amsterdam in science, business and society

68 Pages·2015·3.51 MB·English

AMSTERDAM
IN SCIENCE,
BUSINESS
AND SOCIETY
CORPORATE SOCIAL RESPONSIBILITY
MANAGERS AS INTERNAL ACTIVISTS
FOR ETHICS AND SUSTAINABILITY
THE EFFECT OF MANDATORY AUDIT
FIRM ROTATION AND TENDERING
ON INVESTMENT DECISIONS:
THE IMPORTANCE OF CORPORATE
GOVERNANCE
BUSINESS ANALYTICS AND BIG DATA:
OPPORTUNITIES FOR VU UNIVERSITY
AMSTERDAM?

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1
BUSINESS
ABRI
IN SOCIETY Amsterdam
Business Research Institute
27 INSIGHTS
28 ACCOUNTING
Improving outsourcing negotiations
CONSULTING
5 INTRODUCTION 30 The procurement
Svetlana Khapova and Niki Konijn of professional
services: How do
30
6SUSTAINABLE GOVERNANCE accountancy firms
6 Don’t let the ball drop: Outside CEOs survive tendering
and earnings management processes?
8 Corporate Social Responsibility managers as
internal activists for ethics and sustainability 33 Uncertainty
12 The effect of mandatory audit firm rotation in the
and tendering on investment decisions: consultant-client
The importance of corporate governance relation:
14 Governance as a lever for business model What jokes
innovation in the performing arts can reveal to us
16 Loosening the chains: Unlearning obsolete
business elements
18 INDIVIDUALS
Presenting ABRI researchers /
20 New appointments
36
FINANCIAL MANAGEMENT
PAGE
2 The economic function of Standard&Poor’s
and Moody’s is primarily certification
38
21 HUMAN RESOURCE MANAGEMENT
Well begun is half done: The role of career
competencies in young employees’ well-being,
performance and career development
BIG DATA: A BUSINESS-ACADEMIA DEBATE
21 Datafication of human capital: What every business leader should know
before translating people into numbers
24 Business Analytics and Big Data: Opportunities for VU University Amsterdam?
COLO EDITORIAL STAFF CONTACT [email protected] CONCEPT, DESIGN AND LAYOUT
Svetlana Khapova ABRI-Amsterdam Business Research Institute www.abri.vu.nl Room for ID’s, Nieuwegein
PHON Niki Konijn De Boelelaan 1105, 1081 HV Amsterdam
020-598 5667
INSIGHTS
40
INFORMATION
ACCOUNTING & INNOVATION MANAGEMENT
Improving outsourcing negotiations New ways of working and
human capital development
Innovation processes in small firms:
Combining entrepreneurial
effectuation and managerial 52
causation
44
LOGISTICS
E-commerce logistics:
New ways to create
customer value
MASTERING
LEADERSHIP
46 50 How evolutionary
MARKETING sciences can
Citizens of the help guide
(green) world? organizational change
Cosmopolitan 52 Marketing leadership:
orientation Bridging theory and practice
and sustainability in a joint initiative
54 Leadership in project-based
organizations: New insights
and remaining questions
58 INTRODUCING ABRI RESEARCH CENTERS
58 Servant-leadership: Unlocking
human potential in (e-) organizations
60 Improving business results with
positive reinforcement by ADRIBA
HUMAN RESOURCE MANAGEMENT
Well begun is half done: The role of career 48 STRATEGY 62 A NEW PROGRAMME
competencies in young employees’ well-being, The new logic of doing business: Have you ever Research Master’s Business in Society
performance and career development asked what your customer can do for you?
63RESEARCH GRANTS
49BOOK REVIEW
THE MANAGEMENT IDEA FACTORY
66
PHD DISSERTATIONS
50
MANAGEMENT BOOKS
GET TOGETHER IN SCIENCE,
67 BUSINESS AND SOCIETY
Events
CONCEPT, DESIGN AND LAYOUT PHOTOGRAPY PRINT
Room for ID’s, Nieuwegein ABRI, Amsterdam NPN drukkers, Breda
Shutterstock
ABRI - Amsterdam Business Research Institute
AMSTERDAM
IN SCIENCE,
BUSINESS
AND SOCIETY
For more information visit
www.abri.vu.nl
Next application deadline
(January 2016 start)
10 December 2015
PART-TIME PhD IN BUSINESS
THE ULTIMATE DEGREE
FOR BUSINESS LEADERS

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4
Join us to attain the highest level of professional development
and to generate business innovations that will move your
organization and your career forward.
Embrace a stimulating scientific environment, and
learn to leverage your expertise and extant scholarly
knowledge to make original contributions at the
frontiers of business and management practice.
ABRI
Amsterdam
Business Research Institute
introduction IN SCIENCE,
BUSINESS
AND SOCIETY
BUSINESS
IN SOCIETY
The relationship between business and society is on the corporate agenda.
Companies are increasingly faced with social and environmental issues
surrounding their business activities. Their response to these issues has a
profound impact on how these companies appear in the public eye, and how
their corporate success is being defined. Leading a successful business in the
twenty-first century is therefore as much about competitiveness, growth and
profitability as it is about sustainable governance, ethical leadership and social
PART-TIME PhD IN BUSINESS responsibility.
THE ULTIMATE DEGREE In fact, today’s leading companies, such as Apple, BMW and Philips, are well
known for viewing their interaction with society as an important pillar of their
business strategy, and an integral part of their corporate culture. The example
FOR BUSINESS LEADERS
of these companies signal that a sustainable business community is – and
PAGE
should be - part of society, instead of existing separately from it. 5
Together with the contributors to this journal, we dedicate this issue of Amster-
dam in Science, Business and Society to the theme ‘Business in Society’. The
selected articles featured in this issue offer a multidisciplinary perspective on
this theme. Herewith, we - the Amsterdam Business Research Institute - aim
to promote and facilitate open conversations and exchanges of ideas between
academia and the business world. We also aim to open up possibilities for new
collaborations, and the building of a stronger business community, rooted in
society and propelled by science.
Prof. dr. Svetlana Khapova
Scientific Director
Amsterdam Business Research Institute
Niki Konijn MA
Policy Officer
Amsterdam Business Research Institute
ABRI - Amsterdam Business Research Institute
DON’T LET
DR. YU FLORA KUANG,
VU UNIVERSITY AMSTERDAM
DR. BO QIN,
UNIVERSITY OF AMSTERDAM
PROF. DR. JACCO L. WIELHOUWER,
THE BALLVU UNI VERSITY AMSTERDAM
DROP
OUTSIDE CEOs
AND
EARNINGS MANAGEMENT

PAGE
6 T h e revolving door for top corporate manage- their inside peers. As a result, outside CEOs are less
ment has attracted considerable attention from likely to bear the long-term consequences of their ac-
both popular media and academics. It is gene- tions, because they have usually left the firm for their
rally considered good due diligence to look beyond a next appointment by the time these materialize. We
firm’s borders for CEO candidates, such that virtually would therefore expect firms with new CEOs recruited
every company faced with a CEO vacancy now conducts from outside to report higher income-increasing ac-
an outside search. Accounting scandals such as those cruals during the early years of their tenure than firms
at Worldcom, Enron, Ahold and Parmalat have also with new CEOs promoted from inside the company.
focused attention on the issue of managerial reporting However, we can expect the situation to be different if
of earnings. This study investigates how the origin an outside CEO is able to survive the first few years of
of a CEO, whether internal or external, influences a her or his tenure. Then this leader will have establis-
firm’s accrual-based earnings management and how hed a reputation and proven his or her abilities to the
the effects of CEO origin evolve over a CEO’s tenure. board and the labour market. Inside and outside CEOs
Conventional wisdom suggests that the job security of thus stand an equal chance of facing the long-term
CEOs recruited from outside a company is more closely consequences of their actions. In other words, the
related to firm performance than is the case for CEOs short-term view that is taken by outside CEOs at the
promoted from inside, due to external labour market beginning of their tenure does not persist, but instead
considerations, contract constraints, board pressures, declines as their decision horizon extends beyond
and so forth. Outside CEOs therefore exhibit a stronger the initial years of service. Hence, we hypothesize
desire to demonstrate their superior performance im- that after the first few years of service, discretionary
mediately after taking the helm. Furthermore, outside accruals by outside CEOs will be similar to those by
CEOs tend to remain in office for shorter periods than inside CEOs.
sustainable governance IN SCIENCE,
BUSINESS
AND SOCIETY
WHAT IS ACCRUAL-BASED EARNINGS between inside and outside CEOs, as shown by external hiring decisions, our findings suggest
MANAGEMENT? the converging of the two lines after the fourth that outside CEOs have both an incentive and an
Using discretionary accruals is often consi- year of tenure. opportunity to ‘create’ excellent performance
dered a primary method for firms to manage by staying with a firm for a short period of time
earnings, but what is the idea behind accrual- We derive several key findings from our analy- and relying on earnings management. It should
based earnings management? Bergstresser ses: (1) compared with CEOs that are groomed be the task of a firm’s nomination committee
and Philippon give a vivid example in a paper internally, CEOs airdropped from the outside to examine a candidate’s performance record,
that they published in the Journal of Financial manipulate earnings upward more intensively for instance by investigating the subsequent
Economics in 2006: in the short run; (2) as CEOs’ expectations about performance after the candidate has left his
staying align after a few years, the difference in or her previous employer. Third, a firm’s board
Consider a firm that owns a finite-lived discretionary accruals by internal and outside and audit committee should beware of pos-
goose, laying golden eggs. While cash may CEOs also grows insignificant. We thus find a sible earnings manipulation and short-term
have been used for the initial purchase of the ‘transition’ whereby outside CEOs match inside decision-making by new CEOs, especially in
goose, accrual accounting attempts to match CEOs in their use of discretionary accruals. the case of an external appointment. Earnings
this initial outflow against the future inflows management is often difficult for individual
from this investment. The cost of the goose is PRACTICAL IMPLICATIONS investors to detect due to the complexity of ac-
thus spread over current and future periods… Our study yields several important implications counting rules. Investors should also be aware
A true picture of the firm’s income requires for practice. First, our results emphasize the of new CEOs’ discretion with regard to reporting
an adjustment for the use of the goose, and importance of maintaining financial reporting and, in turn, put less emphasis on bottom-line
thus the difference between cash flows and quality and constraining earnings manipulation. accounting earnings when evaluating a firm’s
earnings reflects the depreciation of the Extending the managerial horizon and decou- performance. Managerial commitment to long-
firm’s asset during the period. And condi- pling the link between short-term accounting term profitability and sustainability should be
tional on cash flow, the firm can reduce or performance and managerial incentives may given more weight in performance evaluation.
increase its reported earnings by assuming a function effectively to de-motivate opportu-
higher or lower rate of deprecation. nistic managerial financial reporting. Second, For further inquiries about the research project,
although the performance record from prior please contact Dr. Yu Flora Kuang,
Other examples of discretionary accruals employment is often considered a key factor in [email protected].
PAGE
include the timing and amounts of extraordi- 7
nary items such as write-offs and provisions for
reorganization, credit losses, inventory values,
and so forth, whereby managers are able to FIGURE 1 // Average Discretionary Accruals over CEO Tenure
determine when and how much of revenues
and expenses to classify on a current income
statement. Such flexibility in accounting choices
creates possibilities for managers to manipu-
late reported earnings.
FINDINGS AND DISCUSSION
Our sample consisted of 5,607 CEO-year
observations (1,341 CEOs) between 1992 and
2008. Figure 1 shows how discretionary ac-
cruals change with CEO tenure in our sample,
after removing the impact of firm-level factors,
industry effects and time trends. We find that on
average, CEOs recruited from outside a com-
pany report higher discretionary accruals at the This figure shows the observed development of discretionary accruals (after excluding other
beginning of their tenure (i.e., ≤ 3 years after elements that affect discretionary accruals) over tenure for outside (bold line) versus inside (normal
appointment). The extent of earnings manage- line) CEOs. The horizontal line represents CEO tenure and the vertical line represents the level of
ment subsequently becomes more comparable de-trended discretionary accruals; 0 represents the year immediately prior to the appointment.
ABRI - Amsterdam Business Research Institute
PAGE
8
sustainable governance IN SCIENCE,
BUSINESS
AND SOCIETY
DR. CHRISTOPHER WICKERT,
VU UNIVERSITY AMSTERDAM
DAVID RISI MSC,
UNIVERSITY OF ST.GALLEN CORPORATE SOCIAL
DR. SHIVA SAYAH,
UNIVERSITY OF DÜSSELDORF
RESPONSIBILITY MANAGERS
AS INTERNAL
ACTIVISTS FOR ETHICS AND
SUSTAINABILITY

PAGE
Corporate Social Responsibility (CSR), a management concept for 9
the systematic integration of social, environmental and ethical
aspects into core business operations in collaboration with
stakeholders, has become central to the corporate world. Nowadays,
few companies can afford not to position themselves with regard to
CSR and communicate their activities to stakeholders. Whilst formal
structures such as codes of conduct, policy documents and certifica-
tion schemes are central for the successful implementation of CSR,
their formal endorsement by company leaders alone often has little to
no effect.

In the worst case scenario, public commitments to CSR without proper
implementation easily lead to accusations of greenwashing or the
symbolic construction of a CSR façade without any substance. CSR
managers play a critical role in avoiding such problems, because they
are responsible for implementing CSR practices internally and sprea-
ding a CSR mindset within companies. Our research shows that CSR
managers have developed a set of creative and informal tactics that
promise to facilitate a more effective implementation of CSR.
ABRI - Amsterdam Business Research Institute
COMPANY LEADERS
KNOW WHAT THEY
SHOULD DO TO MAKE
CSR AN ESSENTIAL
into a company’s daily routines and in their work is to convince other
PART OF THEIR processes successfully and, more employees and decision-makers in
importantly, with the necessary se- their companies about the impor-
BUSINESS riousness, and that it is not easy to tance of CSR. While many leaders
make CSR part of a company’s DNA. and CEOs recognize that CSR is a
CSR managers are therefore indis- ‘must have’, this recognition does
Multinational corporations are con- pensable, because they constantly not always extend to middle mana-
fronted with steadily increasing so- push their colleagues to move from gers and white-collar employees.
cietal demands to incorporate CSR initial strategic commitments to Often motivation or sheer interest
into their strategy, core business concrete operational results. in sustainability topics are lacking,
operations and even their global or people feel overwhelmed by their
supply chains. Many companies have Despite the apparent importance of daily schedules and thus refrain
recognized the complexity of this CSR managers, they have received from launching new CSR projects
task and have hired a CSR manager, surprisingly little attention in (take, for instance, a procurement
or have even created entire CSR empirical research. Understanding manager who needs to include diffe-
departments of ten or more people. what they do is important, because rent CSR standards in his decision-
CSR managers are an emerging it makes it possible to give strategic making that may not be in line
type of professional and usually have advice about how to implement CSR with common financially-oriented
staff positions that are relatively more effectively. objectives). As a whole, the evidence
close to the boardroom. Their job is shows that while commitment from
to manage the strategic planning, In this research project, a collabora- a CEO is essential, successful CSR
PAGE
10 coordination and evaluation of CSR; tion between VU University Amster- implementation by no means au-
in other words, to integrate CSR into dam, the University of St. Gallen in tomatically follows. Rather, it is the
organizational structures and pro- Switzerland and the Heinrich-Heine CSR manager’s job to point people in
cedures. At the same time, they are University in Düsseldorf, Germany, the direction of CSR.
often the most important carriers of we took a closer look at the work
CSR-related knowledge in an orga- of CSR managers. We asked which The responses we gathered in the
nization. CSR managers have thus strategies or tactics CSR managers interviews can be aggregated to five
become key professional agents that use to navigate around tensions tactics that CSR managers tend to
drive the thorough implementation and constraints or even denial of employ. These are not necessarily
of CSR. the importance of CSR among other present to an equal degree in each
employees in the company. We fo- and every company. However, these
Existing research provides many in- cused in particular on the interplay five tactics represent reoccurring
sights into the strategic importance between formal elements such as a patterns that were highlighted by
of CSR, and there are a vast number CSR strategy and informal proces- the majority of the CSR managers to
of best practices available that illus- ses such as subtly encouraging whom we spoke. They emphasized
trate the content of CSR strategies, others to cooperate. For our study, that the systematic application
policies and related management we interviewed 75 CSR managers in of these tactics is an important
frameworks. Company leaders know German and Swiss multinationals in component of successful CSR
what they should do to make CSR the course of 2013. implementation, and allows them
an essential part of their business. to circumvent internal barriers and
It is well known, however, that it Many of the CSR managers we spo- tensions better.
takes a long time to integrate CSR ke to reported that a major difficulty