Fighting Fraud
Title: Who Blows the Whistle on Corporate Fraud?
Authors: Alexander Dyck (adyck@rotman.utoronto.ca), Luigi Zingales (luigi.zingales@gsb.uchicago.edu), and Adair Morse (adairm@umich.edu)
Available Online: Click here.
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Photograph © Sean Justice/Corbis |
Bottom Line: Although regulatory systems have been put in place to catch corporate malfeasance, this research casts doubts on their usefulness. We need better incentives to encourage witnesses to reveal fraud and come forward with evidence.
Boardroom Behavior
Title: Flattery Will Get You Every-where (Especially If You Are a Male Caucasian): How Ingratiation, Boardroom Behavior, and Demographic Minority Status Affect Additional Board Appointments at U.S. Companies
Authors: James Westphal (westjd@umich.bus.edu) and Ithai Stern (i-stern@kellogg.northwestern.edu)
Available Online: Click here.
A survey of 760 board members of Fortune 500 companies examined the way directors earn appointments on multiple boards. The results demonstrated that specific behaviors have a significant influence over whether or not fellow board members will nominate their colleagues to other boards. Board members who praised the efforts of management and ingratiated themselves with other directors were often rewarded for their behavior with multiple board appointments. Directors who gave honest feedback to management, provided tight oversight, and lobbied for close evaluation of executive proposals did not reap the same benefits. The findings concerning minorities and women were startling: Their attempts at ingratiation are rewarded less and their attempts at control more severely punished.
Bottom Line: So much for independent-minded boards. Companies are generally a long way from recruiting and cultivating diverse board members who offer constructive advice and responsible monitoring of executive behavior.
The Power of Suggestion
Title: How Environmental Cues Influence Product Evaluation and Choice
Authors: Jonah Berger (bergerj@wharton.upenn.edu) and Grainne Fitzsimons (grainne@uwaterloo.ca)
Available Online: Click here.
On July 4, 1997, NASA landed the Pathfinder spacecraft on the surface of Mars, a mission that generated huge media interest worldwide in the ensuing months. This period was also marked by an unexpected surge in sales of Mars Bars, a chocolate candy made by Mars Inc. — a curious example of a phenomenon called “priming,” according to this report. To explore the effect of priming on consumer behavior, the authors conducted a series of six surveys in stores, at universities, and in the laboratory, among other places. The results showed that consumers exposed to environmental cues — news stories about Mars, for example — are more likely to notice related products and brands. In one case, the authors asked 144 supermarket customers to list the brands of chocolate candies and soda that first came to mind. Customers mentioned items with orange packaging, such as Reese’s Peanut Butter Cups and Sunkist orange soda, more often on the day immediately preceding Halloween than one week after Halloween.
