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How do we know if managers are doing their jobs properly?

 

John Nowland

Shareholders and other potential investors have little information about the day-to-day activities and performance of top executives. So, how do we know if corporate managers are doing their jobs properly and maximizing company performance?

Prior research has looked at the personal use of corporate jets and the number of days playing golf as indicators of shirking behavior. 

In this research, we use publicly available data on the frequency of top management team meetings as a measure of the behavior of company managers. We examine two hypotheses. More meetings may indicate more effective effort by management teams to enhance company performance. Alternatively, more meetings may be a waste of time and resources.

We find that top management team meetings are positively related to firm performance. This is consistent with a higher number of management team meetings reflecting effective effort by management to enhance company performance.

For shareholders and policymakers, we highlight a new indicator of management effort that can be seen and used by shareholders. Companies are generally reluctant to release any internal information about the performance of their executives, so being able to find a disclosed measure of the activity of top management teams that is positively linked to firm performance is beneficial to shareholders.

In summary, this study highlights top management team meetings as a valid signal of management effort and suggests there should be louder calls for disclosure of these types of executive performance metrics. Otherwise, how do we know if managers are doing their jobs properly?

Top Management Team Meetings and Firm PerformanceAccounting Research Journal, 2021, 33(6), 691-708, I. Harymawan, M. Nasih, J. Nowland.


John Nowland is a Professor in the Department of Accounting. He completed his PhD studies at the University of Queensland in Australia. He has experience working at universities in Australia, Hong Kong and Taiwan. He has also worked in the media, government and banking sectors. His research focuses on corporate governance issues, such as board of director composition and performance. 

John is married with two children, and enjoys playing soccer, cricket and golf.

2021-11-11T07:54:46.433-08:00 2021