Loosey-Goosey Governance: Four Misunderstood Terms in Corporate Governance

18 Pages Posted: 4 Oct 2019

See all articles by David F. Larcker

David F. Larcker

Stanford Graduate School of Business; Stanford University - Hoover Institution; European Corporate Governance Institute (ECGI)

Brian Tayan

Stanford University - Graduate School of Business

Date Written: October 7, 2019


A reliable system of corporate governance is considered to be an important requirement for the long-term success of a company. Unfortunately, after decades of research, we still do not have a clear understanding of the factors that make a governance system effective. Our understanding of governance suffers from: 1) a tendency to overgeneralize across companies and 2) a tendency to refer to central concepts without first defining them. In this Closer Look, we examine four central concepts that are widely discussed but poorly understood.

We ask:

• Would the caliber of discussion improve, and consensus on solutions be realized, if the debate on corporate governance were less loosey-goosey?

• Why can we still not answer the question of what makes good governance?

• How can our understanding of board quality improve without betraying the confidential information that a board discusses?

• Why is it difficult to answer the question of how much a CEO should be paid?

• Are U.S. executives really short-term oriented in managing their companies?

Keywords: corporate governance, good corporate governance, dual-class shares, independent chairman, independent chair, staggered boards, classified boards, board quality, board of directors, board oversight, powerful directors, board culture, board evaluation, pay for performance, CEO pay, executive pay, CEO

JEL Classification: G3, G30, G39, M40

Suggested Citation

Larcker, David F. and Tayan, Brian, Loosey-Goosey Governance: Four Misunderstood Terms in Corporate Governance (October 7, 2019). Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance No. CGRP-79, 2019, Available at SSRN: https://ssrn.com/abstract=3463958

David F. Larcker (Contact Author)

Stanford Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

Stanford University - Hoover Institution ( email )

Stanford, CA 94305
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Brian Tayan

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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