Sarah Peck, Ph.D., primarily teaches the black-and-white world of numbers and financial formulas. But her research — and her passion — resides in the gray areas where ethics and business collide.
Sara Peck , Ph.D., is an associate professor of finance. She specializes in corporate governance and created a class in investment ethics that is believed to be the first in the nation.
Business ethics is getting more attention than ever in the wake of scandals at corporations such as Enron, WorldCom, and, most recently, Hewlett-Packard.
“You hear the interviews these people give, and it’s clear that they didn’t sort of wake up and say, ‘I think I’m going to rob the company,’” says Peck, chair of Marquette’s Department of Finance. “They kind of convince themselves that what they’re doing really isn’t wrong initially, and then they go down that path. It’s part of being human, I think. People lie to themselves all the time.”
Much of Peck’s research has focused on corporate boards, including the characteristics of boards that function well and that are associated with high shareholder returns. She considers the size and mix of individuals on a board, including their age. “If they’re retired, they have more time to spend monitoring and seem to be better at it,” she says.
Incentives are also key. Enron’s board members were paid $50,000 a year, but they only received the money if they stayed for five years. And yet every year, they needed the nomination of management to keep their seats. That’s standard procedure for most corporations — managers, in effect, control who is on the board, and while shareholders can elect alternate nominees, it’s expensive and difficult. Add Enron’s deferred compensation to the equation, and it discourages board members from being effective watchdogs.
“Now when they set that plan up, the idea was, ‘Well, we want to encourage people to stay for long-term strategic planning.’ But the added effect is that they’ve got money sitting in an account, and if they aren’t buddies with the CEO, they lose it,” Peck explains.
Enron could be a classic example of how people lie to themselves. “On one hand, they feel that the mechanism is working and that they’re doing the right thing,” Peck says. “But then they have to think through that there’s some unintended consequences, and it may be in fact that they knew that but nobody really wanted to say it aloud.”
She has also researched CEO compensation, manipulation of earnings, and shareholder rights, and she has published in journals such as American Business Review and Journal of Applied Business Research. She recently teamed up with Michaël Dewally, Ph.D., an assistant professor of finance, for a preliminary paper titled, “Outside Director Resignations: Causes and Consequences.” In the middle of their analysis of 110 cases, HP’s director resigned, making the research even more timely.
What they’ve found so far is that a company’s stock price tends to drop after a director announces his or her resignation. This is especially true for companies with slow growth, decreasing profits and a powerful CEO. But if the director resigns with the explanation “I’m too busy,” the stock price tends to rise.
“We view that as the market saying, ‘It’s good that you’re leaving because now we can get directors who can give their full attention to the firm.’ It’s also occurring in firms that show increased growth, so obviously the firm is doing really well, and they need people who can effectively manage it on the board,” Peck says.
Life Cycle: From Birth to Death
- Unraveling the mysteries of proteins
- Protecting brittle bones
- Understanding the damaged brain
- The lungs: more than gas exchange
- The mind-body connection
- Preserving family peace
- Bringing clarity to delirium
- Protecting muscles on and off Earth
Improving the Human Condition
Studying Our World
Ethics & social justice
- Keeping business honest
- Of humans and cyborgs
- Journalism, ethics and the law
- Punishing corporate crime
- Dissecting financial fraud
- Scrutinizing elder law
Student Research
Interdisciplinary Research
Quick Facts About Marquette
| Identity: | Catholic, Jesuit, private |
| Established: | 1881 |
| Location: | Milwaukee, Wisconsin |
| Undergraduate: | 8,048 |
| Postgraduate: | 3,500 |
| Campus: | Urban, 80 acres |
| Athletics: | 14 NCAA Division I teams (Big East Conference) |
| Colors: | Blue and Gold |
