Director Reputation, Ceo-Board Power, And The Dynamics Of Board Interlocks

This study advances research on CEO-board relationships, interlocking directorates, and director reputation by examining how contests for intraorganizational power can affect interorganizational ties. We propose that powerful top managers seek to maintain their control by selecting and retaining board members with experience on other, passive boards and excluding individuals with experience on more active boards. We also propose that powerful boards similarly seek to maintain their control by favoring directors with a reputation for more actively monitoring management and avoiding directors with experience on passive boards. Hypotheses are tested longitudinally using CEO-board data taken from 491 of the largest U.S. corporations over a recent seven-year period. The findings suggest that variation in CEO-board power relationships across organizations has contributed to a segmentation of the corporate director network. We discuss how our perspective can reconcile contrary views and debates on whether increased board control has diffused across large U.S. corporations.(.)Managemen

Defections From The Inner Circle: Social Exchange, Reciprocity, And The Diffusion Of Board Independence In Us Corporations

This study seeks to reconcile traditional sociological views of the corporate board as an instrument of elite cohesion with recent evidence of greater board activism and control over top management. We propose that CEO-directors may typically support fellow CEOs by impeding increased board control over management but that CEO-directors may also foster this change if they have experienced it in their own corporation. Drawing on social exchange theory, we develop and test the argument that these CEO-directors may experience a reversal in the basis for generalized social exchange with other top managers from one of deference and support to one of independence and control. Using data from a large sample of major U.S. corporations over a recent ten-year period, we show (1) how CEO-directors ''defect'' from the network of mutually supportive corporate leaders, (2) how defections have diffused across organizations and over time, and (3) how this has contributed to increased board control, as measured by changes in board structure, diversification strategy, and contingent compensation. We also provide evidence that a social exchange perspective can explain the diffusion of these changes better than more conventional perspectives on network diffusion that emphasize imitation or learning.Business Administratio

The Swiss Board Directors Network in 2009

We study the networks formed by the directors of the most important Swiss boards and the boards themselves for the year 2009. The networks are obtained by projection from the original bipartite graph. We highlight a number of important statistical features of those networks such as degree distribution, weight distribution, and several centrality measures as well as their interrelationships. While similar statistics were already known for other board systems, and are comparable here, we have extended the study with a careful investigation of director and board centrality, a k-core analysis, and a simulation of the speed of information propagation and its relationships with the topological aspects of the network such as clustering and link weight and betweenness. The overall picture that emerges is one in which the topological structure of the Swiss board and director networks has evolved in such a way that special actors and links between actors play a fundamental role in the flow of information among distant parts of the network. This is shown in particular by the centrality measures and by the simulation of a simple epidemic process on the directors network.Comment: Submitted to The European Physical Journal

Cooperative Or Controlling? The Effects Of Ceo-Board Relations And The Content Of Interlocks On The Formation Of Joint Ventures

This study examines the influence of the social network of board interlocks on strategic alliance formation. Our theoretical framework suggests how board interlock ties to other firms can increase or decrease the likelihood of alliance formation, depending on the content of relationships between CEOs (chief executive officers) and outside directors. Results suggest that CEO-board relationships characterized by independent board control reduce the likelihood of alliance formation by prompting distrust between corporate leaders, while CEO-board cooperation in strategic decision making appears to promote alliance formation by enhancing trust. The findings also show how the effects of direct interlock ties are amplified further by third-party network ties.Business Administratio

Governance networks: Interlocking directorships of corporate and nonprofit boards

This study describes the interlocking networks of corporate directors serving on publicly listed corporate boards and those on the boards of nonprofit organizations in Western Australia in 2006. When this study was undertaken, the state was the beneficiary of a booming economy in resource development prior to the global financial crisis, yielding a substantial number of resource companies with their headquarters in Perth, the capital city of Western Australia. Through social network analysis using NetDraw, we trace the extent of interpersonal connections of prominent individuals who serve on these boards in this relatively isolated state in Australia. The network figures demonstrate the inner circle of companies and nonprofits with their interlocking directorships that suggest the growing interpenetration among the state, the market, and civil society. As a result of reduced government funding during the last two decades in Western Australia, nonprofit organizations have had to use market strategies to increase their revenues, which is one factor that has led to this greater interdependence between previously separate groups. Thus, market forces have blurred the boundaries that once separated private companies from nonprofit organizations, increasing the interlocking nature of their board directors

The Other Pathway To The Boardroom: Interpersonal Influence Behavior As A Substitute For Elite Credentials And Majority Status In Obtaining Board Appointments

Using survey data on interpersonal influence behavior from a large sample of managers and chief executive officers (CEOs) at Forbes 500 companies, we examine how ingratiatory behavior directed at individuals who control access to board positions can provide an alternative pathway to the boardroom for managers who lack the social and educational credentials associated with the power elite. Findings show that top managers who engage in ingratiatory behavior toward their CEO, with ingratiation comprising flattery, opinion conformity, and favor-rendering, will be more likely to receive board appointments at other firms where their CEO serves as director and at boards to which the CEO is indirectly connected in the board interlock network. Further results suggest that interpersonal influence behavior substitutes to some degree for the advantages of an elite background or demographic majority status. Our findings help explain why norms of director deference to CEOs have persisted despite increased diversity in the corporate elite and have implications for research on corporate governance, social networks in the corporate elite, and for the sociological question of whether demographic minorities and individuals who lack privileged backgrounds have equal access to positions of leadership in large U.S. companies. Our study ultimately suggests that such individuals face a rather subtle and perhaps unexpected form of social discrimination, in that they must engage in a higher level of interpersonal influence behavior in order to have the same chance of obtaining a board appointment.Managemen

Banks, knowledge and crisis: a case of knowledge and learning failure

Purpose – Regulators such as Turner have identified excessive securitization, high leverage, extensive market trading and a bonus culture, as being major factors in bringing about the bank centred financial crisis of 2007-2009. Whilst it is inevitable that banks adopt procyclical business strategies, not all banks took excessive risks and subsequently had to be rescued by taxpayers. The paper examines the extent to which individual bank outcomes can be attributed to systematic differences in banking knowledge concerning the primary risks and value drivers of their organisations by bank board directors and top management. Design/methodology/approach – The paper reviews a wide range of theoretical, historical and empirical literatures on banking models and detailed case analyses of failing and non-failing banks. A framework for understanding the role and application of knowledge in banking is developed which suggests how banks, despite their pro-cyclical business strategies, are able to institutionalise learning and actively create new knowledge through time to improve bank organisation, intermediation and risk management. Findings – The paper finds that a lack of basic knowledge of banking risks and value drivers by the boards and senior managers of the failing banks were implicated in the banking crisis. These knowledge problems concerned banks' understanding of their organisation, intermediation and risk management in an active market setting characterised by rapid economic and organisational change. Thus, the failing banks ignored or were unaware of this knowledge and hence experienced acute difficulties with learning the new knowledge needed to address the new problems thrown-up by the financial crisis. Practical implications – The analysis suggests that addressing this knowledge gap via the institutionalisation of banking knowledge ought to constitute an important element of any sustainable solution to the problems currently being experienced by the banking sector. By ensuring greater bank learning, knowledge creation, and knowledge use, governments and regulators could help reduce individual bank risk and the likelihood of future crisis. Originality/value – In contrast to the claims made by some politicians and banking insiders, the analysis indicates that the banking crisis and its severity were neither unpredictable nor unavoidable since some banks, by institutionalising banking knowledge and history of past crises, successfully avoided the pitfalls experienced by the failing banks

Corporate Governance Rating and Family Firms: The Greek Case

Corporate governance (CG) studies have mostly focused on highly dispersed corporations. However, there is an important need for research exploring the governance structure of family-owned firms. The main characteristics that distinguish the family firm from the other types of corporations are the presence of one or more controlling family and the involvement of the owners in the management. Family firm is the most common form of business in Greece. Hence, the governance structures and the performance of the family firms affect the growth opportunities of the capital market. The aim of the paper is to explore the main aspects of CG of family-owned listed companies in Greece. For this purpose, we apply a specific CG rating methodology, using five core CG criteria to distinguish family from non-family firms: shareholders' rights and obligations; transparency, disclosure of information and auditing; board of directors; CEO and executive management and corporate social responsibility and corporate governance commitment. The overall research objective of the study is to develop a CG rating methodology on the current state of corporate governance in Greece. Each firm is rated among the 120 total number of companies (both family-owned and widely- held). The results disclose the potential strengths and weaknesses of the existing corporate governance framework of the family-owned firms and provide specific policy recommendations.family firms, corporate governance rating, Greece