John Byrd, Elizabeth S Cooperman
Journal of Sustainable Finance & Investment,Vol. 8, Issue 2, Pages: 185-202.
To avoid catastrophic climate change risk, the case for fossil fuel reserves not being burned has become stronger. This is particularly the case for coal, as the highest emitter of CO2 per unit of energy, with large portions of coal reserves likely to become stranded assets, posing significant risk to investors. Technology in the past has come to the rescue, so investor valuations may depend on perceptions for the success of technology in reducing stranded asset risk. We examine whether coal company shareholders perceive coal as a technologically stranded asset by studying shareholder reactions to news about CCS (carbon capture and sequestration) technology breakthroughs and setbacks. We find significant positive reactions to CCS breakthroughs, but no reaction for setbacks. This suggests investors have embedded expectations of stranded asset risk into their valuations, but also recognize the significance of
John Byrd, Elizabeth S Cooperman
International Review of Accounting, Banking and Finance,Vol. 9, Issue 1, Pages: 59-78.
Environmental shareholder activists engage in corporate governance activities including divestment campaigns and shareholder resolutions to get companies to change harmful practices. During 2011 to 2015, activists engaged in both activities to compel major fossil fuel companies to acknowledge unburnable reserves (ie, stranded assets) with their burning associated with rising global temperatures and catastrophic climate change. We examine stock market reactions to key news events for activist activities during 2011 to 2015.
John Byrd, Elizabeth Cooperman
Journal of Environmental Investing,Vol. 6, Issue 1, Pages: 75-88.
Hickman, Leila; Byrd, John; Hickman, Kent
Journal of Corporate Citizenship, Volume 2014, Number 55
In his well-known essay, Milton Friedman (1970) argued that it is the social responsibility of business to maximize profit. While such laissez-faire reasoning theoretically considers the welfare of all the stakeholders in the business enterprise through market pricing mechanisms, there is a growing and pressing concern with market failures. Among these failures are externalities, issues of inter-generational equity and short-termism, the commons problem, and decision making biases. The ramifications of these market imperfections have manifested themselves in climate change, financial crises, and deforestation, among other global challenges. Some businesses have responded by refocusing their mission away from solely profit maximisation to broader, more sustainable goals. In this paper, we explore the factors that contribute to businesses adopting one such innovation, the B-Corporation designation.
John Byrd, Elizabeth S Cooperman
Journal of Sustainable Finance & Investment, Volume 4 Issue 3, July 2014, Pages 230-248
Social and environmental shareholder activists engage in a form of corporate social governance by submitting proxy resolutions for a specific change in corporate behavior deemed to be harmful to society. Using a unique data-set for environmental health shareholder resolutions filed by shareholder activists at 70 different companies during 2006–2011, we examine the success rate of resolutions and characteristics affecting the “vote vs. negotiated withdrawal” decision. Supporting a self-interest hypothesis, resolutions …
John Byrd, Elizabeth S Cooperman
Journal of Sustainable Finance & Investment,Vol. 4, Issue 3, Pages: 230-248.
Social and environmental shareholder activists engage in a form of corporate social governance by submitting proxy resolutions for a specific change in corporate behavior deemed to be harmful to society. Using a unique data-set for environmental health shareholder resolutions filed by shareholder activists at 70 different companies during 2006-2011, we examine the success rate of resolutions and characteristics affecting the “vote vs. negotiated withdrawal” decision. Supporting a self-interest hypothesis, resolutions …
John Byrd, Elizabeth S Cooperman, Ken Bettenhausen
Interdisciplinary Environmental Review, Volume 15 Issue 4, January 2014, Pages 271-289
This paper examines attributes affecting a corporation’s choice of an intensity-only (carbon emissions relative to sales, production, etc.) versus an absolute carbon dioxide (CO 2) emissions goal. We investigate alternative hypotheses for this choice including: 1) a high growth hypothesis whereby high growth companies select an intensity goal, to continue to grow without an absolute emission reduction; 2) a high emissions industrial sector hypothesis where firms in high CO 2 emission industries prefer an intensity goal that is …
John W Byrd, Ken Bettenhausen, Elizabeth S Cooperman
International Review of Accounting, Banking, and Finance, Volume 5 Issue 3/4, Fall/Winter 2013, pp. 87-104.
Corporate sustainability activities are often ad hoc; that is, the extent to which a company moves toward being more sustainable is based on organizational feasibility or economic acceptance rather than true sustainability criteria. This paper examines corporate climate and carbon policy through the lens of context-based sustainability (CBS). CBS argues that true sustainable efforts must consider the ecological capacity of the environment and the fair allocation of this capacity. Only by doing so will the result be an outcome of a livable and sustainable world. The paper combines aspects of physical science (atmospheric CO2 carrying capacity) and philosophy (inter-generational equity and resource allocation) with corporate policy. When applied to climate change this implies examining corporate efforts relative to climate stabilization paths and further examining what a fair allocation of future emissions would be. We look at the documented carbon reductions for a sample of large US corporations including EPA Climate Leadership Award Winners in 2012 and a larger sample of companies from the same industries and compare their carbon reductions to several allocations of the global carbon budget required to limit climate change to just 1°C or 2°C. We find that the emissions path of these US corporations only satisfies the most generous, business-as-usual allocation of carbon emissions.
Byrd, John and Cooperman, Elizabeth
International Review of Accounting, Banking & Finance, Volume 4 Issue 2, pp. 100-126
This study examines the effect of shareholder proxy proposals on climate change issues, using a sample of climate change resolutions submitted to U.S. corporations during 2007 to 2009. We test the hypothesis that shareholder climate-change proposals are effective in getting firms to engage in future actions. We examine differences in future actions based on company responses including: (1) SEC exclusion; (2) negotiation and withdrawal; and (3) proxy proposals voted on, and the percentage of vote received on proposal measures. We find evidence of future actions taken for climate change in response to resolutions, although actions can be relatively minor compared to proposal requests. Future actions occur more often for proposals with negotiated withdrawals. For proposals taken to vote, action occurs more often with a shareholder vote of 20 percent or higher. Extractive industry firms are also shown to be more reluctant to engage in climate change actions versus firms in non-extractive industries.
John Byrd, Donald R. Fraser, D. Scott Lee, and Semih Tartaroglu
Journal of Banking & Finance, Volume 36, Issue 4, pp. 957–967
We employ a natural experiment from the 1980s, predating the ubiquitous clamor for independence influenced corporate governance structures, to examine which governance mechanisms are associated with firm survival and failure. We find that thrifts were more likely to survive the thrift crisis when their CEO also chaired the firm’s board of directors. On average, chair-holding CEOs undertook less aggressive lending policies than their counterparts who did not chair their boards. Consequently, taxpayer interests were protected by thrifts that bestowed both leadership posts to one person. This is an important policy issue, because taxpayers become the residual claimants for depository institutions that fail as a result of managers adopting risky strategies to exploit underpriced deposit insurance. Our findings corroborate recent evidence that manager-dominated firms resist shareholder pressure to adopt riskier investment strategies to exploit underpriced deposit insurance.
Kenneth Bettenhausen, John Byrd, and Elizabeth S. Cooperman
International Review of Accounting, Banking and Finance, Volume 2, Issue 3, pp. 28~45
This paper examines the stock price response to the announcement that a U.S. company has been named to the Toxic 100 list of the largest air polluters, where rankings are based on data from the Environmental Protection Agency’s (EPA) Risk Screening Environmental Indicator (RSEI) project. We find a significant negative average abnormal return (AR) of – 1.20% in 2006 and – 1.60 % in 2008 over the two – day announcement periods for the Toxic 100 announcements, representing an average drop in market value for the average firm in the index of – $235,944,909 in 2006 and – $237,595,885 in 2008. Firms in the top 10 ranking of the index had a significantly, larger negative abnormal return than in the bottom 10 ranking. Firms that were not on the 2006 index, but were added to the 2008 index experienced an average abnormal return of -3.5%. The results are interesting for two reasons. One, they show that investors impound environmental risk into their company valuations, implying that environmental disclosure and reporting is important. Two, the results suggest that although analysts had the RSEI data prior to the release of the Toxic 100 lists, they view the Toxic 100 as a significant event. This suggests limits to the semi-strong form of market efficiency, suggesting that the anticipated payoff from computing their own environmental risk assessment may not justify their time and effort required to do so.
John W. Byrd
International Review of Accounting, Banking and Finance, Volume 2, pp. 23-50
Jensen (1986) posits that costly conflicts of interest between managers and shareholders are especially pronounced in companies with substantial amounts of free cash flow. Jensen argues that, all else equal, firms that finance assets with debt will be less prone to this agency problem of overinvestment than other firms. Picchi (1985) and McConnell and Muscarella (1986) provide evidence that investment opportunities in exploration and development were quite limited during the early 1980s. During the same period, cash flows to petroleum producers were large because of high crude oil prices. This research uses data from 1979-1985 for a sample of U.S. oil and gas production and exploration companies to test Jensen’s free cash flow theory. Our evidence indicates that estimated agency costs are inversely related to financial leverage, consistent with the control effects of debt. These results persist across a variety of model specifications and data aggregation methods.
John Byrd, Elizabeth S. Cooperman, Glenn A. Wolfe|
Managerial Finance, Vol. 36 Issue 2, pp. 86 – 102
Purpose – The purpose of this paper is to examine how board tenure affects the compensation of CEOs using a sample of 93 publicly traded US banks.
Design/methodology/approach – The paper proposes a CEO allegiance hypothesis whereby long-term relationships with executives and other directors will shift allegiance from shareholders to executives vs a more traditional expertise hypothesis that predicts superior monitoring of executives by directors with longer tenure. A generalized least squares regression methodology is used to examine the relationship between CEO compensation and outside director tenure.
Findings – For the full sample, board tenure variables were found to be insignificant. However, when examining a subsample of firms with CEO tenure of greater than six years or more, the relationship between CEO pay and the median tenure of outside directors becomes positive, supporting a CEO allegiance hypothesis.
Research limitations/implications – On a caveat, since this study relies on data for large bank holding companies over a short period of time, further research is needed to determine if the results carry over to a broader sample of firms and across time.
Practical implications – The results suggest that the independence of outside directors may be compromised when they serve for longer tenure periods together with the same CEO; an important consideration for better corporate governance.
Originality/value – The study provides a unique examination of outside director independence from the perspective of board tenure and the long-term relationships with executives and other directors that may result in allegiance shifts away from shareholders and towards managers.
John Byrd, L. Ann Martin, and Subhrendu Rath
International Journal of Managerial Finance, Volume 6 Issue 1, pp. 48-57
Purpose – The purpose of this paper is to examine the impact of high‐level‐executives joining the Board of another US company on the shareholder wealth of the firms in which these executives work.
Design/methodology/approach – The “event‐study” methodology is used first to estimate the shareholder effects and then, through multivariate regression analysis, establish a relationship of these effects with executive characteristics.
Findings – The paper documents that the abnormal return becomes more positive the closer the executive is to retirement and more negative as the number of other corporate Boards the executive already sits on increases. Unlike previous research, it is not found that prior performance of the employing company helps explain the cross‐sectional variation in the announcement day abnormal returns.
Research limitations/implications – The result supports the concerns of shareholder activists that key executives joining the Boards of other companies do their home shareholders a disservice by being spread too thin. It supports the hypothesis that investors interpret a CEO joining the Board of another firm as value decreasing.
Originality/value -The paper provides a link between managerial labor and shareholder wealth. Important and high‐level‐executives, while attempting to enhance their own personal benefits by joining other Boards, can destroy shareholder value of the company for which they work.