Managerial Psychology, Strategic Decisions and Corporate Governance: The Case of Alcoa, Inc. (2009-2013)

Abstract

Although Alcoa had various and better strategic options, its strategy during 2010-2013 was sub-optimal and didn’t result in sustainable growth. Alcoa’s decisions and misconduct could have resulted in Deadweight Losses (in both the prices of Aluminium and in Alcoa’s stock prices) and reduced Social Welfare (in terms of increased uncertainty; adverse effects of the stock market; prices of Aluminium; employee morale; and the adverse effects of Alcoa’s litigation strategy on its customers, suppliers, shareholders and employees). This article: i) reviews the earnings management, asset quality management and poor strategic decision making perpetrated by Alcoa during 2010-2013; ii) provides evidence of Regulatory Failure (Alcoa’s corporate governance problems illustrate the weaknesses of “Fair value” accounting, IFRS accounting standards, the Sarbanes Oxley Act, the US FSOC’s “Non-financial SIFI criteria and the Dodd Frank Act); and iii) introduces new theories; iv) summarizes key factors that may affect companys’ receptiveness to corporate venturing proposals.