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Amir N. Licht, Radzyner Law School, IDC Herzliya

Shareholders and Stakeholders around the World: The Role of Values and Culture in Directors’ Decisions. Amir N. Licht, Radzyner Law School, IDC Herzliya Renée B. Adams, Australian School of Business, UNSW Global Corporate Governance Colloquium Tokyo, 2-3 June 2017. Feels like 1919.

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Amir N. Licht, Radzyner Law School, IDC Herzliya

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  1. Shareholders and Stakeholders around the World: The Role of Values and Culture in Directors’ Decisions Amir N. Licht, Radzyner Law School, IDC Herzliya Renée B. Adams, Australian School of Business, UNSW Global Corporate Governance Colloquium Tokyo, 2-3 June 2017

  2. Feels like 1919 Dodge v. Ford (1919) “A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end.” DE Chief Justice Leo Strine (2015) “Directors must make stockholder welfare their sole end, and that other interests may be taken into consideration only as a means of promoting stockholder welfare.” Salesforce’s CEO Marc Benioff (WSJ 2016) “In the 21st century, the most important thing is to focus on stakeholder value, not shareholder value. Your stakeholders are your employees, your customers, your partners, the environment, the communities that you serve, the homeless people in your cities where your offices are. ...” WSJ: “Benioff is among CEOs of companies, including Apple Inc., Bank of America Corp., Walt Disney Co., Intel Corp. and International Business Machines Corp., that have begun pressuring lawmakers on social issues, often with a warning: Change laws or risk losing business.” What were they thinking??

  3. Thumbnail Background • A (the) core issue in corporate governance • Several MASSIVE literatures • Objectives of the corporation - monist (SWM) vs. pluralist • Just recently, here, Hart & Zingales (2016) • Personal attributes matter • Life experience - childhood traumas, military service,… • Personality - esp. narcisism • Risk attidudes - esp. overconfidence • Political attidudes - liberal vs. conservative • A black box - indirect proxies • Two levels of analysis • Individual - How directors deal with the problem • Societal/cultural/institutional - How societies address the issue • Law and finance, legal origins

  4. Values and Culture • Personal values • Conceptions of the desirable • Take shape in adolescence or earlier • Linked to behavior, likely causally • Schwartz (1992, 2009) • 10 value types - universal • Cultural orientations • Latent, external normative system • Informal institutions - North (1990), Williamson (2000) • Basic issues for every society • Schwartz (1999) • Egalitarianism/Hierarchy • Harmony/Mastery • Autonomy/Embeddedness • Hofstede (1980); Inglehart (1997); …

  5. Hypotheses Individual level - Is shareholderism universal? Adams, Licht & Sagiv (2011) - in Sweden “Shareholderism” - a general stance on shareholders vs. stakeholders Other-regarding values: universalism: - ; power: + ; achievement: + Entrepreneurial values: ditto and self-direction: + The law (SWM, btw) notwithstanding - but fixed Societal/cultural level - [How] does culture matter? Countries matter for corporate governance - Doidge et al. (2007) Culture Schwartz - Egalitarianism: - ; Harmony: - ; Autonomy: ? Law Shareholder rights, labor rights, entry regulation (entrepreneurship)… Trust?

  6. Methods • Sample - ~1000 board members of public firms • An international rendition of Adams, Licht & Sagiv (2011) • Email-driven online survey - several languages • US (~400), UK (~60), India (~50), Israel (~60), Germany (~50),… • Corporate Governance - quasi-experimental • Vignettes derived from seminal court cases • Consumers - Ford v. Dodge (1919) • Employees - Parke v. Daily News (1962) • Creditors - BCE v. 1976 Debentureholders (2008) • Community - Shlensky v. Wrigley (1968) • General philosophy - Tetlock (2000) • Respondents indicated how they would vote. • Realistic dilemmas; directors were taken to court for these decisions. • Values - PVQ scale - Schwartz (2007) • Culture- Schwartz (2009) • Most advanced - ~60,000 respondents • Also Hofstede (2001), Inglehart (2010)

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  8. Implications Early draft Individual level Universal relations b/w shareholderism and entrepreneurial, self-enhancement values The law notwithstanding Personal attributes matter - values matter universally Cultural level Egalitarianism, harmony link negatively with shareholderism Countries matter - culture, not [shareholder] law Some regulations might support shareholders, SWM.

  9. That’s it! 12

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