Welcome to the Fall 2015 Research Newsletter of the University of Connecticut School of Business. It has been a busy semester, with our colleagues conducting innovative research in a variety of fields and winning awards along the way.
Business Law
Preventing the Next Global Debt Crisis
Could Aspects of Corporate Financial Strategies Help Prevent Sovereign Default?
Some key strategies from corporate finance could potentially help prevent governments from spiraling into financial collapse and destabilizing the global economy.
That’s the conclusion of UConn Business Law Professor Stephen Park and co-author Tim Samples, a professor at the University of Georgia, in their research article titled, “Towards Sovereign Equity,” which is pending publication in the Stanford Journal of Law, Business and Finance in 2016.Continue Reading
Ukraine’s Quietly Revolutionary Debt Restructuring
Financial Times – Ukraine’s debt restructuring plan, announced last month, is both revolutionary and evolutionary. The agreement to restructure $18bn of privately held government debt stands in stark contrast to Greece’s nearly apocalyptic showdown with the European Union this year and Argentina’s simmering standoff with holdout creditors.
Time to Flex
Giving Workers More Control of Their Time May Be Good for All
Rep-Am.com – When she first began working there 15 years ago, Beekley Corp. in Bristol was a fairly traditional company. “We were of the mind that everybody needed to be here, 9 to 5,” said Maureen O. Gallo, vice president of human assets and operational excellence at the medical supply company. But when the company began asking its employees what it could do to make them perform at their highest level, one fact was clear: They wanted flexibility.
Spring 2015 Research Newsletter
Work-Life Balance
Flexible Work Time Could be Salvation for Families–and an Advantage for Employers–So Why Do Companies, Employees Resist?
The typical two-income American family is stretched to the breaking point with responsibilities, and, for many, flexible work time would be helpful in finding a work-life balance, said Robert Bird, professor of Business Law.
“There are millions of people in our country under intense pressure,” said Bird, who is also the Northeast Utilities Chair in Business Ethics. “They are two-parent, working families taking care of children and/or elderly parents. Inflexible work schedules are making the stress even worse.”Continue Reading
Is it Time to Hire a Chief Legal Strategist?
MIT Sloan Management Review – Could your company use its legal environment to look for strategic opportunities? Consider bringing in a chief legal strategist, recommend Robert C. Bird, associate professor of business law and Northeast Utilities Chair in Business Ethics at the UConn School of Business and David Orozco, an associate professor of legal studies and MBA program director at the Florida State University College of Business.
Faculty Research: A Firm-Driven Approach to Global Governance and Sustainability
American Business Law Journal (forthcoming)
Stephen Park and Gerlinde Berger-Walliser.
The multifaceted role of multinational corporations as quasi-regulators is of growing importance to international business. Corporations increasingly participate in two kinds of international rulemaking: (i) non-binding “soft” law standard setting; and (ii) self-regulation through private rules and standards. Soft law and private regulation often fill governance gaps left by incomplete and/or ineffective governmental regulation. One of the most prominent examples is sustainability rulemaking, in which corporations have become increasingly active due to their growing awareness of the directly-borne costs of environmental degradation and the potential strategic benefits of corporate social responsibility.Continue Reading
How to Navigate the Five Pathways of Corporate Legal Strategy
MIT Sloan Management Review (forthcoming)
Robert Bird. Co-author: David Orozco
CEOs, board members and executives are forced to navigate increased regulation, lawsuits, varying international legal regimes, and the greater prospect of liability due to stiffer legal penalties. Top executives recognize that legal capabilities are a necessary element of long-term corporate success. A Financial Times study found that 24 percent of U.S. companies had lawyer-directors in 2000, and in 2009 that amount notably increased to 43 percent. Corporations generate tangible returns, such as higher stock market valuations, when they employ attorneys who serve as board members, and when top corporate officers have legal knowledge.
Paradoxically, the processes through which corporate legal departments provide competitive advantage remain poorly understood. The law is all too often viewed as a constraint on managerial decisions and is often perceived by executives as a source of costs. This prevailing cost perspective towards the law, while valuable, does not explain how leading companies employ their legal departments to secure long-term competitive advantage for the firm.
Robert Bird and his co-authors explain how viewing the law narrowly as a cost or compliance issue inevitably leads to foregone strategic opportunities, and introduce an actionable framework, the Five Pathways of Corporate Legal Strategy: avoidance, compliance, prevention, value, and transformation. These pathways should enable managers to think about the law strategically and identify value-creating opportunities, thereby creating long-term and sustainable value. Legal rules are not just a checklists to complete, but an opportunity to advance firm goals in a competitive business environment.
The Impact of Local Knowledge on Banking
Journal of Financial Services Research (forthcoming)
Robert Bird. Co-author: John Knopf
Do geographic factors influence the performance and behavior of modern banks? Advances in technology and global information sharing have seemingly made geographic characteristics irrelevant, but a bank with geographic advantages can have a positive impact on bank performance. A key factor influencing the geographic literature is the concept of local knowledge, i.e., information that influences bank decision making but is not readily transmittable beyond a limited geographic boundary. Banks possessing local knowledge can offer products and services to qualified local borrowers that other less informed banks might overlook, including for example a more diverse portfolio of products and services to start-ups and small businesses.
Using a combination of bank performance data, and differences in state laws allowing employers to require and enforce non-compete agreements, Professor Bird and his co-author find that strong not-to-compete laws restricting employee mobility in a state negatively impact the incidence of new bank charters while benefiting incumbent employers. Restrictions on the mobility of local knowledge decrease labor expenses because workers lack the bargaining power of being able to take a job with a local rival. Results indicate that increases in labor restrictions are positively correlated with profitability for established banks. Thus, geographically-specific human capital remains an important differentiating factor that influences bank behavior and competition counter to standard theoretical accounts that might imply otherwise.