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Stakeholder-Focused Accounting: Value Creation and Risks

Idea posted: December 2015
  • Strategy
  • Finance

Current accounting methods inadequately represent and reward stakeholder value creation. Value-creation stakeholder accounting (VCSA) — which combines the disciplines of accounting, value creation and stakeholder theory — is the theoretical foundation for new stakeholding-focused accounting. The best mechanism for implementing the theory is through value-creation stakeholder partnerships (VCSPs), derived from partnership accounting (as opposed to traditional entity convention accounting). 

Idea #571
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Deferred Compensation Helps Retain CEOs

Idea posted: August 2015
  • CSR & Governance
  • Finance
  • Leadership & Change

Researchers exploited a U.S. accounting rule change to prove the power of deferred compensation. The rule change pushed many U.S. firms to significantly accelerate vesting of deferred compensation plans. Of the firms that chose to accelerate vesting, a large majority quickly lost their CEOs. During the same period, most firms that did not accelerate their vesting did not see any significant CEO departure.

Idea #536
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How to Build Brand Equity Through Employee Engagement

Idea posted: December 2014
  • Finance
  • Learning & Behaviour
  • Marketing

From the friendly retail clerk helping a customer to the highly paid consultant who delivers groundbreaking solutions to the business unit, employees can directly impact a company’s brand equity. Therefore, any employee-related policy or resource decision — from training to lay-offs — is in effect a branding issue. 

Idea #466
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The Good and Bad Reasons Corporate Cash Is Trapped Overseas

Idea posted: November 2014
  • CSR & Governance
  • Finance

Policy makers are worried that U.S. companies are using Permanently Reinvested Earnings (PRE) as a tax loophole rather than legitimately trying to grow their overseas operations. They are also concerned about cash trapped overseas instead of being invested in the U.S. economy. The SEC is focused on whether companies are using the rules concerning PRE as a means to overstate their profits. New research shows that a majority of companies are serious about overseas growth rather than looking for tax loopholes. However, cash trapped abroad is still a problem for the U.S. economy. 

Idea #458
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Electronics factory in Shenzhen, China, 2005 (Source: Wikimedia Commons)

Outsourcing Vs Reshoring: The Case for Local Manufacture

Idea posted: August 2014
  • Strategy
  • Finance
  • Operations

Companies offshore their manufacturing to take advantage of lower wages and other cost savings in overseas countries. However, costs incurred from having an extended supply chain may in fact be wiping out the savings from offshoring advantages. MIT Sloan visiting professor Suzanne de Treville believes that one can make a financial case for reshoring manufacturing.

Idea #429
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How Peers Influence Ethics: Good Eggs and Bad Apples

Idea posted: June 2014
  • CSR & Governance
  • Finance

A controlled experiment reveals that managers ‘adjust’ their ethics based on the behaviour they witness from peers. If a peer is honest, the observing manager becomes a little more honest, on average. If a peer is dishonest, the observing manager can become significantly more dishonest. 

Idea #386
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The Sower by Jean-François Millet, circa 1865, Walters Art Museum, Baltimore

How Well Is CSR Embedded in Business Strategy?

Idea posted: May 2014
  • Strategy
  • CSR & Governance
  • Finance
  • Innovation & Entrepreneurship
  • Leadership & Change

CSR and sustainable development are now widely seen as core parts of business. This does not, however, mean they’re always treated as core parts of business strategy. The management control systems big companies use to design, implement and monitor CSR sometimes suggest a ‘reactive’ rather than a ‘proactive’ approach from leaders.

Idea #374
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Trust, Fraud and the Financial Markets

Idea posted: August 2013
  • CSR & Governance
  • Finance
  • Learning & Behaviour

Markets cannot function without relationships, and relationships cannot function without trust. But the mechanisms for building trust can be ‘faulty’. Bernard Madoff’s infamous Ponzi scheme, which ruined thousands of investors, depended on a series of ‘trust-producing’ factors that combined to conceal it from victims and the authorities. Understanding these mechanisms can help prevent similar frauds and abuses of trust.

Idea #195
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ENRON - Arthur Andersen witnesses testify at the Subcommittee on Oversight and Investigations, Committee on Energy and Commerce House of Representatives (107th Congress) hearing on January 24, 2002 (Source: Wikimedia Commons)

How to Recognize Managements With Something to Hide

Idea posted: July 2013
  • CSR & Governance
  • Finance
  • Operations

Is there a pattern to be found in the actions of managers trying to cover up their firm’s wrongdoings? According to this Idea, yes there is: they all tend to engage in the same sort of behaviours, such as exercising stock options more frequently, rarely changing the firm’s auditors, and more. An understanding and awareness of these behaviours can assist shareholders, regulators and other stakeholders notice failures and wrongdoings early and help address problems before disaster hits.

Idea #178
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Alistair Sim as Scrooge, A Christmas Carol, 1951, United Artists

Don't Let CFOs and Accountants Slow Innovation

Idea posted: April 2013
  • Finance
  • Innovation & Entrepreneurship
  • Leadership & Change
Institutions: INSEAD

What can you do when penny pinchers get in the way of your disruptive ideas – ideas that may bring the critical changes your company needs? Firms with a greater degree of accounting conservatism are less innovative because of an obligatory accounting practice of immediately provisioning for future losses. How can you get the breathing space necessary away from the demands of shareholders and the market to innovate and bring about change?

Idea #117
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Financial Literacy to Get Women on Board

Idea posted: March 2013
  • CSR & Governance
  • Finance
  • Leadership & Change
  • Learning & Behaviour

What competencies must be displayed by individuals aiming for board-level positions? Traditionally, the answer to this question would include things like knowledge, motivation and networks. While those are certainly still relevant, new research suggests a finance qualification, or background in finance, is also a key influence — especially when the candidate in question is female.

Idea #104
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