IRRC Institute Announces Winners of 2016 Investor Research Award
Winning Research Examines Investor Issue of Short-Termism, CEO Pay Misalignment and Value of Proxy Access
The IRRC Institute is pleased to announce that two research papers that have the potential to reshape investor thinking on the detrimental impacts of short-term investing have won the 2016 investor research competition. The winners were announced on December 7, 2016, at the Columbia Law School’s 2016 Millstein Governance Forum, Governance, Leadership and the Future of the Corporation, in New York City. Each winning research team was presented with a $10,000 award.
The winning academic research, “Does a Long-Term Orientation Create Value? Evidence from a Regression Discontinuity,” is co-authored by Caroline Flammer, Assistant Professor of Strategy and Innovation at Boston University, and Pratima (Tima) Bansal, Professor of General Management and Sustainability at the University of Western University (London, Ontario). The research shows that providing long-term incentives to executives ― in the form of long-term executive compensation ― leads to increased long-horizon investments and higher business performance. Download the research here.
The winning practitioner research paper, “The ‘Science’ and ‘Art’ of High Quality Investing” is co-authored by Dan Hanson, partner with Jarislowsky Fraser Global Investment Management and lecturer at UC Berkeley Haas, and Rohan Dhanuka, who previously was with the firm. The research examines the issue of “quality”. It finds that investors with a short-term focus tend to undervalue intangible assets — the kind that don’t show up on corporate balance sheets, such as the payoffs from corporate R&D spending, advertising and patent citations. Alternatively, investors and managers who take a long-term view have an opportunity to identify opportunities missed or underpriced by a world focused on the here and now. Download the research here.
Again this year, the submissions were of such high quality that the judges selected two papers for Honorable Mention recognition. The papers receiving Honorable Mention recognition are:
- Are CEOs Paid for Performance? Evaluating the Effectiveness of Equity Incentives by Ric Marshall and Linda-Eling Lee, both with MSCI. The paper examines whether CEO pay reflects long-term stock performance, and finds that it does not. It finds that companies that awarded CEOs higher pay incentive levels had below-median returns based on a sample of 429 large-cap U.S. companies observed from 2005 to 2015. On a 10-year cumulative basis, total shareholder returns of those companies with total summary pay below their sector median outperformed those companies where pay exceeded the sector median.
- On Enhancing Shareholder Control: A (Dodd-) Frank Assessment of Proxy Access by Stuart L. Gillan with the University of Georgia, and Jonathan B. Cohn and Jay C. Hartzell, both with the University of Texas at Austin. The paper examines a key issue in corporate finance – the optimal division of control between shareholders and management. The research indicates that reforms allowing greater shareholder input via increased proxy access are associated with increases in firm value for those firms in which intervention is needed and where shareholders are more likely to seek board access.
The following panel of respected judges reviewed the submissions and selected the winning papers and honorable mentions:
- Mark Anson, Chief Investment Officer, Commonfund
- Robert Dannhauser, Head of Capital Markets Policy, CFA Institute
- James Hawley, Professor & Director, Elfenworks Center for Fiduciary Capitalism, Saint Mary’s College of California
- Robert Jackson, Jr., Professor of Law and Director, Program on Corporate Law and Policy at Columbia Law School
- Erika Karp, Founder, CEO and Chair of the Board at Cornerstone Capital
- Nell Minow, Governance Expert and Columnist, Huffington Post.
Biographies of the judges are available here.
This research competition has rapidly become a prominent award garnering significant attention amongst the investment community, academia and policymakers. It highlights innovative research focused on the nexus between real world economy activity and investment theory. Previous winning research has been covered by major media outlets including The Wall Street Journal, The New York Times and CNBC.
Winning papers will be published by the IRRCi on its website. IRRCi also will distribute the winning papers to some 6,000 individuals interested in the organization’s research.
1$10,000 is awarded for each winning paper. If there are multiple authors, the award will be divided evenly between each author. Each award recipient is fully responsible for all applicable taxes.