Philip Cochran
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COVID-25: Preparing for the Next Black Swan
Professor Philip Cochran's current research focuses on how organizations do and should respond to types of major crisis that are often referred to as “Black Swans”. Black Swans are extremely rare events with severe consequences. There are many other potential Black Swans. A current example of a Black Swans is the one we’re in right now and that is the COVID-19 pandemic. This historically happens once every 100 years. Right now, about 900,00 Americans have died of COVID-19. The 1918 Flu, which was the previous global pandemic, killed about 680,00 Americans and about 50 million people worldwide. This is about twice as many as people that died in all of World War I.
Professor Cochran's translation of research into understanding why society ignores Black Swans and how successful organizations can respond to them is another excellent example of how IUPUI's faculty members are TRANSLATING their RESEARCH INTO PRACTICE.
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Item The composition of boards of directors and incidence of golden parachutes(Academy of Management Journal, 1985) Cochran, Philip L.; Wood, Robert A.; Jones, Thomas B.Golden parachutes are a new and controversial management perquisite that allow covered managers to voluntarily resign and collect substantial remuneration—in some cases several million dollars—after a triggering event, usually a hostile takeover. This ability to unilaterally pull a ripcord has provoked much criticism of this perquisite. Critics of golden parachutes see them as evidence that senior managers can he more interested in maximizing their own incomes than in shareholder returns. Business Week, for example, in an editorial entitled “The Gilded Ripoff,” stated that the ethical difference hetween golden parachutes and theft is “hard to discern” (1982:136). On the other hand, proponents of golden parachutes justify them as a means of attracting and keeping new managerial talent as well ensuring that current management remains objective, loyal, and on board during a hostile takeover attempt. What characteristics are firms that give managers contracts with golden parachutes likely to have' One possible factor is the composition of a firm's board of directors, since it is the board that must ultimately approve such arrangements. Perhaps directors who are insiders are likely to be less independent of the CEO and senior management than are directors who are outsiders. Bacon and Brown reported general agreement among board members of major U.S. corporations that “the board should have a majority of outside directors.…[to] properly carry out its responsibilities and maintain its necessary independence of management” (1977:91). This suggests that if managers want golden parachutes they are more likely to get them in firms that have a high percentage of directors who are insiders. Thus we expect: Hypothesis 1: The probability that firms will give their management golden parachute contracts is positively related to the percentage of directors who are insiders. Another factor likely to be related to whether or not firms provide golden parachutes is the amount of stock that members of boards of directors own. Directors who own substantial amounts of stock should be more inclined to put the interests of stockholders above those of management. To the extent that golden parachutes are unwarranted diversions of stockholder monies, they should be more common in firms with boards that own relatively little of the firms' stock than in firms with boards that own much stock. Thus: Hypothesis 2: The probability that firms will grant golden parachute contracts is negatively related to the percentage of total stock outstanding that their boards of directors own. The size of firms is likely to be related to their propensity to issue golden parachutes. Large firms, at least until 1984, were not considered likely takeover targets, so their managements had less incentive to acquire this particular perquisite than did small firms' managers. In addition, small firms may feel more need to offer such an exotic perquisite than do large firms. Thus: Hypothesis 3: The probability that firms will grant golden parachute contracts is negatively related to their size. Firms that are underperforming and therefore not achieving full potential profits are more likely to be takeover targets than are firms with healthy profits. Further, underperformers are more likely than strong firms to find it difficult to attract and retain qualified managers. Thus: Hypothesis 4: The probability that firms will grant golden parachute contracts is negatively related to their financial performance. Finally, since debt is unattractive to a potential raider, firms that are highly leveraged are less likely takeover targets than those that are not. In fact, adding financial leverage is a defensive tactic often used to avoid takeovers (Brealey & Myers, 1981: 674). Thus we expect: Hypothesis 5: The probability that firms will grant golden parachute contracts is negatively related to their debt.Item Corporate Ethics Programs as Control Systems: Influences of Executive Commitment and Environmental Factors(Academy of Management Journal, 1999) Weaver, Gary R.; Trevino, Linda Klebe; Cochran, Philip L.Our study asked why corporations introduce formal programs to manage ethics and why those programs display varying characteristics. We used control theory to delineate an ethics program's scope and its orientation toward compliance- and values-based control. Managerial choice theory suggests that environmental factors and management's ethical commitment will influence these dimensions. Environmental factors were the stronger influences on scope, but management commitment was the stronger determinant of control orientation. Research and policy implications are discussed.Item Corporate Social Responsibility and Financial Performance(Academy of Management Journal, 1984) Cochran, Philip L.; Wood, Robert A.The relationship between corporate social responsibility and financial performance is reexamined using a new methodology, improved technique, and industry-specific control groups. Average age of corporate assets is found to be highly correlated with social responsibility ranking. After controlling for this factor, there still is some correlation between corporate social responsibility and financial performance.Item COVID-25: Preparing for the Next Black Swan(Center for Translating Research Into Practice, IU Indianapolis, 2021-06-25) Cochran, PhilipIn this presentation, Professor Cochran discusses how organizations do and should respond to types of major crisis that are often referred to as “Black Swans”. Black Swans are extremely rare events with severe consequences. There are many other potential Black Swans. A current example of a Black Swan the COVID-19 pandemic. This historically happens once every 100 years. Professor Cochran seeks to understand why society ignores Black Swans and how successful organizations respond to them. Current research findings suggest that organizations respond by (1) knowing that such events can occur, (2) engaging in scenario planning, (3) building their organizational resilience, (4) creating redundancy in their supply-chains, and (5) building sustainable business practices.Item The Evolution of the Corporate Social Performance Model(Academy of Management Review, 1985) Wartick, Steven L.; Cochran, Philip L.This paper traces the evolution of the corporate social performance model by focusing on three challenges to the concept of corporate social responsibility: economic responsibility, public responsibility, and social responsiveness, it also examines social issues management as a dimension of corporate social performance. It concludes that the corporate social performance model is valuable for business and society study and that it provides the beginnings of a paradigm for the field.Item "Golden Parachutes": A Closer Look(University of California, 1984) Cochran, Philip L.; Wartick, Steven L.This article describes various aspects related to the policy of golden parachutes (GP). Discussed are golden parachutes in regards to changes in organizational control, voluntary and involuntary termination, and guaranteed employment provisions. In regards to the question of who has golden parachutes, the authors examined the proxy statements of all of the 1981 Fortune 500 companies. Content analysis of these statements was conducted. The authors determined that 11 percent of those firms had GPs. Also discussed is what is included in a GP, the pros and cons of GPs, and the legal perspectives.Item Golden Parachutes: Contests, Issues and Trends.(Academy of Management Proceedings, 1983) Wartick, Steven L.; Cochran, Philip L.This paper explores a relatively new executive perquisite, golden parachutes (GP's). The number of firms that have or are planning to adopt GP's is discussed. Features of GP's are outlined. Reasons that firms have adopted GP's are explored. Finally, a series of arguments against this practice are laid out.Item Integrated and Decoupled Corporate Social Performance: Management Commitments, External Pressures, and Corporate Ethics Practices(Academy of Management Journal, 1999) Weaver, Gary R.; Trevino, Linda Klebe; Cochran, Philip L.Corporations can respond to expectations for socially responsible processes and outcomes in organizationally integrated ways or in easily decoupled fashion. This study focused on a particular type of socially responsible organizational process: formal corporate ethics programs. Theory suggests that external pressures for social performance encourage easily decoupled processes but that top management commitments can encourage both easily decoupled and integrated processes. Analysis of survey and archival data generally supported this position. Implications for social performance research, practice, and public policy are discussed.Item An overview of empirical research on ethics in entrepreneurial firms within the United States(Business Ethics Network of Africa, 2009-07) Baucus, Melissa; Cochran, Philip L.Scholars recognise that entrepreneurs may encounter different ethical issues and pressures than managers in larger corporations. This has fostered empirical research aimed at assessing ethics in entrepreneurial settings in the United States. Our emphasis on empirical research with little attention paid to purely conceptual papers allows us to highlight the narrow definition of entrepreneurship used in the US and how US researchers distinguish between entrepreneurship and other types of small businesses. This differs greatly from many other countries, especially those in which researchers equate entrepreneurship with the study of small and medium sized enterprises (SMEs). Researchers in the US often distinguish ethics from corporate social responsibility (CSR), corporate social performance (CSP), stakeholder theory and stakeholder management with different theoretical models proposed in each of these areas. After discussing these various definitional issues, we review the empirical research on ethics in entrepreneurial firms, discussing what the results tell us, identifying gaps in prior research and concluding with recommendations for future research that draws more heavily on theoretical frameworks in the field of ethics.Item Radio Frequency Identification and Privacy Law: An Integrative Approach(American Business Law Journal, 2009) Magid, Julie Manning; Cochran, Philip L.; Tatikonda, Mohan V.The indiscriminate nature of Radio Frequency Identification (RFID)1 technology creates unique privacy issues.2 Currently privacy standards for the type of information gathered through RFID and the use of that information do not exist.3 With few exceptions, compatible readers may legally access from a remote location RFID devices and the information these devices contain. After gathering information, the legal uses of that information are innumerable in terms of aggregation and re-use.