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From the battle among shareholders over the separation of powers at ExxonMobil; to the scrutiny being cast on Société Générale in the wake of its 4.9 billion euro fraud at the hands of one of its young traders; to the first bribery trials implicating the management of Siemens: It would appear that the wave of regulations and codes implemented following the business scandals of five years ago has not completely done away with defective corporate governance. As IESE Dean Jordi Canals explains in his book, it's not enough to simply bolster the legal, financial and regulatory measures governing a company's administration; there must be a commensurate commitment to establishing an integrated vision of corporate governance that considers the entire set of policies, systems, institutions, criteria and processes for decision making at the company, allowing it to develop in the long term. There must also be a global standard, as suggested in another of the documents featured in this month's IESE Insight, which looks at the governance codes of the United States, Germany, Italy, Spain and the United Kingdom. Both works put forward a common idea: the company, in addition to being a financial agent, has greater responsibilities to society and other stakeholders beyond its own employees and shareholders. Prof. Pascual Berrone uses this idea to propose a "logical" model of executive compensation. There are other ways for a company to demonstrate its long-term commitment: by including customer value forecasts in its financial statements; opting for quality content in the case of the media; or creating new markets at the base of the pyramid by capitalizing on new technologies such as cell phones. Read about all these examples in this edition of IESE Insight.
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Corporate Governance |
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10 Good Governance Practices to Keep the Company on Track |
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| Jordi Canals |
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Corporate scandals in the United States and Europe - caused by breaches of trust and the irresponsible behavior of certain executives - have led governments, shareholders, top-level executives and public opinion to a unanimous conclusion: there is a need for better corporate-governance systems. But how does that get achieved? In his book En busca del equilibrio (In Search of Balance), Jordi Canals, dean of IESE, offers an integrated vision of corporate governance that strikes a balance between board supervision and the drives of upper management. 
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Accounting and Control |
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How To Determine Logical Executive Compensation? |
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| Pascual Berrone, Jordan Otten, Luis R. Gómez-Mejía |
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| Who, what, where and why? These are all questions that arise from the complex subject of executive compensation, and the individual questions do not exist in a vacuum. Rather, each element that determines executive compensation, such as the type of company and the country where it is located, affects every other element involved. The "gold standard" of executive compensation for many years has been the alignment of pay with shareholder value; however, researchers are beginning to conclude that shareholder value should perhaps not be the be-all and end-all of executive compensation schemes. But with so many competing factors, how should executive compensation be determined? Authors Pascual Berrone, Jordan Otten and Luis R. Gómez-Mejía provide a global perspective on executive compensation and propose possible changes to the dominant view.
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Organizations and People |
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What Public-Private Partnerships and HR Can Do To Help Labor Flexicurity |
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| José Ramón Pin, Ángela Gallifa, Alfonso Arellano, Florentino Felgueroso, Pablo Vázquez, Enrique González |
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| The public and private sectors now routinely collaborate in areas such as health care and public transport. But is there scope in the labor market for a joined-up government and business approach? IESE's International Research Center on Organizations (IRCO) and the Foundation for Applied Economic Research (FEDEA) examined PPPs at work around the world and concluded they do have a beneficial role to play in the labor market. The paper, "Public-Private Partnerships in Labor Markets," distills common factors for success and sets out how HR should deal with the emerging era of "flexicurity."
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Knowledge and Information |
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The Marathon for Media Quality |
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| Alfonso Sánchez -Tabernero |
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| Can the media boost the quality of their offerings without going against market logic? In view of the superficiality the media have resorted to in recent years, the answer would seem to be no. Nonetheless, Alfonso Sánchez-Tabernero, a professor at the University of Navarra, challenges this defeatist attitude. In the CIEC book, Los contenidos de los medios de comunicación. Calidad, rentabilidad y competencia (Media Content: Quality, Profitability and Competition), he argues that, in the competitive media environment, success lies in offering high-end products, so as to create a barrier that prevents the entry of new rivals. Like long-distance runners, the media should be aware that success requires perseverance, steadiness and a long-term strategy.
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Economics |
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Shock Absorbers: Exchange Rates and E.U. Prices |
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| José Manuel Campa, José González-Minguez, María Sebastiá Barriel |
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| Roller-coaster exchange rates have riveted the world. As the dollar struggles to fend off new lows, people the world over find themselves wondering what it means for them and the price of the products they buy or manufacture. This paper focuses on the form in which domestic prices of imported products in the European Union adjust to exchange rates. The authors José Manuel Campa, José M. González Minguez and María Sebastiá Barriel point to a more than proportional adjustment towards long-run equilibrium in manufacturing industries.
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Marketing |
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Financial Reporting Should Include Customer Equity |
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| Thorsten Wiesel, Bernd Skiera, Julián Villanueva |
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| The basic financial statements - P&Ls and balance sheets - are not enough to help investors clearly understand a company's capability to generate value. The paper "Customer Equity: An Integral Part of Financial Reporting" recommends that companies start reporting "forward-looking customer metrics" by providing the value of their customer base and how it changes over time. This is especially important for companies whose customers are their main assets. As an example of why this is important and how it works, authors Thorsten Wiesel, Bernd Skiera and Julián Villanueva apply their model to the online movie rental service Netflix.
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Corporate Governance |
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Corporate Governance Across Continents |
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| Przemyslaw Koblut, Josep Tàpies, Rafael Fraguas |
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| An unprecedented spate of corporate scandals marked the start of this millennium, but the upside was that it spawned new corporate governance codes in many countries and organizations. In their paper "Review of Selected Generally Accepted Corporate Governance Codes," Przemyslaw Koblut, Josep Tàpies and Rafael Fraguas look at the essential ingredients of the approaches taken in Germany, Italy, Spain, the United Kingdom and the United States. They compare the four European countries on various important aspects of corporate governance, including the mission and functions of boards of directors and how board members should be evaluated and remunerated.
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Service and Operations Management |
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Harnessing the Power of Strategic Trading |
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| Víctor Martínez de Albéniz, Josep María Vendrell Simón |
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| Commodity traders are often limited in the quantity of product they can buy/sell in a market. In addition, the volume of product they move can have an effect in market prices. In "A Capacitated Commodity Trading Model with Market Power," IESE's Victor Martínez de Albéniz and Josep Maria Vendrell Simón take into account these facts and propose an optimal trading policy for traders in commodity markets who want to maximize their profits.
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Finance |
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Cell Phones Calling for Bank Development |
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| Francesc Prior, Javier Santomá |
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| In the Philippines, people spend more on cell-phone calls than food. Every day, the country's operators process two billion text messages, an average of 15 per person. This is possible thanks to the country's powerful cell-phone infrastructure. Philippine banks, on the other hand, are not so prolific: for every 10 cell phones, there's only one credit card. Continuing their study of how developing countries could embrace banking services on a broad scale, Francesc Prior and Javier Santomá of IESE turn their attention to the Philippines. Better mobile banking there, they say, could improve the standard of living for millions of people.
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Marketing |
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Atlético de Madrid: How to Get Out of a Slump |
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| Ignacio Urrutia, Carlos Martí, Adrián Segovia |
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| The Atlético de Madrid soccer team, one of the favorites to win Spain's 1st Division in 1999-2000, finished the season getting bumped down to 2nd Division. Spain's No. 3 club - in terms of history, followers and titles - dropped in category for the first time ever, and just three years before its centennial celebration. How should one of the league's powerhouses react to such a blow, and deal with its dues-paying members and supporters? More importantly, what if the situation dragged on for more than a year? IESE Prof. Ignacio Urrutia and research assistants Carlos Martí and Adrián Segovia take a closer look at what happened to Atlético de Madrid in their "Diario de sus dos añitos en el Infierno" ("Diary of Two Years in Hell").
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