider. The results suggest a need for the re-examination of corporate governance adequacy and the institutionalisation of business ethics.

Physiological and behavioral patterns of corruption

We study the behavior and emotional arousal of the participants in an experimental auction, leading to an asymmetric social dilemma involving an auctioneer and two bidders. An antisocial transfer (bribe) which is beneficial for the auctioneer (official) is paid, if promised, by the winner of the auction. Some pro-social behavior on both the auctioneers' and the bidders' sides is observed even in the absence of any punishment mechanism (Baseline, Treatment 0). However, pro-social behavior is adopted by the vast majority of subjects when the loser of the auction can inspect the transaction between the winner and the auctioneer (Inspection, Treatment 1). The inspection and punishment mechanism is such that, if a bribe is (not) revealed, both corrupt agents (the denouncing bidder) lose(s) this period's payoffs. This renders the inspection option unprofitable for the loser and is rarely used, especially towards the end of the session, when pro-social behavior becomes pervasive. Subjects' emotional arousal was obtained through skin conductance responses. Generally speaking, our findings suggest that stronger emotions are associated with decisions deviating from pure monetary reward maximization, rather than with (un)ethical behavior per se. In fact, using response times as a measure of the subject's reflection during the decision-making process, we can associate emotional arousal with the conflict between primary or instinctive and secondary or contemplative motivations and, more specifically, with deviations from the subject's pure monetary interest.