A chair built to last

A chair built to last

EY Chair in Governance and Compliance

Prof. Jörg Rocholl, PhD, is president of ESMT European School of Management and Technology in Berlin and member of the economic advisory board of the German Federal Ministry of Finance. He is also a research professor at the Ifo Institute in Munich and a Duisenberg fellow of the European Central Bank. After completing his PhD at Columbia University in New York, he was named an assistant professor at the University of North Carolina at Chapel Hill. Professor Rocholl has researched and taught at ESMT since 2007 and was appointed president of ESMT in 2011. He has held the EY Chair in Governance and Compliance since 2010.

The EY Chair in Governance and Compliance is a great fit for Jörg Rocholl’s research and teaching, which focuses on topics such as politically connected boards of directors, corporate governance in banking, and risk-taking incentives among banks. Over the past four years, the chair has supported the production of valuable independent research on some of the governance challenges and weaknesses in the handling of the financial crisis. Discussions with stakeholders have also been the impetus for unique curriculum developments at ESMT, such as the new track “Managing Business Integrity” in the Executive MBA program (EMBA), and the creation of an important platform for dialogue on the topic of successful corporate governance.

Academic insights on governance and compliance

One of Jörg Rocholl’s research papers, entitled “Do politically connected boards affect firm value?,” written with Eitan Goldman and Jongil So, analyzes whether political connections on the boards of directors of publicly traded companies in the United States affect a firm’s value. The research finds that companies with boards that are politically connected to the winning party in a presidential election experience positive returns, whereas those connected to the losing party experience negative returns. It also finds that companies experience positive and statistically significant stock returns following the appointment of a board member connected to the party in power. Their findings show that political connections have a pervasive impact on the value of public companies in the United States. Rocholl says, “These findings are particularly pertinent when one looks at the increased interaction between the political system and the corporate world following the recent financial and economic crisis. This growing government involvement is incentivizing companies to become politically connected.”

In another paper, called “Corporate governance in banking,” Rocholl looks at the role of corporate governance during the financial crisis and focuses specifically on the banking sector and the main criticisms leveled at banks regarding the lack of regulation. His findings show that the evidence for these criticisms is far from clear-cut and that each situation is very much dependent on context and time.

Strengthening corporate governance in the curriculum

The production of research in the area of corporate governance and compliance is just one aspect of the EY Chair, which has also led to a number of other important collaborations between ESMT and EY. Recognizing the need for more teaching in the areas of ethics, compliance, and governance, in September 2014, a new track called “Managing Business Integrity” began within the EMBA program. Several EMBA participants have chosen to take this module, which is being taught by EY senior partners, along with ESMT faculty who are experts on white-collar crime, compliance, corporate governance, and business integrity.

The new EMBA track will prepare participating managers to effectively protect corporate assets from damage caused by misconduct, and to use strategic compliance management, targeted control mechanisms, and incentive systems that are aligned with business ethics and integrity. With support from EY’s Department of Fraud Investigation & Dispute Services, they will also look at investigations into fraud and corruption using forensic and criminological techniques. The aim is to transfer the expertise related to all aspects of business integrity management – including corporate governance, compliance, and forensic fraud investigation – into management education.

A platform for dialogue between academia and industry

The establishment of the Governance Conference between ESMT and EY has provided a much-needed and valuable platform for discussions among leading academics and CEOs on successful corporate governance. The event has taken place three years in a row now. The most recent event, on September 24, 2014, looked at governance issues among the German “Mittelstand” and family enterprises and featured a number of talks from leading Mittelstand CEOs. This conference provides an opportunity for regular interaction on different aspects of corporate governance, and helps to bring a mix of business and academic insights to the table.

Banking and Finance, Organizational Behavior

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