Purpose This paper aims to investigate the process and business model innovations within the ultra-fast business model (UFBM) that have potential sustainable applications. Design/methodology/approach An exploratory multiple case study research method was used, emphasizing on an integrative literature review and focusing on two successful Chinese-origin companies that have revolutionized the e-commerce market: Shein and Temu. Findings Although the UFBM adopted by these companies remains highly controversial and is commonly associated with harmful business practices and lack of business responsibility, both have managed to develop process and business model innovations that may interest sustainability-driven organizations. They have implemented their unique versions of the customer-to-manufacturer (C2M) production system, which reduces costs and facilitates information exchanges between customers and manufacturers, thereby achieving a better product-market fit. Further still, they have redefined the shopping experience through their interpretations of collaborative consumption, as manifested in live and social commerce, gamification and group buying formats. Originality/value Instead of dismissing the UFBM due to its negative environmental and societal impacts, the study concentrates on process and business model innovations that have a potential for sustainability. That does not mean praising the business model as a whole, but instead indicating its potentially interesting aspects that could serve as inspirations for managers and business leaders who are concerned with sustainability. Learning from others' experiences is a recognized business practice, and in this case, could be particularly beneficial for companies with limited resources or opportunities for experimentation.
Purpose Opportunities for shareholder value creation from deep decarbonization in fossil fuel and related industries may be unlocked with a permanent change in corporate governance practices. The purpose of this study is to highlight the conceptual links between corporate collaborations, decarbonization and equity value creation to enable the large-scale reallocation of funds necessary to halve carbon emissions by the end of this decade. Design/methodology/approach Consistent with shareholder value maximization, the author uses the constant dividend growth framework to show that a permanent change in corporate governance practices can impact expectations of future cash flows and required rates of return. This study includes a simulation to explore how perpetual corporate collaborations on decarbonization that influence the key equity value drivers can add value to the equity of collaborative firms. Findings Perpetual corporate collaborations with key stakeholders focused on equity value drivers hold great potential for accelerating the reallocation of funds to low-carbon assets. Simulation results suggest that relatively small changes, especially in required rates of return, may result in substantial increases in equity values for collaborative leaders in deep decarbonization. Originality/value This study identifies new sources of shareholder value from long-term corporate collaborations with key stakeholders on deep decarbonization. A collaborative focus on important equity value drivers can attract capital also to hard-to-abate industries and initiate sharp cuts in carbon emissions. Corporate governance practices, thus, reformed render shareholder value creation incentive compatible with rapidly decarbonizing global supply chains, making it possible to meet climate action goals by 2030.
Purpose The purpose of this paper is to develop a theory of enterprise risk management (ERM). Design/methodology/approach The method is to develop a theory for ERM based on identifying the general risk management problems that it is supposed to solve and to apply the principle of deduction based on these premises. Findings ERM consists of risk governance, which is a set of mechanisms that deals with the agency problem of risk management and risk aggregation, which is a set of mechanisms that deals with the information problem of risk management. Research limitations/implications The theory, by identifying the central role of the Board of Directors, encourages further research into the capabilities and incentives of directors as determinants of ERM adoption. It also encourages research into how ERM adoption depends on proxies for agency problems of risk management, such as a decentralized company structure. Practical implications The theory encourages Boards of Directors to focus on understanding where the under and over management of risk are likely to be greatest, as opposed to the current practice of mapping a large number of risk factors. Originality/value The theory complements existing theory on corporate risk management, which revolves around the role of external frictions, by focusing on internal frictions in the firm that prevent effective risk management. It is the first work to delineate ERM vis-a-vis existing risk theory.
Purpose This paper aims to examine how board evaluations have emerged as an important tool in public policy and corporate practice for enhancing board effectiveness. Design/methodology/approach The authors review the extensive literature on effectiveness and the emerging literature on board evaluation to identify ways to assess the current policy direction for external evaluation of corporate boards. Findings The paper develops an integrated framework of effectiveness that can be used as a tool for board evaluation, in particular for externally facilitated exercises. Research limitations/implications Through its integration of prior conceptual work this paper advances our theoretical understanding of this emerging part of policy and practice, with to-date lack much empirical basis. Practical implications The framework that is developed shows ways to focus how the practice is conducted by boards and external evaluators alike. Social implications It can also help policy formation by pointing out the limitations as well as benefits of various policy options. Originality/value In pointing to ways to develop study of the field through empirical research, it provides direction for future academic research. It also identifies a need for and direction toward the professionalization of practice.
Purpose This study aims to investigate the relationship between corporate governance risk and agency costs across different countries. Design/methodology/approach Corporate governance risk indicators were obtained from the Institutional Shareholder Services Europe (S.A.) for 4,135 firms across 27 countries. Agency costs and other control variables were derived from companies’ annual financial reports using the DataStream database. Ordinary least squares multiple regression analysis model was used to test the study hypothesis. Findings Agency costs have a significant negative impact on corporate governance risk across countries. The extent of corporate governance mechanisms used, however, varies across geographic regions and industry types. The relationship between corporate governance risk and agency costs is more obvious in the non-financial than financial sector. These results were robust after several statistical checks. Practical implications The findings will help stakeholders, including corporate management, regulators and investors to improve corporate governance mechanisms and capital allocation decisions across countries. Originality/value Evidence is provided on the role of agency costs in corporate governance risk across geographic regions for financial and non-financial companies. The paper also overcomes common problems in corporate governance research such as construct validity, limited data and endogeneity.
PurposeThe purpose of this study is to examine the effect of the audit committee (AC) independence, financial expertise, internal audit function, audit quality and ownership concentration on earnings quality (EQ) and, consequently, ascertain whether the AC’s independence and financial expertise has a moderating effect on the relationship between internal audit function and EQ.Design/methodology/approachThe study sample is 508 firms listed on the Main Market of Bursa Malaysia (formerly known as Kuala Lumpur Stock Exchange) for the years 2009 to 2012. EQ was measured using two modified Jones models of discretionary accruals.FindingsThe findings reveal that the independence of AC and investment in internal audit function, as well as the Big4 audit firm, are related to greater EQ. Ownership concentration is found to be associated with lower EQ. The study provides evidence that AC’s independence moderates the relationship between internal audit function (investment in and sourcing arrangements of internal audit function) and EQ. It also shows that AC’s financial expertise moderates the relationship between sourcing arrangements of internal audit function and EQ.Practical implicationsThis study extends the prior related literature by examining the AC’s independence and financial expertise as moderating variables on the relationship between internal audit function and EQ.Social implicationsPolicymakers might use the findings regarding EQ in relation to governance practices, to recognize the important roles played by the AC’s independence and financial expertise on the effectiveness of internal audit function with EQ.Originality/valueThis study uses the agency theory and resource dependence theory to provide empirical evidence on the impact of internal audit function and AC on EQ in the ownership concentration environment.
Renzo Mori Junior, Daniel M. Franks, Saleem H. Ali
Purpose New sustainability certification schemes (SCS) with different scope, governance structure and operating practice are fast emerging. This rapid growth and divergence in metrics has resulted in questions about the effectiveness of such schemes. Although this practice has been growing fast, to date, there are no reviews comprehensively synthesising the literature regarding SCS’ main flaws, challenges and improvement opportunities. This paper aims to identify what are the key components affecting effectiveness of SCS, highlighting their benefits, flaws and improvement opportunities. Design/methodology/approach An integrated literature review was conducted to identify and assess recent studies related to the benefits, flaws, effectiveness and improvement opportunities of SCS worldwide. Findings Key components affecting the effectiveness of SCS were identified (sustainability awareness; market access; management systems and productivity; social, environmental and economic impacts; monitoring outcomes; competition, overlapping and interoperability; stakeholder participation; and accountability and transparency). The authors argue that SCS to succeed have to be effective; provide accountability about their goals and achievements; and manage stakeholders’ expectations. Civil Society’s awareness of the scientific underpinnings of sustainability issues also contributes to the existence and improvement of such schemes. Research limitations/implications The limitations of this study are associated with the secondary material that was publicly available for our literature review. Originality/value This paper fulfils an identified need to explore the key components affecting effectiveness of SCS, their benefits, flaws and improvement opportunities. Such a synthesis also identifies the key areas where interoperability between SCS should be pursued by corporations and governments.
PurposeThis paper aims to develop a conceptual model that systematically interprets how key governance factors drive the alignment and the rent-extraction effects of executive stock options (SOs) as proxied by plan characteristics.Design/methodology/approachThe authors draw on the review of 202 articles published in international academic journals. They collect data from library databases and by hand-searching and citation-tracking relevant papers on the topic. Moreover, the authors review and classify the studies as related with determinants or proxies of alignment and rent-extraction effects of SOs.FindingsThe conceptual model systematically interprets the results of the literature review and identifies the relationships between archetypes, driving factors and proxies of the rent/alignment effect of executive SOs. It highlights that, given ownership archetypes, effective (ineffective) governance practices drive the alignment (rent) aim of SOs as proxied by the optimal (non-optimal) plan design.Practical implicationsThis paper supports compensation committees in selecting the SO characteristics that better attract investors and retain executives. Moreover, it guides future policy making interventions aiming at mitigating the rent-extraction effect of SOs.Originality/valueThe paper highlights that the governance determinants of SO aims can be effectively classified as archetypes or drivers of rent-extracting and aligning outcomes of these remuneration tools. Moreover, it offers a useful framework to guide future research efforts by providing a comprehensive interpretation of the relationships between ownership archetypes, driving factors and proxies of SO effects.