Interview with Espen B. Eckbo, Tuck Centennial Professor at Tuck School of Business

Interview with Espen B. Eckbo, Tuck Centennial Professor at Tuck School of BusinessTuck consistently ranks in the top 10 in all the major business school rankings and we had the pleasure of talking to Professor Eckboe who is the man behind the centre of Corporate Governance at Tuck.
Professor Eckbo, what does it mean to be a Tuck Centennial Professor?
Tuck was founded in the year 1900, and is today the world’s oldest MBA business school program. Year 2000 was the centennial celebration for the school. As part of the capital campaign for the centennial, they raised funds for a chair in finance, the Tuck Centennial Chair, which was given to me. You find a pdf file with my CV on
Why did the Tuck School of Business set up this centre of Corporate Governance? What is your raison d’?tre if I may express it this way?
I founded the Center for Corporate Governance in 1999 (before all the corporate scandals broke). The center promotes academic research and brings into the classroom the ongoing debate on corporate governance issues and reforms. See the web site
Corporate governance is a system of checks and balances designed to protect investor rights. To raise capital corporations around the world sell financial contracts. These contracts specify certain rights, such as interest and principal (if debt), dividends and voting rights (if equity). However, these rights are not worth much if they cannot be protected, either by court actions or by direct actions by the investor. If the rights are not protected, then corporate finance becomes expensive. Thus, countries around the world are developing systems of investor protection that promotes financial and economic development.
Globalization has become a controversial issue on which the disadvantaged poor (or at least those who purport to speak for them), are on one side and the rich and wealth (or at least those advocate the virtues of Globalization) are on the opposing side. Does the center have a stand on this debate and why?
Principles of good corporate governance enhance the ability of all interest groups, also labour, to raise concerns and influence the terms and fulfilment of their contracts. As such corporate governance developments help lower the controversy over international trade. On the other hand, we do not go into specifics of the labour contracts. That’s the domain of labour unions and other parties to the labour contract itself.
You may wonder why financial contracts need special protection. The problem is this: When the public (you and me) invest in the stock market, we do so without any intention or incentive to control the firms that receive the cash for investment purposes. So, who makes sure that your rights as an investor are protected? Well, nobody, except the board of directors (which is typically too close to the firm to stand up for investor rights), or the legal system (which may be undermined by corruption of the judicial system in many countries). So we need to develop systems for protection. When it comes to labour, however, everyone is working to negotiate and enforce their own labour contracts. So, you don’t need a special system of protection for these types of contracts. That’s why corporate governance does not get into the debate over globalization of labour markets.
The main task is to promote the reputation of the Tuck School of Business around the world. I do so by organizing conferences and one-day events with business and governmental leaders around the world (about one a year). The center has organized policy debates throughout South America, Europe, and Asia. I also host a world-class academic conference in corporate finance here at Tuck every two years.
Looking at the concept of Governance, do you think that this can be applied also to the public sectors and eventually the international organisations?
Public sector corporate governance is very important. Non-profit organizations are probably the worst when it comes to governance. One of the reasons for this is the lack of a clear allocation of ownership rights to the resources handled by this sector. For this reason it is also more difficult to successfully change things around. Change processes become political (with all kinds of special interest groups clamouring for a piece of the pie), while in the corporate sector, at least there are some well defined owners (equity holders) with the right to design the system.
In this world of globalisation, what do you see at the major threats?
On the governance side, there is a definite trend towards international convergence of systems, and I don’t think this trend can be broken. The reason is simply that just about every country (including Russia and China) sees it as in their interest to attract foreign investment capital.
On the political side, the main threat to globalization and international economic development is terrorism and the continued dependence on oil to produce energy. The two may be linked; however, terrorism goes far beyond the oil. I believe that the UN should play a major role in countering terrorism. However, as you know, the UN itself is an organization fraught with governance problems. With so many diverse interests, and with no international law to back up UN’s right to interfere in member countries internal affairs, the UN is bound to be passive (Rwanda, Kosovo, Sudan…). So, it may be beneficial for the UN to have a state like the US be aggressive. Sort of like a « good cop, bad cop » combination. So, the willingness of the US to play this role is actually a positive development (whatever you think of President Bush).