Five-in-Five with Ian Gow

Tell us about the centre and why it was established?

The centre was established late last year thanks to $2 million in seed funding from the Vice Chancellor, and led by two directors, Professor Margaret Abernethy and me. We are currently in an initial incubation period, but over time we will support corporate governance research activities across the faculty, run industry-focused workshops and conferences, and publish discussion papers on key issues—the Insight Series. Our aim is to provide an independent, data-driven perspective on issues in corporate governance and regulation.

Corporate governance is clearly a topical issue in Australia. Last week I picked up a daily business newspaper and there were articles about corporate governance issues on pages one, two, three and five, and this seem not unusual.

In corporate governance, everyone thinks we already know the answers—and this a phenomenon all around the world—but if you actually dig into those answers, there is not a lot of good research to back them up. I see a real opportunity to add value to society by undertaking quality research, as well as building data capability to support that research and inform practice.

What will be the centre’s research agenda?

We plan to engage heavily with industry—or what people call ‘downtown’ here in the Faculty—and seek its help in selecting topics and guiding our research agenda. We will be talking to stakeholders such as investors, super funds, asset managers, and directors, all the constituents of corporate governance, and asking them what they think the key issues are and using that to guide where we focus our efforts.

Our Insight Series, which will be two- to four-page studies of key issues, will be directly aimed at helping corporate governance practitioners (e.g., boards, managers, and investors) to keep abreast of key and emerging corporate governance issues.

Tell us about yourself and what you bring to the centre?

Professor Ian Gow, Director, Melbourne Centre of Corporate Governance and Regulation

I grew up in rural New South Wales. I started high school in Tumut, finished at Albury North High School, then did undergraduate studies in Law and Commerce at the University of New South Wales.

I initially worked in consulting, including a period where my focus was on performance measurement and incentive design, which are big issues in corporate governance. My sense then was that these were complex issues and there wasn’t a lot of good theory driving how we did many things. So, while doing an MBA at Harvard Business School, I seriously considered doing doctoral studies to explore these issues further. While I did work for a couple of years after my MBA, the idea of doing research didn’t quite go away, and I ended up leaving Wall Street to enter the PhD program in business at Stanford University.

But, the reality is that academic research is quite divorced from practice, so I jumped at the opportunity presented by the centre both to come back to Australia and get seriously involved in research that I hope will address real problems for practitioners, like the ones that sparked my interest in research in the first place.

I collaborate closely with Professor David Larcker, who was my dissertation adviser. He is one of the world’s leading researchers in corporate governance and heads the Corporate Governance Research Initiative (CGRI) at the Stanford Graduate School of Business. The CGRI is something of a role model for our centre, as they’ve been doing this for more than 10 years. We will continue to collaborate with them, and with others around the world who have a shared goal of doing relevant, insightful research.

Tell us about your own research focus?

My field of study for my PhD was accounting, but in academic research, accounting is not limited to ‘debits and credits’ and covers issues such as performance measurement, incentives, corporate governance, and how information is used in business and investment decisions. And my research reflects that.

Of my papers, one of my favourites, written in collaboration with David Larcker, looked at corporate governance ratings. After the collapse of companies such as Enron and WorldCom in the early 2000s, there was a big push for the development of corporate governance measures that could predict ‘the next Enron’. We investigated how effective the ratings that emerged from this push were in predicting key outcomes of interest, such as accounting restatements or poor future performance. We found that the ratings performed very poorly. Most of the ratings we examined didn’t survive for long after our paper, and the possibility that our paper made a difference is what I like about that paper.

A more recent paper uses the way CEOs talk in conference calls to develop a measure of CEO personality. To do this, we trained a model using high-quality data on CEO personalities and then applied that model to measure personalities of CEOs across the US. We’re currently revising our paper to examine when firms choose CEOs with different personality traits.During my time at Harvard, I’ve also wrote a number of case studies. One case examines the role of cultural factors in driving corporate governance in Japan, where shareholders formally hold a lot of power, more so than say the United States, but tend to take backseat for cultural reasons. While a concern in some parts of the world is excessive focus on shareholder rights, in Japan they feel that a greater focus on shareholders’ interests is needed to drive improved productivity and corporate performance. My hope is that we will produce quality case studies at the centre, as these can be a good way of understanding and thinking about important issues in context.

What has been your career highlight?

Right here, right now. Or perhaps in a few years’ time, when the centre is properly established and making a difference to corporate governance practices in Australia and across the world.