Board-CEO Ties in the CEO Labour Market: Three Essays

This thesis consists of three essays which examine the effects of company board of directors (board)-Chief Executive Officer (CEO) ties in the externally appointed CEO labour market. Over the last five decades, globalization and outsourcing have generated demand for CEOs with generalist rather than company-specific skills. An intimate knowledge of a company and its operations, gained over years of internal experience and training has been replaced by the need for proven strategic leadership and decision-making skills. As a result, companies have found it easier to acquire these skills in a globally competitive market rather than develop them internally. An unintended consequence has emerged: these outsiders may not be well known to a company’s board. This informational asymmetry can be problematic as a board typically has limited information to assess a prospective outsider CEO. In this context, company directors have the potential to help employing companies fill information gaps through their past professional relationships with prospective outsider CEOs. Do prior relationships with prospective outsiders assist boards to appoint transformational and highly productive CEOs? Or do they serve directors’ own and prospective CEOs’ collusive interests at the expense of the corporation and its investors? Does gender matter in the appointment and pay of a new connected/unconnected CEO? The three essays are predominantly empirical and draw on a working sample of 1,460 public company outsider CEO successions across 22 countries that occurred between 1992 and 2018. This working sample consists of data collected from several financial databases including Bloomberg, BoardEx, Compustat, Datastream, Execucomp and Standard & Poor’s (S&P) Capital IQ (CIQ). The first essay investigates the effect of board-CEO ties on outsider CEO performance as measured by return on assets (ROA), return on invested capital (ROIC), return on sales (ROS) and cumulative market-adjusted total stock returns (CARs). It applies an empirical, variance partitioning analysis that compares the performance of companies led by CEOs that have previously worked with directors (Connected CEOs) to those led by CEOs with no prior working relationships with directors (Non-connected CEOs). The results show that the benefits of these relationships to companies are small and that they are more pronounced in institutional environments where there are lower indicators of institutional and governance transparency. As such, they confirm and extend the findings of the literature on CEO succession events in three ways. First, they show that governance transparency places a moderating effect on the role of prior board-CEO ties in outsider CEO successions. Second, the resultsshow that varying governance transparency may play a role in CEO succession events globally. Finally, they show that CEO-led company performance varies according to whether market- or accounting-based financial metrics are used. The second essay explores the effect of board-CEO ties on the awarding of new outsider CEO compensation. Do board-CEO ties help companies offer compensation that serves their interests and those of their investors? Alternatively, are these ties exploited by CEOs such that they can negotiate compensation predominantly in their own interests against those of investors? The empirical analysis focuses on first-year compensation awarded to the newly appointed outsider CEOs and its key compositional elements: namely, the proportion of fixed relative to variable (i.e. equity or performance-related) remuneration. Results show that in the United States, United Kingdom, Canada and Australia, countries that share common approaches to corporate governance, board-CEO ties are associated with CEOs being awarded a greater proportion of their compensation as fixed and in cash rather than variable and at risk. This outcome favours the CEO, but it may also be acceptable to investors consistently with the hypothesis that board-CEO ties reduce informational risk on the new appointee, thus limiting the need to rely on equity as compensation to align incentives. The results are also consistent with the hypothesis that board-CEO ties empower CEOs to negotiate compensation in their own interests in those countries where the presence of independent directors and dispersed arms’ length institutional investors enables CEOs to bargain with boards over pay. They make several contributions. First, they show that board-CEO ties matter in the awarding of new outsider CEO compensation. Second, they highlight that institutional settings and corporate governance-imposed boundary conditions exist to the role of board-CEO ties in reducing information asymmetry and in the political process where CEO pay is negotiated. Third, the results extend existing arguments for the role of information asymmetry in the awarding of CEO compensation and the managerial power theory (MPT) or hypothesis through the linking of several unique theoretical perspectives. The results demonstrate that institutional theory as it applies in a wide-ranging international context is linked to interpreting the theories of asymmetric information and CEO risk-taking and power in explaining the setting of new outsider CEO compensation. The third essay analyses the effect of board-CEO ties and board gender diversity on the composition of CEO compensation, by gender. Despite overwhelming evidence of a gender pay gap that disadvantages women across the entire labour market, women and men CEOs are paid comparable overall levels of compensation. As the CEO compensation literature has not fully explored whether there are gender differences in the composition of compensation, the paper tests this hypothesis. A theoretical model is developed to account for empirical evidence that women and men occupy different wage bargaining positions when negotiating compensation with companies, in part because of differences in reservation wages. These bargaining positions are important because they anchor wage negotiations and affect the level and composition of compensation offered to a prospective CEO. The essay’s results show that overall compensation for women and men is comparable; however, women CEOs in the United States, United Kingdom, Canada and Australia receive a lower proportion of fixed compensation to overall than men. This finding provides new insights into the existence of a gender pay gap for CEOs, consistent with well-known gender differences in risk preferences and bargaining positioning. In an extended analysis, the essay finds that greater board gender diversity can help women close the gender gap in pay structure. Building on this thesis’s contributions, future research could continue to explore how corporate and institutional transparency affects the functioning labour markets, including those for CEOs. Further research could also investigate more nuanced aspects of board-CEO ties such as the impact of different board structures, including those with independent directors and specific remuneration and nominations, and compensation committees, that recommend and award CEOs

pyprop8: A lightweight code to simulate seismic observables in a layered half-space

The package pyprop8 enables calculation of the response of a 1-D layered halfspace to a seismic source, and also derivatives (‘sensitivity kernels’) of the wavefield with respect to source parameters. Seismograms, seismic spectra, and measures of static displacement (e.g. GPS, InSAR and field observations) may all be simulated. The method is based on a ThompsonHaskell propagator matrix algorithm, described in O’Toole & Woodhouse (2011) and O’Toole et al. (2012). The package is entirely written in Python, dependent only on the mainstream libraries numpy (Harris et al., 2020) and scipy (Virtanen et al., 2020). As such, it is lightweight and easy to deploy across a variety of platforms, making it particularly suited to use for teaching and outreach purposes

Probabilistic point source inversion of strong-motion data in 3-D media using pattern recognition: A case study for the 2008 M w 5.4 Chino Hills earthquake

Despite the ever increasing availability of computational power, real-time source inversions based on physical modeling of wave propagation in realistic media remain challenging. We investigate how a nonlinear Bayesian approach based on pattern recognition and synthetic 3-D Green's functions can be used to rapidly invert strong-motion data for point source parameters by means of a case study for a fault system in the Los Angeles Basin. The probabilistic inverse mapping is represented in compact form by a neural network which yields probability distributions over source parameters. It can therefore be evaluated rapidly and with very moderate CPU and memory requirements. We present a simulated real-time inversion of data for the 2008 Mw 5.4 Chino Hills event. Initial estimates of epicentral location and magnitude are available ∼14 s after origin time. The estimate can be refined as more data arrive: by ∼40 s, fault strike and source depth can also be determined with relatively high certainty

Application of Collaborative Learning Paradigms within Software Engineering Education: A Systematic Mapping Study

Collaboration is used in Software Engineering (SE) to develop software. Industry seeks SE graduates with collaboration skills to contribute to productive software development. SE educators can use Collaborative Learning (CL) to help students develop collaboration skills. This paper uses a Systematic Mapping Study (SMS) to examine the application of the CL educational theory in SE Education. The SMS identified 14 papers published between 2011 and 2022. We used qualitative analysis to classify the papers into four CL paradigms: Conditions, Effect, Interactions, and Computer-Supported Collaborative Learning (CSCL). We found a high interest in CSCL, with a shift in student interaction research to computer-mediated technologies. We discussed the 14 papers in depth, describing their goals and further analysing the CSCL research. Almost half the papers did not achieve the appropriate level of supporting evidence; however, calibrating the instruments presented could strengthen findings and support multiple CL paradigms, especially opportunities to learn at the social and community levels, where research was lacking. Though our results demonstrate limited CL educational theory applied in SE Education, we discuss future work to layer the theory on existing study designs for more effective teaching strategies.Comment: 7 page

Overcomplete tomography: a novel approach to imaging

Regularized least-squares tomography offers a straightforward and efficient imaging method and has seen extensive application across various fields. However, it has a few drawbacks, such as (i) the regularization imposed during the inversion tends to give a smooth solution, which will fail to reconstruct a multi-scale model well or detect sharp discontinuities, (ii) it requires finding optimum control parameters, and (iii) it does not produce a sparse solution. This paper introduces ‘overcomplete tomography’, a novel imaging framework that allows high-resolution recovery with relatively few data points. We express our image in terms of an overcomplete basis, allowing the representation of a wide range of features and characteristics. Following the insight of ‘compressive sensing’, we regularize our inversion by imposing a penalty on the L1 norm of the recovered model, obtaining an image that is sparse relative to the overcomplete basis. We demonstrate our method with a synthetic and a real X-ray tomography example. Our experiments indicate that we can reconstruct a multi-scale model from only a few observations. The approach may also assist interpretation, allowing images to be decomposed into (for example) ‘global’ and ‘local’ structures. The framework presented here can find application across a wide range of fields, including engineering, medical and geophysical tomography

Transparent soil for imaging the rhizosphere

Understanding of soil processes is essential for addressing the global issues of food security, disease transmission and climate change. However, techniques for observing soil biology are lacking. We present a heterogeneous, porous, transparent substrate for in situ 3D imaging of living plants and root-associated microorganisms using particles of the transparent polymer, Nafion, and a solution with matching optical properties. Minerals and fluorescent dyes were adsorbed onto the Nafion particles for nutrient supply and imaging of pore size and geometry. Plant growth in transparent soil was similar to that in soil. We imaged colonization of lettuce roots by the human bacterial pathogen Escherichia coli O157:H7 showing micro-colony development. Micro-colonies may contribute to bacterial survival in soil. Transparent soil has applications in root biology, crop genetics and soil microbiology

Discovery and analysis of topographic features using learning algorithms: A seamount case study

Identifying and cataloging occurrences of particular topographic features are important but time-consuming tasks. Typically, automation is challenging, as simple models do not fully describe the complexities of natural features. We propose a new approach, where a particular class of neural network (the “autoencoder”) is used to assimilate the characteristics of the feature to be cataloged, and then applied to a systematic search for new examples. To demonstrate the feasibility of this method, we construct a network that may be used to find seamounts in global bathymetric data. We show results for two test regions, which compare favorably with results from traditional algorithms