Chapter 5
Shifting Dynamics from 1970 to 2000
Coming as it did near the end of what had been a long period of optimism which allegedly included a spirit of sharing, Milton Friedman’s much discussed 1970 New York Times essay, “The Social Responsibility of Business Is to Increase Its Profits,” and its emphasis on shareholder value as virtually the sole criterion by which corporate performance should be judged seemed far out of the mainstream. He roundly denounces corporate “social responsibility” as a socialist doctrine and takes shareholders’ ownership of the corporation as a given. He asserts that “the manager is the agent of the individuals who own the corporation” and, further, that the manager’s primary “responsibility is to conduct the business in accordance with [the owners’] desires.” He characterizes the executive as “an agent serving the interests of his principal.”
Agency Theory is Born
The seeds of what has become known as agency theory, which has continued its relentless growth to this day, were further fertilized by the 1976 Journal of Financial Economics article “Theory of the Firm,” in which Michael Jensen and William Meckling set forth the theory’s basic premises:
–Shareholders own the corporation and are “principals” with original authority to manage the corporation’s business and affairs.
–Managers are delegated decision-making authority by the corporation’s shareholders and are thus “agents” of the shareholders.
–As agents of the shareholders, managers are obliged to conduct the corporation’s business in accordance with shareholders’ desires.
–Shareholders want business to be conducted in a way that maximizes their own economic returns. (The assumption that shareholders are unanimous in this objective is implicit throughout the article.)
Under this view, boards of directors are simply an organizational mechanism for controlling “agency costs”—the costs to shareholders associated with delegating authority to managers.
The impact of this view, which I am impudent enough to assert is dead wrong, has been pernicious, which we will explore in later chapters.
The Stock Market Corrects
By 1972 the S&P 500 Index’s price to earnings ratio (P/E) stood at 19, and the Nifty Fifty’s average P/E was more than twice that at 42. Then came the stock market slump of 1973–74, in which the Dow Jones Industrial Average fell 45 percent in just two years, perhaps reflecting the end of the Bretton Woods monetary system and/or fixed stock trading commissions, concern over the Vietnam War, soaring inflation and the first of the 1970s oil crises.
Outrage over the Wreck of Penn Central Fuels New Focus on Board Role
The bankruptcy of the venerable Penn Central railroad resonated in its day as did the fall of Enron, and the questionable payments scandal revealed through the Watergate investigation at least as much rot as was found in the accounting abuses in the late 1990s. The result was to begin to push the board away from its then accepted advisory role toward the so-called oversight model, at least in aspiration. The forces put in motion in the 1970s did much to drive subsequent corporate governance reform forward. The decline of insiders and the rise of independent directors began then as did the formal role of audit committees.
The Penn Central story laid bare the weakness of the 1950s view of the board. The august members of that board appeared to have little to no inkling of the financial troubles facing the railroad. As working capital deteriorated and indebtedness escalated in the two years before the collapse, the board approved over $100 million in dividends. Suspicion of management escalated, as it was made brutally clear that the directors had been neither advisors nor monitors, but puppets.
Much as Enron’s collapse foreshadowed financial frauds at many other firms, the Penn Central collapse was followed by other dramas such as the Equity Funding scandal and the failures of LTV, Ampex, and Memorex. Myles Mace’s widely read 1971 book, Directors: Myth and Reality, exposed director passivity and the failure of the board concept as then understood. Based on decades of research, he declared that it was possible to conclude that the advising board had been no more than a way of giving managers the appearance of accountability.
Broad Corruption Revealed Leads to Focus on Governance Per Se
Meanwhile, the Special Prosecutor’s investigation into the drama known as Watergate resulted in fifty public corporations being criminally prosecuted or subject to SEC enforcement action; another 400 voluntarily admitted having made illegal campaign contributions or paid bribes abroad and in the U.S. One result was adoption of the Foreign Corrupt Practices Act, which created enforcement powers and significant penalties for breaking the law.
In the aftermath it seemed that while senior corporate officers often knew of these payments, outside directors had not and were not otherwise in the loop of the corporation’s internal controls. Inquiry that would lead to such knowledge was considered not decorous, and beyond the scope of the advising board. While that may seem remarkable today, it does offer some insight into why it seems that in later years intelligent and able directors often seemed asleep at the switch. Directors did not know there was a switch, did not recognize they were responsible for pulling it, and management typically did not see fit to inform them. Though expectations of the board may have changed, the legacy behavior of the advising board remained.
This view of the board’s responsibility or lack of same was evident in the Delaware Supreme Court’s 1963 ruling in Graham v. Allis-Chalmers Mfg. Co. that: “absent cause for suspicion there is no duty upon the directors to install and operate a corporate system of espionage to ferret out wrongdoing which they have no reason to suspect exists.” This could certainly be interpreted to indicate that the board was not responsible for assuring themselves that disclosures were correct.
Additional pressure on the advising board model came from the corporate social responsibility movement fueled in the 1970s by concern about corporate involvement in the Vietnam War and their policies on the environment, employment, and other social issues. The corporation of the 1950s and 1960s considered the interests of employees and the communities in which they lived through charitable giving. Consistent with the temper of the times, the 1970s saw a push for deeper corporate engagement with social problems.
Other governance reform proposals were much further reaching and focused on the board. Nader, Green & Seligman famously proposed federal chartering, under rules that required full time directors nominated exclusively by shareholders and gave weight to board representation of various constituency groups.
The Board as Overseer Takes Root as Independent Directors Become Desirable
The cumulative effect of these pressures led, by the end of the 1970s, to a significant reconceptualization of the board’s role and structure. The advising board model was replaced by recognition of the need for the oversight board, as presented in Mel Eisenberg’s influential 1976 book, The Structure of the Corporation: A Legal Analysis. The new model of the board rapidly became conventional wisdom, endorsed by the Chairman of the SEC, the corporate bar, and even the Business Roundtable.
The staffing of the audit committee by independent directors came to be seen as essential. The SEC initially made the existence of an audit committee a matter of disclosure only, but in 1976 requested that the NYSE amend its listing requirements to include an audit committee composed of independent directors with access both to accounting information and to the outside auditors on a private basis. By the time the NYSE adopted the requirement, audit committees had become a widely accepted element of board structure, found in almost 95 percent of large public companies.
The term independent director entered the corporate governance arena as descriptive of the kind of director capable of fulfilling the oversight role. Until then, the board was divided into inside and outside directors, defined in a 1962 New York Stock Exchange statement that an outside director was simply one who is non-management. The composition of the board began to shift in favor of independent directors and pressure grew to increase the independence of the nominating committee.
The Definition of Independence Proves Elusive; We Know It When We See It
The question, however, was what constituted independence. The clear goal to my mind was to develop board members who were both seasoned and independent minded, willing as needed to challenge the thinking of management, possibly bring new points of view to the table, and act as needed, consistent with their actual legal responsibility.
But how can such qualities be defined and mandated? Unable to do that, definitions turned instead to trying to protect the exercise of independent judgment from the influence of economic and even social factors. Federal regulatory guidance, stock exchange listing standards, state fiduciary law, and best practice pronouncements have all played a role in line-drawing, and the results, while useful, are not consistent.
The 1978 Corporate Director’s Guidebook, an influential product of prominent corporate lawyers, drew a two-level distinction, first distinguishing between management and non-management directors and then between affiliated and non-affiliated non-management directors. A former officer or employee was to be regarded as a management director. A director with other economic or personal ties which could be viewed as interfering with the exercise of independent judgment was an affiliated non-managerial director, such as commercial bankers, investment bankers, attorneys, and others who supply services or goods to the corporation.
In 1978 the SEC went so far as to propose proxy disclosure that would categorize outside directors as affiliated or independent. In response to corporate objections, the proposal was withdrawn. In its 1977 audit committee listing standard, the NYSE required staffing by directors independent of management.
It still permitted directors from organizations with customary commercial, industrial, banking, or underwriting relationships with the company to serve unless the board found that such relationships would interfere with the exercise of independent judgment as a committee member. That definition remained intact until 1999, when the criterion of audit committee independence was significantly tightened in response to the prodding of the Blue Ribbon Committee on Improving Audit Committee Effectiveness.
The 1980s Board Role: The Board Becomes Important
The adoption of the oversight board was not fully established by the end of the 1970s, since its acceptance by management was at least partially intended to forestall further reforms, such as the briefly popular idea of national chartering. By the end of the 1980s managements were, however, aggressively promoting the virtues of the monitoring board, since a robust board including a significant percentage of independent directors seemed to offer a safe harbor against the fear of hostile takeover, which became pervasive.
Although in total, hostile transactions accounted for only a small percentage of those completed, the idea of a possible hostile bid became a powerful threat. Nearly half of major U.S. corporations received an unwanted bid. Many friendly deals were negotiated in the shadow of a potential hostile bid. Even very large corporations came under attack from financial buyers whose access to the high yield bond market meant they could engineer a highly leveraged transaction that would ultimately be repaid through the sale of various corporate divisions and other assets.
A hostile bid was rationalized by some as a form of competition among management teams for control over the assets of a particular corporation. Theoretically, the team that could put the assets to highest and best use would be able to offer the highest price and would prevail, and a successful hostile bid would make those particular assets more productive. In addition, the background threat of a hostile bid would have a disciplining and stimulating effect on other managements. This would lead to more productive use of assets throughout the economy.
Mighty Institutional Investors Weigh In
The hostile takeover activity also reflected the increasing importance of institutional investors. By 1980 institutions held more than 40 percent of the value of U.S. equity markets, which arguably meant that more large shareholders were focused directly on shareholder value and delighted to sell to a bidder offering a significant market premium.
In part, this may have reflected investor sophistication about the target management’s claims that the bid was too low were rarely proven true. They also may have understood what the general public did not: that many corporations, having experienced prolonged inflation, had assets on their books which were properly valued according to generally accepted accounting principles (GAAP) but had much greater value in the then prevailing market. Those undervalued assets provided significant impetus to deal makers who saw great opportunities that did not require much effort to realize.
Another important factor that influenced institutional investor behavior was the typical evaluation process of the investment management firm who was managing the institutional investor’s money. Hire and fire decisions were made on the basis of performance track record. For example, a mutual fund marketed itself on the basis of annual performance; a money manager engaged to manage pension fund or endowment money was benchmarked against unmanaged broad market indices, or against peers, often on a quarterly basis.
Early in the takeover cycle, the return from such investments was spectacular as it was easy to capture value and pay down debt by selling the assets of the company acquired and realizing attractive returns quickly. These returns drew in more money. Many institutions became crucial funding sources for financial buyers. Some provided equity capital to buyout firms; others purchased the indebtedness that financed leveraged acquisitions. During this time, it was hard for pension fund and endowment executives and the investment managers who managed their money not to look like heroes, or at least like savvy investors.
The Courts Recognize Independent Judgment of the Board as Mission Critical
Many incumbent CEOs, unsurprisingly, did not agree with the efficiency-enhancing view of hostile takeovers, instead seeing such activity as driven by arbitrageurs looking for quick profits, able to secure funding due to the performance pressures on institutional investment managers cited above. Nevertheless, hostile bids were powerful phenomena that needed to be dealt with. In the face of fear, CEOs turned to the idea of the monitoring board and to independent directors for protection, despite the potential decrease in their autonomy. The concept of independent directors charged with independently evaluating the adequacy of the hostile bid compared to the value of the enterprise may have been difficult to swallow but offered valuable protection.
From a legal standpoint, independent directors also proved valuable regarding standards developing in Delaware defining fiduciary duty law. In a series of highly visible cases, the Delaware Supreme Court permitted a target board to just say no to a hostile bid. Boards were permitted to adopt a so-called poison pill, a corporate finance technique that imposed high costs on a successful hostile bidder. Judicial approval of such measures appeared to be tied not only to the existence of independent directors, but to their actively informed decision-making process.
The courts were faced with difficult choices. They could prohibit devices such as the poison pill and leave the outcome to shareholder action, which Delaware law otherwise strongly discouraged, or they could allow management the discretion to resist hostile bids, rife with conflict problems, or they could themselves decide on the reasonableness of takeover defenses in particular transactions which would transform courts into economic as opposed to legal standard setters.
Placing the onus on the board of directors, however, had a doctrinal foundation and could elegantly resolve the various conflicting agendas. Perhaps wanting not to alienate possible pro-takeover parties such as institutional investors or the federal government, the Delaware courts delved into not only board process but also director independence. The lesson was clear. The price of the power to just say no to a hostile bidder was a board that consisted of a majority of independent directors as well as a process that would rely on those directors to exercise their independent judgment.
The reliance on the business judgment of independent directors by the Delaware Supreme Court in the important decision of Zapata Corp. v. Maldonado held that even for a demand-excused shareholder derivative legal action, a special committee constituted of independent directors could nevertheless obtain dismissal of the action if it demonstrated this was in the best interests of the corporation. In its dismissal request, the special committee had the burden of demonstrating its independence. These developments increased the demand for directors and helped further define the independence standard.
Economic Uncertainty and Social Unrest Reduce American Confidence
The U.S. economy had not thrived in the 1970s, and for the first time it seemed that U.S. corporations were out-competed on the world stage. Chrysler, for example, in the early 1980s escaped bankruptcy only with a government bailout, and GM seemed to be losing out to Toyota as the world’s premier automobile manufacturer. Inflation was having a significant impact, and general confidence in the American destiny was flagging.
The role of institutional investors including both mutual funds and pension investors has only become more critical since then and we will explore both shortly in greater detail. We will also look at how their return requirements and undervalued corporate assets powered the birth of the private equity and leveraged buyout markets. We will explore the role of the brokerage firm Drexel Burnham in building the high yield bond market and financing various acquisitions. Finally, we will spend some time dwelling on the development of the swap markets and the techniques and impact of securitization. These markets, still largely invisible to board members, are part of the now enormous world of derivative products, all of which took root in the remarkable decade of the 1980s.
Market Crashes on Black Monday
On October 19, 1987, the markets dropped a stomach-wrenching 23 percent giving rise to the label Black Monday, echoing the first day of the 1929 crash. Continuing a decline that began the prior week, sell orders overwhelmed the system at the opening bell Monday morning, and floor specialists couldn’t open for an hour.
Confusion and panic spread through cash and futures markets. This, the biggest percentage drop in stock market history, prompted a rare two-column Wall Street Journal headline: “The Crash of ’87: Stocks Plunge 508 Amid Panicky Selling.” The market rebounded the next day, posting a record gain of 102.27 points on the Dow. Confidence appeared restored when another rally followed on Wednesday, and so began the bull market that would last another decade.
Behind the scenes, however, the repercussions of such a plunge received much study. The New York Stock Exchange seriously considered closing, a step that would have sent a profoundly troubling signal to the world’s markets. In the end, only a flood of liquidity from the Federal Reserve and a concerted effort by big companies, prompted by frantic calls from their investment bankers, to buy back their stock combined with an odd but fortuitous spike in futures on the Major Market Index brought the markets back from the brink.
Changing Market Forces Become Visible
Though they did not cause the crash, two relatively new elements of market structure contributed to the volatility: program trading and portfolio insurance. Program trades are large-volume transactions that are typically executed automatically when index prices rise or fall to predetermined levels. Portfolio insurance is a hedging technique used by institutional investors to mitigate market risk by short-selling stock index futures. Both are unpredictable and trigger volatility.
The 1987 panic roused investors’ worst fears and sent a sobering message to the managers of the corporations whose combined market valuations shed a stunning $500 billion that day. The complexities of a vastly changed capital market environment were at work. This environment relied not on thoughtful assessments of the soundness of corporate fundamentals, but rather on automated trading algorithms and an unsettling concentration of ownership by institutional investor intermediaries, whose own priorities often clashed with those of primary investors seeking long-term capital appreciation. The unsuspecting public was left behind.
NYSE Establishes Safeguards
As a response to the market crash of October 1987, the NYSE established a circuit breaker system in October 1988, halting trading temporarily if prices fall steeply in a short period of time. The system was devised based on the federal Brady Commission report, which suggested that rapidly falling prices could intensify panic among investors and cause limit orders to become stale. The report also suggested that broad price swings could create uncertainty about order execution, which would prompt investors to refrain from trading.
The theory was that by creating a required a pause in trading, investors would have some time to assimilate new information and thus make informed choices during periods of high volatility.
Initially, the exchange set the triggers to suspend trading for up to 15 minutes following point declines in the Dow Jones Industrial Average of approximately 10, 20 and 30 percent. In 2013, the exchange altered the rule to establish circuit breaker triggers for declines of 7, 13 and 20 percent in the S&P 500. Also, under the rules modification, if the market declined by 20 percent, trading is halted for the remainder of the trading session.
The 1990s Board: Independence Criteria Tighten as Equity Linked Compensation Grows
The anemic results or failure of many highly leveraged late-1980s contested transactions damaged the credibility of hostile bids generally. Easy financing for buyers was gone with the 1990 demise of Drexel Burnham. The post-1980s conventional wisdom was that the hostile bid was a high cost mechanism to achieve an acquisition, and their use declined.
The trend toward increasing the role of independent directors, defining that meaning, and supporting the ability to behave independently, however, continued. In 1989, Jay W. Lorsch and Elizabeth MacIver in their book Pawns or Potentates: The Reality of America’s Corporate Boards argued that the independent directors and boards were acting more like pawns and not so much as the potentates they were legally intended to be. Various mechanisms, many first adopted during the 1970s corporate governance reform, developed to define and enhance the independence of directors.
These included continuing tightening of the standards and rules of disqualifying relationships of independent directors as well as increasing of both negative and positive reinforcement of vigilance, such as legal liability for fiduciary duty breach, reputational sanctions, and stock-based compensation. At the board level, further development of internal board structures continued, such as more mandated committees and the designation of a lead director. Finally, there was a clear move beginning to reduce CEO influence in director selection and retention by the creation of a nominating committee staffed solely by independent directors.
Various panels and blue ribbon commissions developed somewhat influential best practice guidelines for relationship tests. The most important version, in the American Law Institute’s 1992 Principles of Corporate Governance, recommended that the board of a public corporation should have a majority of directors who are free of any significant relationship with the corporation’s senior executives.
Significant relationship was defined in a way to disqualify many affiliated directors, both through categorical exclusions relating to the firm’s principal outside law firm or investment bank, and through attention to customer/supplier relationships crossing a relatively low ($200,000) materiality threshold. The Principles also called for the corporation’s nominating committee to engage in a more individualized review of factors that could undermine the independence of particular directors.
Further federal regulatory tightening of the independence standard came through the 1996 establishment in Section 162(m) of the Internal Revenue Code of criteria for directors eligible to approve exceptions to the $1 million deductibility cap on executive compensation. Those criteria disqualified a former officer of the corporation and a director who receives remuneration from the corporation either directly or indirectly, in any capacity other than as a director, and define acceptable limits of director ownership interest in or employment by an entity that received payments from the corporation.
These IRS regulations influenced the SEC’s 1996 rules specifying independent director approval of certain stock-related transactions as a condition of exemption from the short swing profit recapture provisions of section 16(b) of the 1934 Securities Exchange Act. The definition of an independent director with such approval power followed the substance of the IRS regulation. The tests of economic distance for director independence established by these two important federal regulatory agencies became important benchmarks in other realms evaluating independence.
True Independence Grows in Value
The shift toward independent directors is reflected not just in the numbers or percentages but also in the likelihood of independence in fact. The legal resolution of the hostile takeover battles of the 1980s made clear not only that the firm is not always up for sale, but that the ultimate decision maker was not management but instead had to be the less conflicted board. The growing focus on director independence was stimulated by the desire to enhance the credibility of such decision making to the relevant audiences, including the courts and increasingly active institutional investors.
With hostile takeovers defanged, a major force driving the alliance between management and the board was gone, and the board sought ways to align management behavior with the interests of shareholders. Some 1990s boards sought to bring stock price-linked incentives into executive compensation contracts, termination decisions, and severance packages. This marks another important turning point in governance thinking: a continuing movement toward serving the shareholder as distinct from the stakeholders more prevalent in prior decades.
These compensation contracts typically involved the use of stock options. Both tax and accounting rules favored the use of plain vanilla stock options, meaning immediately exercisable, at-the-money options on the company’s stock. Such options were taxable to the executive only when exercised, not when issued and grants of such options were not expensed so did not reduce the corporation’s net income. Their popularity is suggested by the shift in composition of S&P 500 CEO compensation over the 1992–2000 period from 27 percent to 51 percent in stock options.
Equity Linked Compensation Creates Moral Hazard
Stock option packages can create a significant moral hazard, which can easily be seen in hindsight, especially given subsequent developments. Managers with large option grants may be strongly tempted to produce results the market expects by manipulation of financial results, not difficult to do by overstating earnings. Several recent studies find that the probability of accounting fraud, though small, nevertheless increases with the amount of stock-based compensation and increases as well with the fraction of total compensation that is stock-based.
It might appear that achieving financial results through manipulation would not be a serious threat, as the corporation’s true condition will eventually come to light. The stock price will fall, the executive’s options become worthless, and legal sanctions for fraud may ensue. Before such revelations occur, however, the executive may already have exercised his options and effected a prompt sale of the underlying stock at the inflated price; the corporation might reprice the worthless options or grant some new ones; the necessary earnings restatement may be buried with some other extraordinary adjustment; or a positive shift in market conditions may overtake the earlier misrepresentation. And so on.
In short, executives receiving large grants of options had major incentives to pursue the highest possible share price, with foreseeable moral hazard problems, as well as potential threats to earnings quality. Appropriate operation of the contracts critically depended upon the quality of the corporation’s disclosure. The necessary link had to be the deliberate and focused oversight by the board of financial disclosure, which was, in many cases, just plain missing. Many boards had simply failed to appreciate and protect against the special temptations created by stock-based compensation to misreport financial results.
Independence of Mind Needs Help from Independence of Process
Observers have debated whether boards generally failed in their obligation to establish arm’s length bargaining with senior managers. Regardless of the board’s independence in other matters, it seems clear that independence in the setting of compensation was compromised in many situations. In some cases, the CEO or other members of the management team participated in compensation committee activities.
Conspicuously, boards often rely on consulting firms to assist them in developing and evaluating compensation packages, which can be extremely complex, as can the definition of appropriate peer groups. Likely a holdover habit from previous periods, the board then typically used the same consulting firm that management used for broader employee compensation framework development. Clearly, that firm may have difficulty realizing that it needs to work for two separate clients. The knowledge of the company and its people cannot help but permeate the recommendations made to the board, historically more remote and less familiar.
Revolving CEOs
Another trend developing in the 1990s was the increasing board tendency to evaluate CEO performance with respect to shareholder returns and to terminate more quickly, borne out by a study by Booz Allen Hamilton of CEO turnover in the 1995–2001 period for the 2500 largest companies. The CEO turnover rate worldwide nearly doubled in the 1995 vs. 2000 period, and the rate of explicitly performance-related turnovers increased three times, from 25 in 1995 to 80 in 2000. The result was to shorten average CEO tenure from 9.5 years in 1995 to 7.3 years in 2001.
The first and most obvious conclusion is that CEOs must deliver acceptable and recognizable total returns to shareholders. Shareholder returns clearly moved higher on the management and board agenda than in years past, when net income and return on assets were the measures by which a corporation’s managers were judged. In those bygone days, management focused on effective stewardship; the relevant benchmarks were competitors in the same industry. Focus on shareholder return, however, broadens those benchmarks as shareholders are judging each company against all others. This shift continued the pressure for fundamental change in management behavior and board perspective.
Another element of the 1990s board focus was the use of the equity linked golden parachute, a generous severance package, often based on approximately three times salary/bonus of prior years. In a change in control transaction the accelerated vesting of stock options granted but not yet vested was often added. The severance payments were nice, but the option acceleration provisions could make the CEO genuinely rich. This was a significant consolation prize for the terminated CEO, which presumably reduced resistance, and made it easier for the board to attract a replacement CEO under similarly demanding performance expectations.
In the case of an uninvited takeover bid, such packages often converted CEOs from opposition to acquiescence. One consequence was that despite the availability of the nearly bullet-proof anti-takeover defense of a poison pill, takeover activity in the United States reached new heights in the 1990s. In particular, in the 1996–2000 period, fewer than 100 (of 40,000 total) acquisitions were reported as hostile.
Read More
“The Social Responsibility of Business Is to Increase Its Profits”, Milton Friedman, New York Times, 1970
“Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure”, Jensen, Michael C. and Meckling, William H., University of Rochester, 1976
The Wreck of the Penn Central, Daughen, Peter, & Binzen, Joseph, 1971
The Structure of the Corporation: A Legal Analysis, Eisenberg, Melvin, 1976; Beard Books 2006
Taming the Giant Corporation, Nader, Ralph; Green, Mark, and Seligman, Joel; W. W. Norton & Company, 1977
The Foreign Corrupt Practices Act of 1977, published by Department of Justice, Criminal Division
Mergers and Acquisitions, Auerbach, Alan J., ed. University of Chicago Press, 1987
The Cycles of Corporate Social Responsibility: An Historical Retrospective for the Twenty-first Century, Wells, C.A. Harwell, 2002
Pawns or Potentates: The Reality of America’s Corporate Boards, Lorsch, Jay W. & MacIver, Elizabeth, 1989
Principles of Corporate Governance, edited and published by American Law Institute, 1992
“Executive Compensation: A New View from a Long-Term Perspective, 1936–2005”, Frydman, Carola, MIT Sloan School of Management and NBER, & Saks, Raven, Federal Reserve Board of Governors, Oxford University Press 2010.
“CEO Incentives: It’s Not How Much You Pay, But How”, Jensen, Michael C. & Murphy, Kevin J., Harvard Business Review, 1990