TITLE

Co-opted Boards

AUTHOR(S)
Coles, Jeffrey L.; Daniel, Naveen D.; Naveen, Lalitha
PUB. DATE
June 2014
SOURCE
Review of Financial Studies;Jun2014, Vol. 27 Issue 6, p1751
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
We develop two measures of board composition to investigate whether directors appointed by the CEO have allegiance to the CEO and decrease their monitoring. Co-option is the fraction of the board comprised of directors appointed after the CEO assumed office. As Co-option increases, board monitoring decreases: turnover-performance sensitivity diminishes, pay increases (without commensurate increase in pay-performance sensitivity), and investment increases. Non-Co-opted Independence—the fraction of directors who are independent and were appointed before the CEO—has more explanatory power for monitoring effectiveness than the conventional measure of board independence. Our results suggest that not all independent directors are effective monitors.
ACCESSION #
95992897

 

Related Articles

  • BOARD CONTROL, REMUNERATION COMMITTEES, AND TOP MANAGEMENT COMPENSATION. Conyon, Martin J.; Peck, Simon I. // Academy of Management Journal;Apr98, Vol. 41 Issue 2, p146 

    Using panel data on large, publicly traded U.K. companies gathered between 1991 and 1994, the authors examined the role of board control and remuneration committees in determining management compensation. Board monitoring, measured in terms of the proportion of nonexecutive directors on a board...

  • A new kind of captured board. MULÉ, ANN C.; ELSON, CHARLES M. // Directors & Boards;2014 First Quarter, Vol. 38 Issue 2, p27 

    The article presents the author's insights on the management knowledge-captured board. The authors' say that good-governance advocates have sought to destroy the management-captured board by emphasizing the vitality of board independence. They state that the independent board members may be de...

  • Independent chairmen not so popular in 2013. BURR, BARRY B. // Pensions & Investments;5/27/2013, Vol. 41 Issue 11, p0003 

    The article looks at shareholder votes on various corporate governance issues, as of 2013. It discusses independent chairman proposals, or proposals requiring the chief executive officer (CEO) and chairman positions to be held by different people. Other topics include executive compensation and...

  • Cronyism and the Determinants of Chairman Compensation. Oxelheim, Lars; Clarkson, Kevin // Journal of Business Ethics;Sep2015, Vol. 131 Issue 1, p69 

    This study examines determinants of chairman compensation in a supervisory board setting and, specifically, the relationship between chairman and CEO compensation. Using a sample of publicly listed firms in Sweden, the study indicates that chairman compensation-despite its fixed nature-is...

  • Effects of Litigation Risk on Board Oversight and CEO Incentive Pay. Laux, Volker // Management Science;Jun2010, Vol. 56 Issue 6, p938 

    Various commentators have praised the WorldCom and Enron settlements for holding outside directors personally liable, arguing that heightened director liability will induce greater board oversight. This paper shows that the connection between director liability and board behavior is more subtle,...

  • CEOs Under Fire: The Effects of Competition from Inside Directors on Forced CEO Turnover and CEO Compensation. Mobbs, Shawn // Journal of Financial & Quantitative Analysis;Jun2013, Vol. 48 Issue 3, p669 

    This study examines board monitoring when a credible chief executive officer (CEO) replacement is on the board. Inside directors whose talents are in greater demand externally, as reflected by their holding outside directorships, are more likely to become CEOs, and their presence is associated...

  • Director Independence: A Focus on Board Tenure. Romanchek, Bob; Keckley, Jeff // NACD Directorship;Jan/Feb2014, Vol. 40 Issue 1, p75 

    The authors discuss the issue of associating corporate director independence with tenure. They explain that although there are no rules in the U.S. linking a director's independence with tenure, other countries have established rules associating independence with the length of time a director...

  • Inside vs. outside directors. Loewenstein, Victor H. // Corporate Board;Jul/Aug96, Vol. 17 Issue 99, p22 

    Compares the roles of inside directors, outside directors and chief executive officers (CEO). Inside directors' loyalty to CEOs; Common titles appointed to inside directors; Impact of a solid succession planning on Wall Street analysts; Advice to establish a new board after a merger.

  • Golden Parachutes: CEOs and the Exercise of Social Influence. Wade, James; O'Reilly, III, Charles A.; Chandratat, Ike // Administrative Science Quarterly;Dec90, Vol. 35 Issue 4, p587 

    Using an agency theory framework and data on 89 Fortune 500 firms, we assess whether the granting of golden parachutes to chief executive officers is the result of an economically rational process or determined by the social influence of the CEO. While increased takeover risk is associated with...

Share

Read the Article

Courtesy of THE LIBRARY OF VIRGINIA

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics