Seven Gaping Holes in Our Knowledge of Corporate Governance

17 Pages Posted: 12 Apr 2023 Last revised: 28 Jul 2023

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: April 11, 2023


In Closer Look, we highlight significant “holes” in our knowledge of corporate governance. These are central issues where insufficient or inadequate study has left us unable to answer basic questions, and where key assumptions relied upon by experts have not been verified or validated. While the concepts we review are not exhaustive, each is critical to our understanding of the proper functioning of governance, including board oversight, the recruitment of CEO talent, the size and structure of CEO pay, and the advancement of shareholder and stakeholder welfare.

We ask:

• What practices make a board effective?
• What are the real factors that determine whether a director is “independent?”
• How scarce is CEO talent, and how efficient is the labor market for CEOs?
• How much value is a CEO directly responsible for creating and how much pay should they be offered?
• Are companies currently aligning pay and performance in the right way?
• Does the composition of a company’s shareholder base influence the decisions the board and management make?
• What role should stakeholder needs play in corporate decision making? Would outcomes improve (or be worse) if more investment were made toward ESG?

Keywords: Corporate governance, board quality, board structure, board of directors, independence, labor market for CEO talent, CEO succession, succession planning, CEO compensation, pay levels, executive pay, pay for performance, pay mix, shareholder base, activist shareholders, index funds, passive sharehold

Suggested Citation

Larcker, David F. and Tayan, Brian, Seven Gaping Holes in Our Knowledge of Corporate Governance (April 11, 2023). Rock Center for Corporate Governance at Stanford University Working Paper Forthcoming, European Corporate Governance Institute – Finance Working Paper No. 914/2023, Stanford University Graduate School of Business Research Paper No. 4416663, Available at SSRN:

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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