Features
Unlocking shareholder value: How finance professors enrich corporate governance, maximise wealth
I recently attended a conference “The AsianFA Annual Conference” at the University of Ho Chi Ming City (UEH University, Vietnam). The key note speech was delivered by Professor Roni Michaely, an Israeli academic specializing in Economics and Finance. Michaely is Professor of Finance at the University of Hong Kong, School of Business and Economics. Professor Michaely’s research has also received many awards and honours. Michaely published numerous works (several of which received best-paper awards) in high ranked academic journals. His research has been also frequently featured in the Wall Street Journal, the New York Times, the Economist, Investor’s Business Daily, the San Francisco Chronicle, BusinessWeek, Forbes, Barrons, Money, Reuters, Worth, among others.
Prof Michaely presented a paper utilizing a unique dataset comprising nearly one million voting rationales provided by investors. The research findings shed light on the motivations behind institutional investors’ voting decisions and their impact on corporate governance practices.
The first finding reveals that institutional investors are more likely to provide rationales when voting against management, indicating that they disclose their concerns over management practices.
The most significant reasons include board independence, board diversity, tenure, firm governance, and busyness. These factors play a crucial role in institutional investors’ decision-making process when opposing directors.
Furthermore, the research highlights an increasing trend among institutional investors to vote against directors who have failed to address environmental and social issues adequately. This indicates a growing emphasis on holding directors accountable for their actions and the impact of their decisions on broader societal concerns.
The study finds that institutional investors’ concerns are well-founded, as companies with low board gender diversity receive more rationales regarding board diversity. Similar patterns are observed for companies with long director tenure and directors with busy schedules.
Finally, the research demonstrates that companies that experience high dissent voting related to board diversity, tenure, and busyness tend to improve their board composition in the subsequent year. This suggests that voting rationales containing investors’ reasons for opposing directors serve as valuable information for firms, enabling them to address governance shortcomings and promote better practices within their portfolio companies.
In summary, this particular study shows that institutional investors are more likely to provide rationales when voting against management, indicating their concerns over management practices. Key factors driving opposition to directors include board independence, diversity, tenure, firm governance, and busyness. Institutional investors are increasingly voting against directors to hold them accountable for addressing environmental and social issues. Companies with low board diversity, long director tenure, and busy directors receive more rationales related to these factors. Moreover, companies with high dissent voting on board diversity, tenure, and busyness tend to improve their board composition in the following year. These findings suggest that voting rationales contain valuable information for firms and serve as a low-cost strategy to promote good governance practices in portfolio companies.
Another researcher revealed that to maintain diversity in corporate boards they hire finance professors from universities. That strategy serves many purposes;
Financial Expertise:
Finance professors possess specialized knowledge and expertise in the field of finance. They bring a deep understanding of financial concepts, markets, and instruments to the boardroom. Their expertise can enhance the board’s ability to make informed decisions regarding financial strategies, investments, risk management, and capital allocation.
Research and Data Analysis:
Finance professors are well-versed in conducting rigorous research and analyzing complex data. They can provide valuable insights based on empirical evidence and help the board in assessing the financial implications of various strategic choices. Their analytical skills enable them to identify trends, risks, and opportunities, guiding the board’s decision-making process.
Teaching and Communication Skills: As educators, finance professors possess strong teaching and communication skills. They can effectively articulate financial concepts, principles, and strategies to fellow board members who may not have a finance background. Their ability to simplify complex financial information can foster better understanding and facilitate more meaningful discussions among board members.
Objective and Independent Thinking: Finance professors often maintain a degree of independence and objectivity in their research and analysis. This mindset can be valuable in the boardroom, where unbiased thinking is crucial. They can challenge prevailing assumptions, ask critical questions, and provide alternative perspectives, contributing to more robust board deliberations and decision-making.
Academic Network and Industry Insights: Finance professors typically maintain extensive networks within academia and the industry. They have access to the latest research, trends, and best practices in finance. This network can provide valuable insights and connections that can benefit the board in staying updated on emerging financial issues, regulatory changes, and industry developments.
Institutional Knowledge and Governance Expertise:
Finance professors often have a deep understanding of corporate governance practices and frameworks. They can bring this knowledge to the board, helping to enhance governance processes and ensure compliance with regulatory requirements.
Their familiarity with governance principles can contribute to improving board effectiveness, transparency, and accountability.
Bridge between Academia and Practice:
Hiring finance professors to cooperate boards creates a bridge between academia and the corporate world. They can facilitate the transfer of knowledge, research findings, and best practices from the academic realm to practical applications in the boardroom. This integration can foster innovation, informed decision-making, and the adoption of evidence-based strategies.
In summary, hiring finance professors from universities to cooperate boards offers the advantages of financial expertise, research and data analysis skills, teaching and communication abilities, independent thinking, academic and industry networks, governance expertise, and bridging the gap between academia and practice.
These benefits can strengthen board performance, contribute to sound financial decision-making, and enhance overall governance practices within organizations.
Another paper discussed on The growing demand for (environmental. Social and governance) ESG-related corporate information spurs the adoption of mandatory ESG disclosure regulations worldwide. We document that firms respond to these mandates by strategically adjusting productive assets through acquisitions and divestitures to enhance their ESG profiles. In particular, firms acquire more assets with strong ESG performance but divest those with weak ESG records, particularly in the wake of negative ESG incidents. Moreover, firms facing ESG disclosure mandates pay higher premiums for acquiring good-ESG assets and accept lower premiums for divesting poor-ESG assets. Acquisitions are more effective than divestitures for improving ESG performance and enhancing firm value.
Another paper points out that Researchers often study the relationship between CSR and firm value and the linkage between ownership and firm value separately. Only a few papers in the existing literature combine both the study branches, that is answering how ownership can affect the CSR-firm value relation. In this paper, we intend to fill this gap by investigating how state ownership can affect the mentioned relationship. Using a sample of Vietnamese listed firms, we figure out an interesting feature in the Vietnamese financial market. When the state is the sole large shareholder in a firm, it negatively affects the CSR-firm value relation. However, when there are foreign institutions concurrently appearing as other large shareholders, the state ownership then positively affects the mentioned relation. We interpret the phenomenon by using the overinvestment hypothesis. That is due to the agency problem, when the state presents as the only large shareholder, it uses the firm’s financial resources to overinvest in CSR activities to improve the state’s reputation in the public eye. However, doing that comes at the cost of other shareholders, specifically a decrease in firm value. Nevertheless, when foreign institutions come in, they can help monitor and alleviate the issue, therefore, the firm value increases. In this case, foreign institutional investors might play an effective role in mitigating the mentioned issue.
Another study from Korea argues that, the effects of corporate social responsibility (CSR) on firms’ stock performance were examined in the context of a corporate scandal closely tied to environmental and social (ES) issues, namely the humidifier disinfectant scandal in Korea. The researchers found that firms with higher ES ratings, particularly those with stronger social ratings, experienced significantly better stock performance during the product safety scandal. The findings highlight the influential role of CSR in shaping a company’s stock performance, especially when investors demonstrate significant attention to ES issues. This suggests that firms’ investments in CSR can effectively mitigate nonfinancial risks and contribute to their overall financial performance.
(The author, a senior Chartered Accountant and professional banker, is Professor at SLIIT University, Malabe. The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of the institution he works for.)
Features
The challenge of being positive about SAARC
It was a few years back that a former President of Sri Lanka took it on himself to pronounce SAARC ‘dead’. Since then there have been other sections of Sri Lankan opinion that have joined the critics of SAARC and taken the solemn stance that SAARC has indeed died what may be called a natural death.
Their fatalism is understandable. SAARC has failed to meet at heads of government or state level for the past several years to take the SAARC process notably forward. Regional cooperation has more or less been only an appealing idea. No substantive concrete projects have taken off to make the idea a hard reality. ‘Inner paralysis’ seems to be SAARC’s lot. Hence the fatalism in these circles.
However, being one of the worst cash-strapped regions of the world and a teemingly populated one with people virtually left to their devices, what choices do the ‘SAARC Eight’ have other than to try their best to band together and continue with their cooperation efforts, however small they may be?
There is no escaping the mounting debt trap for many of these countries and bankrupt Sri Lanka is a glaring example, but ‘throwing in the towel’ and abandoning themselves entirely to the diktats of the strongest economies and their agencies will prove a ‘living death’ for many countries in the SAARC fold.
The gains may be meagre but giving-up on SAARC cooperation in full would prove self-defeating for the organization and South Asia. Right now, the collective intention ought to be to salvage what the region could from the tenuous cooperative efforts. Moreover, such initiatives could go some distance to generate a degree of goodwill among the Eight and help in sustaining a dialogue process.
Given this backdrop it proved ‘a stich in time’ for the Regional Centre for Strategic Studies (RCSS), Colombo, to recently host the SAARC Secretary General Ambassador Md. Golam Sarwar to a round table discussion on the unifying potential of SAARC and its future possibilities, besides other related issue areas.
Held on June 24th and moderated by RCSS Executive Director and former ambassador Ravinatha Aryasinha, the forum brought together a vibrant, wide ranging audience comprising academicians, diplomats, senior public servants, civil society activists and many others. Following the presentation by Ambassador Golam Sarwar titled, ‘Reigniting SAARC: Achievements, Challenges and the Way Ahead’, a lively Q&A followed.
The above forum could be described as an act of lighting the proverbial ‘candle’ rather than ‘cursing the darkness.’ It surely is a ‘darkness’ that could be seen as daunting considering that the region’s pivotal powers, India and Pakistan, are failing to act in a spirit of accord but are engaged in bitter finger-pointing on a number of questions of vital importance to SAARC.
On the other hand, what is the rest of the region doing to bring the above sides together? It is disappointing that to date the rest of SAARC has failed to launch a major diplomatic drive to bring peace between the feuding regional heavyweights. It needs to act without delay and establish its earnestness and this effort would need to prove SAARC’s staying power in the unfolding months and even years.
In assessing SAARC’s seeming failure local opinion in particular has failed to factor in what could be described as weak leadership. Since Sheikh Mujibur Rahman of Bangladesh, the founding father of SAARC, the region has failed to produce a visionary leader who could advance the SAARC cause with charisma and drive.
Among other reasons, weak leadership accounts considerably for the faltering and stuttering status, as it were, of SAARC. Badly needed are leaders who could go the extra mile, think less of narrow national interests and work diligently towards the collective well being of the region but SAARC’s millions of ordinary people have been made to wait in vain for leaders of such stature. Instead, they have been burdened with politicians who seem to be relishing the apparently moribund state of SAARC.
Looking back, it could be said that it was the dynamic leadership factor that led to the launching of the Non-Aligned Movement and for its sustenance for a few decades. True, it could be seen in some quarters that NAM is no more, but as in the case of SAARC, the former too has been unfortunate to be burdened over the years with politicians who lack the vision and drive to unflaggingly advance the fortunes of the South. NAM and SAARC lack the dynamism and vision of leaders of the stature of Jawaharlal Nehru, for example, to give them the required guidance and intellectual depth.
The reasons are complex for there not being among us currently political leaders with the vision and the steadfast commitment to advance the legitimate interests of the South. However, it could be stated with conviction that the majority of Southern leaders have too easily caved in to the demands of the global North and its financial agencies.
These leaders have failed to see, for instance, that the largely market economy oriented Northern governments would not view with favour a centrist economic model that attaches priority to the interests of the dis-empowered publics of the South. This realization ought to have dawned on the current government in Sri Lanka, for instance, some while ago but it has no choice but to abide by IMF dictates since economic survival at present is unthinkable without the latter’s succour.
Accordingly for SAARC this should be the time for some soul-searching. Priority needs to be attached to ending the feuding between India and Pakistan since at present the material fortunes of the region hinge largely on these regional giants giving peaceful relations among them a try. This is no easy challenge to meet but some daring, visionary diplomacy needs to take hold among the rest of SAARC.
There is some sense in SAARC bringing the peoples of the region together through programs that address their best collective interests. A meeting of minds among SAARC nations could enable SAARC and its agencies to build a region-wide people’s movement for progressive political and economic change that could in turn lead to the region’s political leaders sensitizing themselves more to the neglected needs of their publics.
However, the time is ‘now’ for the initiation of these progressive changes and the voice of SAARC well wishers would need to drown out those of their critics.
Features
OPA seminar examines Sri Lanka’s economic recovery, resilience and growth pathways
A seminar, “Sri Lanka’s Economic Crossroads: Navigating Recovery, Resilience and Growth” was recently held by the Organisation of Professional Associations of Sri Lanka (OPA) at the OPA Auditorium, bringing together economists, OPA members, and professionals from diverse fields for an insightful discussion on Sri Lanka’s economic recovery and future growth prospects.
The event was held under the patronage of Jayantha Gallehewa, President of the OPA, and was jointly organised by the National Issues Committee (NIC) and the Seminars, Workshops and Programmes Committee of the OPA. The event reaffirmed the organisation’s commitment to advancing professional excellence, fostering insightful intellectual engagement, facilitating interdisciplinary knowledge exchange and creating a constructive platform for informed dialogue on issues of national importance.
The panel of speakers comprised Dr. Harsha Aturupane, Lead Economist and Programme Leader for Human Development at the World Bank for Sri Lanka and the Maldives; Dr. Achinthya Koswatta, Senior Lecturer in Economics at the Open University of Sri Lanka, and Anushan Kapilan, Lead Economist at Verité Research.
In his welcome address, the President of the OPA emphasised that Sri Lanka was at a critical juncture in its economic recovery journey where sustained reforms, effective implementation, and collective national commitment are essential to achieving long-term stability, resilience and inclusive growth. He noted that the country had experienced one of the most severe economic crises in its history with the economy contracting by 7.8 percent in 2022 and a further 11.5 percent in 2023, resulting in significant economic and social challenges.
Delivering his introductory remarks Bhanu Wijeyaratne, Vice President of the OPA and Chairman of the National Issues Committee, underscored the need to move beyond short-term economic stabilisation towards a comprehensive agenda of structural transformation. He observed that the economic crisis had revealed deep-rooted weaknesses within the economy, including persistent fiscal pressures, rising public debt, foreign exchange limitations, and insufficient diversification of the export base. He stressed that addressing these challenges through strategic reforms, institutional strengthening and long-term economic planning would be essential to establishing a more resilient and competitive economy.
While acknowledging recent positive developments, including improved inflation management, tourism recovery and signs of economic stabilisation, Wijeyaratne stressed the need to advance reforms aimed at strengthening fiscal discipline, enhancing productivity, improving competitiveness, developing human capital and reinforcing governance and institutional effectiveness.
He further highlighted the important role of professionals, businesses, academia and other stakeholders in contributing to evidence-based dialogue and supporting Sri Lanka’s journey towards a resilient, inclusive and sustainable economic future.
Delivering the keynote presentation, Dr. Harsha Aturupane provided a comprehensive assessment of Sri Lanka’s economic prospects within the broader context of global economic transformation. He argued that Sri Lanka functioned as a small open economy whose performance is significantly influenced by developments in the global marketplace. External factors could not be controlled, and the country must strengthen its domestic capacity and resilience to respond effectively to international economic shifts, he noted.
Tracing the evolution of global economic systems, Dr. Aturupane highlighted the transition from ideological divisions between state-controlled and market-oriented economies towards increasingly pragmatic approaches focused on growth, competitiveness and development. He noted that Sri Lanka’s own economic journey reflects a similar evolution, with contemporary policy debates now centred on practical solutions for sustainable economic progress.
The presentation also examined the transformative impact of globalisation. Dr. Aturupane observed that global economic integration had enabled several East Asian economies, including South Korea, Singapore, Taiwan and Hong Kong, to achieve remarkable economic advancement through export-led growth strategies. Sri Lanka similarly benefited from this process through the expansion of its apparel industry and increased integration into global value chains.
Turning to Sri Lanka’s recovery programme, Dr. Aturupane emphasised that the ongoing stabilisation process should be viewed as a national programme supported by the International Monetary Fund rather than solely as an IMF initiative. He observed that strong worker remittances, improved tourism earnings, enhanced government revenue mobilisation and prudent import management have contributed significantly to economic stabilisation.
Despite this progress, he cautioned that rebuilding foreign exchange reserves and meeting future debt obligations remain major challenges. He underscored the need to strengthen export performance, attract investment and generate sustainable foreign exchange earnings to ensure long-term economic resilience.
The discussion also focused on monetary stability, inflation management and exchange-rate policy. Dr. Aturupane stressed that maintaining price stability was fundamental to sustainable growth and household welfare, while sound monetary policy remains essential for preserving economic confidence.
Looking beyond stabilisation, he argued that Sri Lanka must transition towards a broader economic transformation agenda. Sustainable growth, he noted, will depend on expanding productive capacity through investment, technological advancement, innovation, skills development and structural reforms.
Among the key constraints identified was the high cost of energy, which continues to affect competitiveness and investment attractiveness. Dr. Aturupane emphasised the importance of improving efficiency and affordability within the energy sector to enhance Sri Lanka’s business environment.
He further highlighted the social dimensions of the crisis, noting the rise in poverty and economic vulnerability among households. Strengthening social protection systems and ensuring inclusive growth, he argued, must remain central components of the national development agenda.
Another critical challenge identified was Sri Lanka’s demographic transition. With an ageing population, outward migration and evolving labour market dynamics, the country is increasingly confronting labour shortages in several sectors. Dr. Aturupane suggested that greater automation, increased labour-force participation and strategic workforce planning would be necessary to address these emerging realities.
Concluding his presentation, he emphasised the need to improve governance, strengthen institutions, enhance competitiveness and create an enabling environment for private sector investment. Sri Lanka’s future success, he noted, will depend on its ability to move decisively beyond crisis management towards a development model founded on resilience, innovation, productivity and inclusive growth.
Dr. Achinthya Koswatta reiterated the importance of policy consistency and predictability in fostering investment and industrial development. She observed that frequent policy changes create uncertainty and discourage long-term investment decisions, whereas stable and coherent policy frameworks build confidence and support sustainable economic transformation.
Meanwhile, Anushan Kapilan highlighted the substantial progress achieved in restoring macroeconomic stability following the recent crisis. He noted significant improvements in fiscal performance, including increased government revenue, reduced reliance on debt financing and a historically low fiscal deficit.
He further observed that public debt levels are declining faster than anticipated, economic growth has exceeded expectations and inflation has been brought under control more rapidly than forecast. Nevertheless, he cautioned that the recovery remains uneven, particularly within the industrial sector and that many households have yet to experience a meaningful improvement in living standards.
The seminar was expertly coordinated by Eng. Chamil Edirimuni, Vice President of the OPA and Chairman of the Seminars, Workshops and Programmes Committee, while the technical moderation and interactive discussion session were facilitated by Bhanu Wijeyaratne, Vice President of the OPA and Chairman of the National Issues Committee.
The event was attended by Tisara De Silva, President-Elect of the OPA, Eng. Ravi Rupasinghe, General Secretary, Past Presidents, members of the Executive Council, representatives of the General Forum and professionals representing a wide range of disciplines.
The seminar concluded with a vibrant exchange of ideas and perspectives, reaffirming the importance of evidence-based policy dialogue, institutional collaboration and collective national commitment in advancing Sri Lanka’s economic recovery, resilience and sustainable growth.
Features
Her roots run deep in Sri Lanka
Yes, for UK-based presenter and artiste Samantha Kay, home is where the heart – and the roots – are. And her roots run deep in Sri Lanka.
In an exclusive interview with The Island, Samantha says “I’m proud to be Sri Lankan. My mum is from Kandy and my dad is from Colombo, so Sri Lanka has always held a very special place in my heart.
“Whenever I visit Sri Lanka, I love spending time on the beautiful south coast, especially Hikkaduwa and Mirissa. It’s somewhere I always feel connected to my roots and completely at peace.”
Now living in Bournemouth, on the south coast of England, where, she says, she is lucky to be close to some of the UK’s most beautiful beaches, including the iconic Sandbanks, Samantha has built a career that refuses to fit into one box.
She is a radio presenter, podcast host, singer-songwriter, personal trainer and life coach.
“I genuinely love the variety because every role allows me to connect with people and, hopefully, make a positive difference in someone’s day.”
Of course, music has taken her far.
One of her proudest achievements, she says, was releasing a song with 90s music icon Angie Brown, which reached No. 9 in the UK Club Charts.
She also reached the final stages of The X Factor and performed at Wembley Stadium in front of thousands.
Beyond music, Samantha competed in bikini bodybuilding across the UK, winning several titles. “It taught me discipline, resilience and self-belief,” she recalls.
Today, her focus is on radio, podcasting and coaching women. Her podcast encourages people to live life on their own terms rather than feeling pressured to follow society’s expectations.
Says Samantha: “Whether someone is single, changing careers, travelling solo or simply trying to find their purpose, I want them to know that it’s never too late to create a life that feels authentic. If you’ve ever felt like you don’t fit into the box, maybe you were never meant to.”
Samantha Kay also spent a year in Dubai, performing at five-star hotels, including FIVE, and coaching at the iconic outdoor gym on Palm Jumeirah.
“I taught strength and conditioning classes, and hosted wellness retreats, combining my passion for music, health and inspiring others.”
However, with family matters calling her back to the UK, she made the choice to return. “Family comes first,” she says.
Looking ahead, Samantha plans to grow her radio and podcast work, release more music, and expand her wellness retreats.
“My biggest passion is helping people, especially women, build confidence and believe in themselves,” she says.
“Wherever my career takes me, I hope to continue inspiring others to live with courage, kindness and authenticity, while never forgetting my Sri Lankan roots.”
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