Accounting & Management

- November–December 2024
- Article
How Robust Is Your Climate Governance?

By: Lynn S. Paine and Suraj Srinivasan

During the past few years, as evidence of climate change and its effects has mounted, many corporate boards have added climate governance to their agendas. But the maturity of boards’ climate-oversight processes and activities varies widely. To better understand how climate issues are being handled in the boardroom and to determine what good climate governance looks like in practice, the authors interviewed 20 directors who hold leadership positions on the boards of S&P 500 companies. Drawing from those interviews and other research, they identify eight hallmarks of meaningful climate oversight. For example, “the board is knowledgeable about the company’s climate profile,” “the board has the expertise needed for effective climate oversight,” and “the board can articulate the company’s climate positioning and strategy.” The authors also offer their perspective on the set of issues associated with each hallmark that corporate leaders must grapple with as they decide how to incorporate climate issues into their company’s governance. Climate concerns are here to stay, and climate governance will increasingly be seen as a core element of good governance.
- November–December 2024
- Article
How Robust Is Your Climate Governance?

By: Lynn S. Paine and Suraj Srinivasan

During the past few years, as evidence of climate change and its effects has mounted, many corporate boards have added climate governance to their agendas. But the maturity of boards’ climate-oversight processes and activities varies widely. To better understand how climate issues are being handled in the boardroom and to determine what good...
- December 2024
- Article
Proxy Advisory Firms and Corporate Shareholder Engagement

By: Aiyesha Dey, Austin Starkweather and Joshua White

We study how Institutional Shareholder Services (ISS) affect firms’ engagement with shareholders. Our analyses exploit a quasi-natural experiment using say-on-pay voting outcomes near a threshold that triggers ISS to review engagement activities. Firms receiving ISS treatment exhibit swift and substantive increases in extensive and intensive margins of engagement, especially when their boards have higher agency conflicts and directors are more likely to lose voting support from ISS. Increases in engagement persist over time, and shareholders appear to value the increased engagement. Collectively, we shed light on an unexplored channel through which ISS positively influences firms’ governance and information environments.
- December 2024
- Article
Proxy Advisory Firms and Corporate Shareholder Engagement

By: Aiyesha Dey, Austin Starkweather and Joshua White

We study how Institutional Shareholder Services (ISS) affect firms’ engagement with shareholders. Our analyses exploit a quasi-natural experiment using say-on-pay voting outcomes near a threshold that triggers ISS to review engagement activities. Firms receiving ISS treatment exhibit swift and substantive increases in extensive and intensive...
- December 2024
- Article
Human Bias in the Oversight of Firms: Evidence from Workplace Safety Violations

By: Jonas Heese, Gerardo Pérez Cavazos and Andreya Pérez Silva

We study the effects of mood as a source of human bias on regulators’ oversight and enforcement decisions. We use weather at facilities at the time of an OSHA inspection to proxy for the OSHA compliance officers’ mood. We find that during periods of good mood due to sunny weather, the number of workplace safety violations and dollar penalties assessed by the officer decrease. These effects are more pronounced when OSHA officers have more discretion. In turn, the effect of mood on oversight and enforcement decisions can be mitigated by increased monitoring by the regional OSHA office. Furthermore, our results suggest that there is a slightly higher incidence of workplace accidents after “good mood” inspections. Overall, our findings show that regulators’ mood results in bias in the oversight of firms.
- December 2024
- Article
Human Bias in the Oversight of Firms: Evidence from Workplace Safety Violations

By: Jonas Heese, Gerardo Pérez Cavazos and Andreya Pérez Silva

We study the effects of mood as a source of human bias on regulators’ oversight and enforcement decisions. We use weather at facilities at the time of an OSHA inspection to proxy for the OSHA compliance officers’ mood. We find that during periods of good mood due to sunny weather, the number of workplace safety violations and dollar penalties...

About the Unit

The Accounting & Management unit at Harvard Business School strives to be the worldwide leader in research, course development, and teaching on top managements' use of performance measurement systems to:

Communicate with external investors to ensure that their firms' securities are fairly priced and that they are able to access capital,
Measure and evaluate their firms' economic performance,
Improve resource allocation and strategy implementation within their firms, and
Build accountability for performance through effective external and internal governance.

Unit research, course development, and teaching fall into two broad areas: Financial Reporting and Analysis and Management Accounting. Our research helps scholars and educators understand current best practices for the design and use of performance measurement systems that help managers to build more effective, value-creating organizations. Our teaching materials enable us to bring the results of this research into the classroom, and to practice.

Recent Publications

How Robust Is Your Climate Governance?

By: Lynn S. Paine and Suraj Srinivasan

November–December 2024 |
Article |
Harvard Business Review

During the past few years, as evidence of climate change and its effects has mounted, many corporate boards have added climate governance to their agendas. But the maturity of boards’ climate-oversight processes and activities varies widely. To better understand how climate issues are being handled in the boardroom and to determine what good climate governance looks like in practice, the authors interviewed 20 directors who hold leadership positions on the boards of S&P 500 companies. Drawing from those interviews and other research, they identify eight hallmarks of meaningful climate oversight. For example, “the board is knowledgeable about the company’s climate profile,” “the board has the expertise needed for effective climate oversight,” and “the board can articulate the company’s climate positioning and strategy.” The authors also offer their perspective on the set of issues associated with each hallmark that corporate leaders must grapple with as they decide how to incorporate climate issues into their company’s governance. Climate concerns are here to stay, and climate governance will increasingly be seen as a core element of good governance.

Keywords: Corporate Governance; Climate Change; Corporate Social Responsibility and Impact; Governing and Advisory Boards

Citation

Find at Harvard

Proxy Advisory Firms and Corporate Shareholder Engagement

By: Aiyesha Dey, Austin Starkweather and Joshua White

December 2024 |
Article |
Review of Financial Studies

We study how Institutional Shareholder Services (ISS) affect firms’ engagement with shareholders. Our analyses exploit a quasi-natural experiment using say-on-pay voting outcomes near a threshold that triggers ISS to review engagement activities. Firms receiving ISS treatment exhibit swift and substantive increases in extensive and intensive margins of engagement, especially when their boards have higher agency conflicts and directors are more likely to lose voting support from ISS. Increases in engagement persist over time, and shareholders appear to value the increased engagement. Collectively, we shed light on an unexplored channel through which ISS positively influences firms’ governance and information environments.

Keywords: Business and Shareholder Relations; Governing and Advisory Boards; Policy; Voting

Citation

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Human Bias in the Oversight of Firms: Evidence from Workplace Safety Violations

By: Jonas Heese, Gerardo Pérez Cavazos and Andreya Pérez Silva

December 2024 |
Article |
Review of Accounting Studies

We study the effects of mood as a source of human bias on regulators’ oversight and enforcement decisions. We use weather at facilities at the time of an OSHA inspection to proxy for the OSHA compliance officers’ mood. We find that during periods of good mood due to sunny weather, the number of workplace safety violations and dollar penalties assessed by the officer decrease. These effects are more pronounced when OSHA officers have more discretion. In turn, the effect of mood on oversight and enforcement decisions can be mitigated by increased monitoring by the regional OSHA office. Furthermore, our results suggest that there is a slightly higher incidence of workplace accidents after “good mood” inspections. Overall, our findings show that regulators’ mood results in bias in the oversight of firms.

Keywords: Prejudice and Bias; Governing Rules, Regulations, and Reforms; Happiness; Working Conditions; Safety

Meghna Modi at Revlon India: Leading With a Bold Purpose

By: Aiyesha Dey, Sarah Mehta and Sarah Sasso

November 2024 |
Case |
Faculty Research

This case is about Meghna Modi, the head of struggling cosmetics company Revlon India, as she tries to both turn the company around and implement her personal purpose at work. Influenced by her own life struggles, Modi feels compelled to empower her frontline employees, most of whom are women, to break free of the societal constraints they face and pursue their goals. But with Revlon India on the brink of bankruptcy, is the time right for Modi to prioritize her personal purpose?

Keywords: Leadership; Management; Performance; Personal Development and Career; Beauty and Cosmetics Industry; Asia; India; Delhi

Citation

Educators

Climate Solutions, Transition Risk, and Stock Returns

By: Shirley Lu, Edward J. Riedl, Simon Xu and George Serafeim

2024 |
Working Paper |
Faculty Research

Using large language models to measure firms' climate solution products and services, we find that high-climate solution firms exhibit lower stock returns and higher market valuation multiples. Their stock prices respond positively to events signaling increased demand for climate solutions. These firms also show higher future profitability during periods of regulatory uncertainty, unexpected increases in climate concerns, and when a larger share of their sales occurs in states with climate plans and stronger public support for addressing climate change. Overall, our results indicate that high-climate solution firms, whose business benefits as climate transition risks materialize, hedge investors against such risks.

Keywords: Technology; Generative Ai; Large Language Models; Climate Finance; Climate Change; Innovation and Invention; Environmental Sustainability; AI and Machine Learning; Investment; Financial Markets

Citation

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BWX Technologies - Student Version

By: Suraj Srinivasan and Yuan Zou

November 2024 |
Supplement |
Faculty Research

Citation

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BWX Technologies - Instructor Version

By: Suraj Srinivasan and Yuan Zou

November 2024 |
Supplement |
Faculty Research

Citation

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Catalysts for Climate Solutions: Corporate Responses to Venture Capital Financing of Climate-tech Startups

By: Shirley Lu, George Serafeim and Simon Xu

2024 |
Working Paper |
Faculty Research

We study whether incumbent firms increase their product focus on climate solutions in response to venture capital (VC) financing of climate-tech startups. Using large language models to measure a firm's focus on climate solutions, we find that incumbents in similar product markets as VC-backed startups increase their product focus on climate solutions. Consistent with VC investment serving as a signal for future demand and commercial potential of climate solutions, the increase is more pronounced when the VC investment demonstrates more promising financial prospects and has higher visibility. Additionally, incumbents with a pre-existing focus on climate solutions are more likely to respond, and their stock prices respond positively in anticipation of future benefits from the commercial potential of climate solutions. Overall, the results suggest that VC financing of climate-tech startups serves as a signal of the commercial viability for climate technologies, thereby catalyzing incumbents' investments in climate solutions.

Keywords: Climate Finance; Climate Change; Technological Innovation; Entrepreneurship; Venture Capital; Private Equity; Environmental Sustainability; Business Startups

Citation

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