Lies, Damn Lies, and Statistics: Why a Widely Used Sustainability ...

V O LU M E 2 9 | N U M B E R 2 | S P RIN G 2 0 1 7

Journal of

APPLIED CORPORATE FINANCE

In This Issue: Sustainability and Shareholder Value How We Invest

10

Michael Bloomberg and Carl Pope

SASB 2016 Symposium

16

Tim Koller, McKinsey & Company, with Jonathan Bailey,

Sustainability and Rewriting the Book on Valuation: An Interview with Tim Koller SASB 2016 Symposium Roundtable

FCLT Global 22

The SEC and Improving Sustainability Reporting

Keith Higgins, Securities and Exchange Commission; Alan Beller, Cleary Gottlieb; and John White, Cravath, Swaine, & Moore. Moderated by Mary Schapiro, Promontory Financial Group

SASB 2016 Symposium Roundtable

32

The Next Wave of ESG Integration: Lessons from Institutional Investors

Ted Eliopoulos, CalPERS; Kristi Mitchem, Wells Fargo Asset Management; Chris Ailman, CalSTERS; and Michelle Edkins, BlackRock. Moderated by Janine Guillot, Sustainability Accounting Standards Board

SASB 2016 Symposium Roundtable

44

Analysts’ Roundtable on Integrating ESG into Investment Decision-Making

Dan Hanson, Jarislowsky Fraser Global Investment Management; Jennifer Bender, State Street Global Advisors; Robert Lamy, CFA Institute; and Tom Lyons, Montgomery Fixed Income. Moderated by Bruno Bertocci, UBS Asset Management

Far Beyond the Quarterly Call: CECP’s First CEO-Investor Forum

56

Tim Youmans and Brian Tomlinson, CECP Strategic Investor Initiative

Evaluating Sustainable Competitive Advantage

70

Baruch Lev, New York University

The Purpose of the Firm, Valuation, and the Management of Intangibles

76

Bartley J. Madden

Investing in the UN Sustainable Development Goals: Opportunities for Companies and Investors

87

Willem Schramade, NN Investment Partners

Evaluating the Effectiveness of Sustainability Disclosure: Findings from a Recent SASB Study

100

Lies, Damn Lies, and Statistics: Why a Widely Used Sustainability Metric Fails and How to Improve It

109

Arturo Rodriguez, Henrik Cotran, and Levi S. Stewart, Sustainability Accounting Standards Board Jon Bartley, Al Chen, Stephen Harvey, Scott Showalter, Gilroy Zuckerman, North Carolina State University, and Levi Stewart, Sustainability Accounting Standard Board

Lies, Damn Lies, and Statistics: Why a Widely Used Sustainability Metric Fails and How to Improve It by Jon Bartley, Al Chen, Stephen Harvey, Scott Showalter, Gilroy Zuckerman, North Carolina State University, and Levi Stewart, Sustainability Accounting Standard Board

bout 75% of the S&P 500 companies produced sustainability reports in 2015, up from 20% in 2011, according to the Governance & Accountability Institute.1 These corporations publish sustainability reports that track their performance in key performance indicators or KPIs, e.g., water use, greenhouse gas [GHG] emissions, waste generated. Nearly all of these companies report a total inventory for key parameters—that is, the total amount of resource consumed or waste generated. This is an important metric in the sense that it measures the entity’s “global footprint” for that parameter. But because companies tend to be dynamic, changing in size and scope from year-toyear, total inventory does not measure what investors really want to understand: namely, the change in a company’s overall efficiency in managing key sustainability parameters.2 Average intensity is the most widely used metric for measurement of a company’s efficiency regarding sustainability parameters. This metric normalizes the total inventory against a relevant operating parameter, typically the company’s total revenue or productive output, e.g., CO 2 per ton of product produced. Average intensity is most useful in providing perspective on an industry sector’s resource consumption and waste production relative to other sectors. Its use in comparing companies within an industry sector is more limited because of differences in the scope of activities and sourcing policies among the companies. Virtually all interested parties desire information on how well a company manages its sustainability performance, i.e., is it becoming more efficient in the consumption or production of critical sustainability parameters? Sustainability organizations such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) provide reporting frameworks and identify metrics intended to enhance the creditability of sustainability reports with a wide range of stakeholder groups.3 While all their efforts are necessary for global acceptance, our research underscores the need to provide guidance on how such metrics should be calculated in addition to the specific metrics to be reported. Further, it is critically important that senior sustainability managers use metrics that accurately

A

1. Wall Street Journal, November 12, 2015. 2. The Greenhouse Gas Protocol, 2014.

Journal of Applied Corporate Finance • Volume 29 Number 2

reflect the corporation’s performance in managing resources and reducing waste. An all-too-common error is to equate a change in average intensity with a change in overall efficiency. Average Intensity is Not a Reliable Measure of Efficiency Understanding what average intensity actually measures (and what it does not) is critically important to corporate managers. If a company persists in continuing costly but ineffective programs because average intensity falsely indicates that it is making good progress, management is wasting time and money, and possibly misleading investors. Conversely, a company may abandon effective programs because average intensity is not improving and the management information system fails to accurately report that the efficiency of sustainability programs actually improved. Although the change in a company’s average efficiency for a sustainability parameter is a major component of the change in average intensity, many other factors contribute to the change in average intensity, notably (1) outsourcing and insourcing, (2) changes in facility utilization, and (3) changes in product or service mix. These three factors frequently obscure the actual efficiency improvement achieved by a company’s sustainability program. Outsourcing and In-sourcing Impacts Average Intensity Outsourcing and in-sourcing have an obvious impact on average intensity, assuming outsourced activities are not included in company reporting systems. These practices result in a simple manipulation of the metric’s numerator, denominator, or both. For example, if a water-intensive manufacturing step is moved to a third-party (outsourced) while the final production remains on site, average intensity will decrease because the water usage on site decreases while production remains the same. Similarly, if a low-intensity process step is outsourced, average intensity will increase because the remaining processes have higher intensities. Example 1 Illustrates how outsourcing and in-sourcing actions can result in significant changes in average intensity without any measured change in true effi3. Global Reporting Initiative (GRI) Standards at https://www.globalreporting.org/ standards and Sustainability Accounting Standards Board (SASAB) Standards at https:// www.sasb.org/.

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Example 1: The Impact of Outsourcing on Average Intensity

A

cme Company produces widgets in a three step process: 1) component manufacturing, 2) sub-unit fabrication, where the components are assembled into widget sub-units, and 3) final assembly, where the sub-units are assembled to complete the widget. In the base-year, the company produces 1,000,000 widgets. The company consumes 1,000,000 liters (L) of water resulting in a baseyear average intensity of 1.0 L/widget produced. Process step 1 consumes 600,000 L, step 2 consumes 300,000 L ciency. In this instance, the change in average intensity results from nothing more than a change in what is being included or excluded in the numerator, the denominator, or both. One company, Bacardi Limited, first recognized this distortion when the bottling of a major product line was moved to a contract manufacturer. As a result, Bacardi’s average water intensity increased because the outsourced product bottling had a lower water intensity than distilling. The impact was therefore much larger in the denominator (units of water bottled) than in the numerator (water consumed). Recognizing and adjusting for this type of distortion is important to ensure accuracy and confidence in reporting results. Change in Facility Utilization Impacts Average Intensity Facility utilization is an issue familiar to cost accountants and relates to the identification of the facility’s fixed costs that are added to the variable costs to calculate total product costs. This fixed versus variable distinction is relevant to the measurement of sustainability parameters as well. Resource consumption and waste generation also contain fixed components that are independent of production quan-

and step 3 consumes 100,000 L. In year 2, the company produces the identical number of widgets, but outsources step 1 to an overseas company. Steps 2 and 3 are completed within Acme’s production facility, with the same water use efficiency, i.e., the company consumes 400,000 L of water to complete the production of 1,000,000 widgets. Acme has done nothing to improve its water use efficiency, but its average intensity has been reduced 60% to 0.4 L/widget through outsourcing. tity, and variable components that are directly related to the amount of production. For example, the quantity of water consumed per unit of product consists of the direct variable water use, e.g., water for cleaning and cooling the product and equipment, and an allocation of the facility’s water use that is fixed relative to production, e.g., irrigation water for facility grounds. An increase in production (higher facility utilization) results in a smaller allocation of the fixed water use to each unit of production, causing the overall average intensity of water use to decrease. Although this is a positive outcome, there has been no change in the actual efficiency of water usage. Example 2 demonstrates the potential for distortion of overall average intensity as a measure of efficiency improvement caused by a change in production volume. Facility utilization generally reflects anticipated product demand that is often a function of overall economic conditions. Therefore, changes in facility utilization will often move in the same direction across most of a company’s product lines, resulting in a systemic shift in the average intensity when all the product lines and activities are compiled across the corporation. Again,

Example 2: Impact of Facility Utilization on Average Intensity

X

YZ, Inc. produces a cleaning agent, “Wonder Dust”, at a modern production facility. In the base-year, the plant operated at 72% of capacity and produced 1,000,000 tons of product. The plant consumed 1,000,000 (L)iters of water during the year: 400,000 L were fixed water usage for restroom facilities, cafeteria, locker rooms and irrigation; and 600,000 L were variable water usage resulting in average usage of 0.6 L of water per ton of product. The average intensity during the base-year was therefore 1.0 L/ton of product produced. Wonder Dust experienced a sharp growth in demand and the plant was instructed to increase its production by 25% to meet demand and 110


replenish depleted inventories. In the following year, the plant operated at 90% of capacity, producing 1,250,000 tons of product. There was no change in water use efficiency (fixed nor variable); therefore the plant consumed 400,000 L of water for fixed usage, and 750,000 L of water directly related to production for a total consumption of 1,150,000 L. The company’s average intensity for water consumption therefore dropped by 8% to 0.92 L/ ton even though no improvement in efficiency (fixed or variable) was achieved. If instead the company decreased production by 20% to 800,000 units, the average intensity would increase by 10% to 1.1 L/unit. Spring 2017

Example 3: The Impact of Product or Service Mix on Average Intensity

A

BC Corporation has two devices, A and B, and each contributes to overall water use. There is no change in outsourcing or in-sourcing, nor is there any fixed water use – all water use is variable. Manufacturing product A requires 10 L of water per unit while B requires 1 L per unit. In the base-year, the company produces 1,000,000 units of each product; total water consumption is therefore 11,000,000 L and the company’s average intensity was 5.5 L/unit. In the current-year, demand for product A has decreased by 20% from the base-year while demand for this factor directly causes average intensity to change without any real change in underlying efficiencies. This was a common problem for companies during the recent recession, when reduced facility utilization tended to mask real improvements in efficiency. Conversely, as demand picks up the reduction in average intensity overstates efficiency improvements. Change in Product or Service Mix Also Impacts Average Intensity Companies produce a variety of products and services that contribute to their overall resource consumption or creation of waste. Every product and service has a unique rate (or intensity) for each sustainability parameter, and these rates will change independently from year to year. The aim of efficiency programs is to reduce these intensity rates. In the absence of any of the distortions discussed above, the individual intensity rates will provide accurate measures of the efficiency change for each product or service from year to year. However, if the relative mix of activities changes, a company’s overall average intensity will not accurately reflect the change in a company’s overall efficiency in managing that specific parameter. While outsourcing/ in-sourcing and facility utilization affect both the sustainability intensities of individual products and services, changes in product or service mix only impact overall average intensity when activities are aggregated across the company. As illustrated in Example 3, when the product or service mix shifts toward products or services that have lower intensities the company’s average intensity will decrease, and vice versa even when no change has occurred in the underlying product and service intensities. This distorting effect was recognized by Bacardi Limited when its scotch whisky distilling sites were instructed to increase scotch production relative to other beverages to meet increasing customer demand for scotch. This shift in product mix had a large, negative distorting effect on the overall average intensity of greenhouse gas emissions even though the company

product B has increased by 20%. The company produced 800,000 units of A and 1,200,000 units of B, and as a result consumed 9,200,000 L of water. There was no change in water use efficiency, but the company’s average intensity decreased to 4.6 L/unit, a 16.4% reduction as a result of the change in product mix. If the shift had instead favored product A, i.e., it was up 20% while product B was down 20%, the average intensity would have increased by 16.4% to 6.4 L/unit. accomplished reductions in per unit emissions in substantially all product lines including scotch. Because scotch distillation produces more greenhouse gases per unit than the activities to produce the company’s other beverage products, average greenhouse gas intensity across all products was increased. The failure of average intensity to accurately measure the real improvement in the efficiency that Bacardi Limited was accomplishing for all product lines led the company to explore a new, more meaningful, efficiency metric for sustainability parameters that is described below. Real Change in Sustainability Efficiency Can Be Measured Most large companies are diverse and dynamic entities with many activities that contribute toward resource consumption and waste creation. These companies, over their life spans, typically experience considerable change in the scale of their operations as well as the mix of products and services offered. Outsourcing, in-sourcing, and change in facility utilization routinely accompany these changes. As a result, the change in average intensity is not a reliable measure for change in overall sustainability efficiency. Companies that wish to accurately track their overall efficiency in managing sustainability parameters can do so by using a method that relies on flexible budgeting concepts that are widely applied for financial management. This method, which was jointly developed by Bacardi Limited and North Carolina State University, is able to effectively eliminate all of the distortions previously discussed, and so provide an accurate measure of a company’s overall performance for each sustainability parameter. For example, to measure overall water-use efficiency, a company needs to define the water use for every product and service in terms of fixed and variable factors during the baseline year.4 In any subsequent year, the total water used by each activ-

4. The baseline is defined as the initial year a company adopts the flexible budgeting method.


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Example 4: The Flexible Budget Method vs. Average Intensity

T

he performance measurements for the Base Year for the combined business units appear below: Acme Division (Widgets), XYZ Division (Wonder Dust) and ABC Division (Device A and Device B). Average intensity is

calculated based on total revenues and, as shown below, results in 81.3 Liters per $1000. The water use rate factors are determined for each product line and listed in the two columns at the far right of the table.

BASE YEAR Product

Step

Output Units

Output

Price $/Unit

Rev ($000)

Water, L

Variable W Rate, L/Unit

Fixed Water, L

Widgets

1

Units

1,000,000

600,000

0

0.6

2

Units

1,000,000

300,000

0

0.3

3

Units

1,000,000

100,000

0

0.1

Total

1.0

Units

1,000,000

$20

$20,000

1,000,000

0

Wonder Dust

Tons

1,000,000

$100

$100,000

1,000,000

400,000

0.6

Device A

Units

1,000,000

$20

$20,000

10,000,000

0

10.0

Device B

Units

1,000,000

$20

$20,000

1,000,000

0

1.0

$160,000

13,000,000

TOTAL

81.3

The performance measurements for the Current Year for the combined divisions appear below. The improvement levels (1% to 3%) have been applied to each product line. Actual water consumption is shown in the column labeled ‘Water, L” and the flexible budget values appear in the adjacent column. Recall that the “flexible budget value is the quantity of water that would have been consumed

L/($000)

if no change in efficiency occurred. The Index value is simply the ratio of Actual Water Use to Flexible Budget Water Use, multiplied by 100. The individual Index values for the product lines reflect the 3%, 2% and 1% improvements, respectfully, that these product lines achieved for the Current Year.

CURRENT YEAR Product

Step

Output Units

Output

Price $/Unit

Widgets

1

Units

0

2

Units

1,000,000

3

Units

1,000,000

Total

Units

1,000,000

$20

$20,000

Wonder Dust

Tons

1,250,000

$100

$125,000

Device A

Units

800,000

$20

Device B

Units

1,200,000

$20

TOTAL

Rev ($000)

Water, L

112


Index (100)

0

291,000

300,000

97,000

100,000

388,000

400,000

97.0

1,127,000

1,150,000

98.0

$16,000

7,920,000

8,000,000

99.0

$24,000

1,188,000

1,200,000

99.0

$185,000

11,011,000

11,150,000

98.8

59.5

The Average Intensity for the Current Year is calculated as 59.5 L per $1000 in revenue. This is a 27% improvement compared to the Base Year; nearly all of the improvement results from the distortions discussed in Examples 1 to 3.

Flexible Budget, L

L/($000)

The Overall Flexible Budget Index value is determined to be 98.8 (vs. a Base-Year value of 100), reflecting a 1.2% improvement. This is the actual improvement in water use efficiency as compared to the 27%.

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ity is added up and compared to the “flexible budget” (FB) quantity of water. The FB quantity is calculated by applying the base-year fixed amount and the base-year variable factors to the current-year activity level. In effect, the FB is the quantity of water that would be used in the current-year, assuming there is no change in efficiency. Example 4 demonstrates the power of the f lexible budget method in measuring actual underlying efficiency. For this example, we combine the previous examples: Acme Company, XYZ Inc., and ABC Corporation are assumed to be business divisions of a larger company. An initial problem is that average intensity cannot be calculated when product lines have different units of measure, e.g., widgets, tons, and devices. A widely used solution to this problem is to define a common denominator such as the dollars of revenue received for each product. To illustrate this approach, we simply assume that devices and widgets sell for $20 each while Wonder Dust sells for $100 per ton. In our previous examples we assumed no change in efficiency. To make the illustration more interesting, Example 4 assumes that each division actually achieves a small improvement in water use efficiency. Acme Division improved its water use efficiency by 3% from its base-year, XYZ Division improved by 2% and ABC Division improved by 1%. Because all product lines improved by at least 1% but no more than 3%, we know that overall corporate efficiency improvement must fall within this range. Further, because the production of Device A requires the largest use of water and that activity achieved 1% improvement, our overall corporate improvement is expected to be near the low end of the range, slightly higher than 1%. In fact, use of the flexible budget method determines that the corporation’s overall improvement in efficiency was 1.2%. Average intensity, however, shows a 27% improvement, clearly a gross overstatement of the change in efficiency. Example 4 illustrates how average intensity is a poor proxy for efficiency while the flexible budget method provides an accurate measure of a corporation’s sustainability performance. Senior managers who rely on average intensity as a proxy for efficiency can be misled about their organization’s overall performance. In contrast, the flexible budget method provides management with an accurate measure of the corporation’s overall change in efficiency.

Further, the method allows managers to easily analyze the performance of the individual businesses and activities that contributed to overall corporate performance. As a result, managers can be evaluated on the changes in operational efficiency they actually control rather than the arbitrary distorting effects that influence average intensity. By focusing on actual drivers of efficiency and holding managers accountable for controllable sustainability factors, the flexible budget method increases the likelihood that companies will achieve efficiency improvements. Without the flexible budget method, companies are effectively “flying blind” in their sustainability improvement programs. Bacardi Limited, a world-class company, has demonstrated the viability of the flexible budget method since 2011. Bacardi Limited’s 2014 Corporate Responsibility Report states:

5. Bacardi Corporate Responsibility Report 2014, p.54. https://www.bacardilimited. com/wp-content/uploads/2016/07/2014_CR_Report.pdf 6. For example the GHG Protocol provides extensive discussion and guidance for multiyear comparisons of sustainability measurements. The GHG Protocol explicitly calls for recalculation of base-year absolute quantities to reflect structural changes that have occurred including acquisitions, dispositions, out-sourcing, and in-sourcing. The GHG Protocol does recognize that when the normalizing activity variable (denominator of the intensity ratio) is dollars of revenue, there is potential for distortion of intensity improve-

ment measurements because of changes in product prices and product mix. The GHG Protocol states that a restatement is necessary in this circumstance, but no guidance is provided as to how to determine the restatement. To date, the fact that changes in product mix can cause material distortion in measures of efficiency improvement irrespective of the normalizing variable has not been recognized in any of the formal sustainability measurement guidelines.


“Bacardi measures performance in two ways: absolute totals and efficiency metrics… By measuring efficiency in this way for each activity across our global operations, we more accurately reflect our actual performance. This prevents arbitrary distortions of our Company-wide efficiency that can result from changes in our product mix, sourcing location or merger-and-acquisition activities.” 5 More detailed information for applying the method in sustainability reporting can be found in the references. Conclusion With an increasing number of companies reporting sustainability results and numerous organizations establishing sustainability reporting guidelines, the time is right for both preparers and standard setters to pause and reflect on the accuracy and usefulness of the information being presented. The application of the flexible budgeting methodology described in this article will benefit both users of sustainability data and managers who use the information for internal decision making. The measure of efficiency that results from this approach offers an opportunity to improve the guidelines established by global organizations for transparency of organizational sustainability activities.6 And, the creditability of sustainability reporting depends on it.

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Jon Bartley, Ph.D., is Professor Emeritus of Accounting and former

D. Scott Showalter, CPA, CGMA, CGFM, is Professor of Practice

Dean of the Poole College of Management, North Carolina State University in Raleigh, NC. You can reach Jon at [email protected]

at the Poole College of Management, North Carolina State University in Raleigh, NC. You can reach Scott at [email protected]

Y.S. Al Chen, Ph.D., CPA, CITP, CGMA, CMA, CFM, is Professor of

Levi Stewart, CPA, is Sector Analyst – Consumer Staples at Sustain-

Accounting at the Poole College of Management, North Carolina State University in Raleigh, NC. You can reach Al at [email protected]

ability Accounting Standards Board. You can reach Levi at levi.stewart@ sasb.org

Stephen K. Harvey, M.S., M.B.A., P.E., is former Global Director

Gilroy Zuckerman, Ph.D., is Associate Professor of Accounting

of Environment, Health and Safety for Bacardi Limited and is currently Industry Fellow in Corporate Responsibility at the Poole College of Management, North Carolina State University. You can reach Steve at [email protected]

and former Associate Dean of Academic Affairs of the Poole College of Management, North Carolina State University in Raleigh, NC. You can reach Gil at [email protected]

References Jon Bartley, Frank Buckless, Y.S. Al Chen, Stephen K. Harvey, D. Scott Showalter, and Gilroy Zuckerman, “Flexible Budgeting Meets Sustainability at Bacardi Limited,” Strategic Finance, December 2012, pp. 29-34. Jon Bartley, Frank Buckless, Y.S. Al Chen, Stephen K. Harvey, D. Scott Showalter, and Gilroy Zuckerman, “How Widely Used Sustainability Metrics Distort Actual Performance—And a Solution to This All-Too-Common Problem”, Environmental Quality Management Journal, Summer 2015, pp. 1-9. Jon Bartley, Frank Buckless, Y.S. Al Chen, D. Scott Showalter, and Gilroy Zuckerman, “Flexible Budgeting Applied to Sustainability Measurements,” IMA Research Foundation C-Suite Report. NJ: Institute of Management Accountants http://www.imanet.org/docs/default-source/ thought_leadership/risk-management-internal-controls/flexible_budgeting.pdf?sfvrsn=2, August 2015. Jon Bartley, Y.S. Al Chen, Stephen K. Harvey, D. Scott Showalter, and Gilroy Zuckerman, Using Flexible Budgeting to Improve Sustainability Measures, AICPA.org. http://

www.aicpa.org/InterestAreas/BusinessIndustryAndGovernment/ Resources/Sustainability/Pages/ImproveSustainabilityMeasures. aspx, January 26, 2017. Jon Bartley, Y.S. Al Chen, Stephen K. Harvey, D. Scott Showalter, and Gilroy Zuckerman, Using Flexible Budgeting to Improve Sustainability Measures, Part II. AICPA.org. https://www.aicpa.org/InterestAreas/BusinessIndustryAndGovernment/Resources/Sustainability/Pages/ ImproveSustainabilityMeasures2.aspx, April 17, 2017. Investors Want More From Sustainability Reporting, Says Former SEC Head. Wall Street Journal, http://blogs.wsj. com/cfo/2015/11/12/investors-want-more-from-sustainabilityreporting-says-former-sec-head/?mod=djemCFO_h , November 12, 2015. The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (revised edition). Greenhouse Gas Protocol & World Business Council for Sustainability Development, 2014 http://www.ghgprotocol.org/standards/ corporate-standard, 2014.

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ADVISORY BOARD

EDITORIAL

Yakov Amihud New York University

Carl Ferenbach High Meadows Foundation

Mary Barth Stanford University

Kenneth French Dartmouth College

Amar Bhidé Tufts University

Martin Fridson Lehmann, Livian, Fridson Advisors LLC

Michael Bradley Duke University Richard Brealey London Business School

Stuart L. Gillan University of Georgia Richard Greco Filangieri Capital Partners

Donald Lessard Massachusetts Institute of Technology John McConnell Purdue University Robert Merton Massachusetts Institute of Technology Stewart Myers Massachusetts Institute of Technology

Laura Starks University of Texas at Austin

Associate Editor John L. McCormack

Joel M. Stern Stern Value Management

Design and Production Mary McBride

G. Bennett Stewart EVA Dimensions

Assistant Editor Michael E. Chew

René Stulz The Ohio State University Sheridan Titman University of Texas at Austin

Richard Ruback Harvard Business School

Alex Triantis University of Maryland

G. William Schwert University of Rochester

Laura D’Andrea Tyson University of California, Berkeley

Trevor Harris Columbia University

Robert Bruner University of Virginia

Glenn Hubbard Columbia University

Charles Calomiris Columbia University

Michael Jensen Harvard University

Christopher Culp Johns Hopkins Institute for Applied Economics

Steven Kaplan University of Chicago

Alan Shapiro University of Southern California

David Larcker Stanford University

Betty Simkins Oklahoma State University

Martin Leibowitz Morgan Stanley

Clifford Smith, Jr. University of Rochester

Robert Eccles Harvard Business School

Editor-in-Chief Donald H. Chew, Jr.

Robert Parrino University of Texas at Austin

Michael Brennan University of California, Los Angeles

Howard Davies Institut d’Études Politiques de Paris

Charles Smithson Rutter Associates

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Ross Watts Massachusetts Institute of Technology Jerold Zimmerman University of Rochester

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