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The Future of Corporate Governance

Moderator: Stewart C. Myers
William F. Pounds Adam Emmerich: October 7, 2005; Running Time: 1:25:12

About the Lecture

About the Lecture

While they won’t directly address headline-grabbing corporate swindles (Enron! Tyco! WorldCom!), these speakers are well aware of the turmoil roiling away in boardrooms these days. William Pounds, long an insider within the top tiers of corporate life, makes a case that improving governance means having “the most appropriate and effective chief executive officer in place in every corporation.” All the things we’re concerned about, “integrity, transparency, high quality professional performance,” will fall into place if the right person occupies this central role. And don’t count on regulations and hard work by committees “to protect shareholders and employees from disappointment if the wrong person sits on top,” says Pounds. But the process of attracting the best candidate, the job of corporate boards, is tricky. Plus, says Pounds, we don’t really understand how boards work as organizations, so establishing best practices for recruiting and evaluating CEOs will require some serious research and data collection – a good assignment for business students.

In Adam Emmerich’s very long view, which begins as early as the British East India Company, today’s business scandals represent mere bumps in the road for corporate governance. The modern corporation got its start in the 17th century, according to Emmerich, and the key notions of corporate governance have been in place since around 1911. There’s “an economic logic to corporate organization,” he says, which makes it a “very good system,” and one that’s been very stable. The most recent changes in governance emerged as reaction to the takeover wave of the 1980s, when courts compelled boards to take a more active and restraining role with CEOs. And the Sarbanes-Oxley law accelerates the trend of more active boards. But, wonders Emmerich, “does the enhanced degree of interaction between a board and CEO lead to a more effective CEO? Currently, the zeitgeist says we’re not worried about an effective CEO but about a dishonest CEO.” Emmerich conjectures that greater board activism might lead to less efficient public companies. He also notes a corollary trend of activism among large shareholders, including, hedge fund managers, and he perceives the possibility for conflicts of interest.

Lecture Details

Location: Kresge Auditorium

About the Speakers

Moderator: Stewart C. Myers

Gordon Y Billard Professor of Finance, MIT Sloan

Stewart C. Myers is past president of the American Finance Association and co-author of the leading graduate-level textbook on corporate finance. He is a Research Associate of the National Bureau of Economic Research and is active as a financial consultant, advising major corporations on mergers and acquisitions, capital investment decisions, methods of financing, measurement of the cost of capital, and various valuation issues. He is also a director of the Cambridge Endowment for Research in Finance.

Myers has appeared as an expert witness in many major cases and regulatory proceedings involving estimation of the cost of capital, the analysis of profitability and value, intellectual property, the determination of damages, and various tax issues. His work has spanned a wide range of industries, including oil and gas pipelines, telecommunications, oil production, railroads, pharmaceuticals, insurance, and banking and financial services.

William F. Pounds

Professor Emeritus of Management; Dean Emeritus, MIT Sloan

An expert in corporate governance and operations management, William Pounds has served as a director of many companies and as a trustee of a number of non-profit organizations. From 1981 to 1991, he was the senior adviser to The Rockefeller Family. His research delves into the problems of governance, operations management, quantitative methods of managerial analysis, and cognitive theories of decision-making.

Adam Emmerich

Partner, Wachtell, Lipton, Rosen & Katz

Adam Emmerich joined Wachtell, Lipton, Rosen & Katz in 1986 and was named a partner in 1991. He attended Swarthmore College and the University of Chicago, from which he received his Juris Doctor degree with honors. While at the University of Chicago, Emmerich served as Topics and Comments Editor of The University of Chicago Law Review, was elected to the Order of the Coif, and received an Olin Fellowship in law and economics. Following law school, he served as law clerk to Judge Abner J. Mikva, of the United States Court of Appeals for the District of Columbia Circuit.