Monitoring the monitor: Enabling strategic change when the former CEO stays on the board

Firms often retain their former CEOs on the board after succession to benefit from the former CEOs’ firm-specific expertise. However, their presence can inhibit successor CEOs from implementing meaningful strategic change, as the former CEOs seek to preserve their personal legacy and may see the strategic landscape differently, especially when the successor CEO is hired from outside the firm. Using a strategic leadership interface perspective, we propose that board members can alleviate this potential tension and enable strategic change. To test our theory, we focus on a subsample of succession events: when the former CEO stays on board as chair and the successor CEO is an outsider. This scenario is likely to result in strategic tension and cognitive differences between these two organizational leaders. We find that in such situations, boards with a higher proportion of outside directors experience greater post-succession strategic change; we find no effect in other succession scenarios. We isolate legacy conservation as a motivating factor by showing that the effect manifests for divestitures but not for acquisitions.     

Why and when female directors are less engaged in their board duties: An interface perspective

Female representation on boards is perhaps one of the most studied topics in board-governance research. At the same time, much is unknown about female directors' task engagement within boards. Drawing from psychological theory on societal gender beliefs, our study tests whether the impact of director gender on supervisory task engagement hinges on status dynamics in two relational interfaces: the director–board interface and the director–CEO interface. According to this perspective, female directors show less task engagement because gender is a diffuse status cue that creates status differentiation within the director–board interface. Multi-source board survey data (n = 61 boards, n = 315 directors) confirms that, within the confines of the boardroom, female directors do, indeed, receive lower-status ratings than male directors. This effect is weaker when boards have a female chair. Furthermore, lower status explains perceived lower task engagement of female directors, but this link critically hinges on the CEO–director interface. The impact of status differences is more pronounced when directors intersect with a relatively dominant CEO. All in all, the results demonstrate that relational interfaces play a key role for female directors’ task engagement in their board duties.     

Unternehmenserfolg, Wechsel im Vorstandsvorsitz und Disziplinierung von Finanzvorständen

The Chief Financial Officer (CFO) is often referred to as a company’s No. 2 on contemporary management boards; yet corresponding empirical evidence is scarce. As a result, academic literature has not yet investigated whether CFOs—like CEOs—are dismissed more frequently if corporate performance is poor and to what extent forced Chief Executive Officer (CEO) turnover also influences disciplinary action towards CFOs. Therefore, in this paper we examine the antecedents of forced CFO departures in the largest German corporations between 1999 and 2006. Building on principal-agent theory, we expect respective relationships between the board of directors, the CEO, and the CFO. Moreover, we propose that principals also take team-specific and firm-specific human capital into consideration when disciplining agents. We find that poor corporate performance and forced CEO turnover both independently increase the likelihood of CFO dismissal. In addition, we find indications for a close team relationship between CFOs and CEOs. In summary, our results support the prominent role of CFOs alongside CEOs on contemporary management boards and suggest a more detailed consideration of CFOs in future research on performance consequences of managerial successions.     

The Service Role of Outside Boards in High Tech Start‐ups: A Resource Dependency Perspective

Despite growing interest in the board of directors of entrepreneurial firms, the role of outside board members in high tech start‐ups has been largely neglected. This dearth of research is surprising since the high level of resource dependency these ventures face is likely to heighten the potential contribution outside board members can make. We argue that, for high tech start‐ups, the service role the board plays will be crucial in overcoming resource dependencies. In contrast to existing studies that tie the outside boards’ servicing role to board characteristics, we propose that greater attention needs to be paid to the resource profile of the venture. Building on resource dependency theory, we find that the extent to which the outside board members fulfil a service role is dependent on the initial human, financial and technological resource base of the entrepreneurial venture. Specifically, we find that ventures with less diversified teams, teams with lower levels of R&D experience and higher levels of financial experience and ventures earlier in the technological development process receive higher levels of support from the outside board.     

Boards in microfinance institutions: how do stakeholders matter?

Microfinance Institutions provide financial services to poor people. Governance of these organizations is important so that they can operate efficiently and sustainably. This study analyzes the influence of stakeholders (donors, employees, customers, and creditors), on board structure (board size and CEO duality), and on organizational performance. We use a global data set of 379 microfinance institutions from 73 countries, collected from rating organizations. Supported by stakeholder theory, agency theory and resource dependence theory, we find stakeholders to be important and have various influences on microfinance institutions. We find donors to be associated with small boards, non-duality and better performance. Employees are associated with large boards, while customers are associated with duality and good financial performance. Creditors opt for duality and better social performance. Implications and areas for future research are discussed.     

Conflict in the boardroom: a participant observation study of supervisory board dynamics

We develop a conflict-oriented model of board task performance and argue that a common framework, that is, a shared understanding of its role, helps boards to perform well. Conflict is the mediating effect through which this plays out. We posit that a common framework increases board task performance because it reduces intragroup relationship conflicts, increases task conflicts within the board, and reduces conflicts in the relationship between board and CEO. We explore the model through a comparative participant observation study of 11 supervisory boards in action. The results show that while low levels of relationship conflict are typically considered a sign of a well-functioning board, the avoidance of relationship conflict negatively impacts board task performance and may lead to ‘cognitive blindness’. Boards of directors should manage—rather than avoid—relationship conflict. Based on our findings, we suggest an extended model of conflict in boards that takes into account the negative effect of conflict avoidance.     

Power and trust in board–CEO relationships

In this paper we develop and test a theoretical model that reduces relational risks to solve the puzzle of conflicting task requirements imposed on boards of directors in listed companies. Doing so unites two seemingly conflicting tasks—board control and service tasks—through examining relational risks between the board and the CEO. We also present two mechanisms that could reduce relational risks. One is board power over the CEO, and the other board trust in the CEO. Practitioners could apply these two mechanisms to achieve better performance of board control and service tasks simultaneously. We test hypotheses using 441 survey responses collected in 2005. The result shows a good fit between the model and survey data, indicating examining relational risks is a rewarding approach to understanding conflicting board task performance, and board control over the CEO and board trust in the CEO are two effective mechanisms to reduce relational risks.     

Board age and corporate financial fraud: An interactionist view

Unlike past studies which have focused on either executives or boards of directors, this study takes an interactionist view to investigate the determinants of corporate financial fraud. We propose that CEOs evaluate the opportunities for financial fraud according to both situational stimuli and their own personal characteristics. As older directors are often more experienced and have more to lose if they fail in their monitoring duties, we expect them to be more capable and to have stronger motivation for monitoring CEOs closely. As such, we propose that a CEO is less likely to engage in corporate financial fraud when the average age of the board of directors increases (i.e., board age). However, when the CEO is older than the board, the CEO may attach less importance to board age when deciding whether to commit fraud. Therefore, we further propose that the CEO–board directional age difference can weaken the effect of board age. Our empirical analyses provide strong support for these hypotheses. Our study contributes to the literature on corporate governance by highlighting the often neglected roles of board age and CEO–board directional age difference in deterring corporate financial fraud.     

CEO human capital,top management teams,and the acquisition of venture capital in new technology ventures: An empirical analysis

We combine signalling and human capital theory to analyze how competencies of new venture CEOs impact the amount of money technology ventures acquire in venture capital (VC) financing rounds. Using data on 117 financing events in the biotechnology industry, we show that education in management, founder-based firm-specific experience, international experience, and industry-specific experience of the CEO impact the VCs’ financial commitments. Moreover, we find that the effects of management education and industry experience are moderated by the size of the venture's top management team. We discuss the implications of these findings for the research literature on technology ventures and venture capital.     

Determinants of CEO Age at Succession

Based on Brickley’s (2003) call for research on the CEO/turnover relation, we examine determinants of CEO age at succession. Utilizing the similarity–attraction paradigm, we propose that board members will select new CEOs that are similar to their own age. We find a strong positive relation between successor CEO age and average board member age. Thus, the similarity–attraction paradigm seems to play a role in board of director selection of CEO successors. However, we also propose that poor prior performance may mitigate similarity–attraction. Our results are also consistent with this hypothesis because we find no relation between successor CEO and board age following poor prior performance. Finally, the hiring of an age-similar CEO does not reduce the companies’ subsequent financial performance and may even have a slightly positive impact on it.     

Relational Ownership and CEO Continuity: A Property Rights Perspective

Inspired by agency theory, research on Chief Executive Officer (CEO) succession often focuses on turnovers as a mechanism to discipline CEOs in the event of poor firm performance. Recent research extends this view by showing that CEO turnovers can also lead to substantial disruption in a firm's management. Less is known, however, about the antecedents of disruption and continuity in the context of CEO turnovers. Drawing on modern property rights theory, we investigate how CEO continuity varies across different types of firms. Using a sample of Swiss publicly traded firms, we find that relational ownership enhances the likelihood of CEOs staying in office or moving to the position of board chair. Firms with little relational ownership, in contrast, display a high degree of CEO continuity only when capital intensity is high. Provided that a CEO turnover occurs, relational ownership and capital intensity reduce the likelihood of interim CEO successions. These findings highlight the importance of a nuanced view of CEO continuity, taking into account owner types as well as contextual factors.     

CEO Duality,Agency Costs,and Internal Capital Allocation Efficiency

This study examines the impact of CEO duality on firms’ internal capital allocation efficiency. We observe that when the CEO is also chair of the board, diversified firms make inefficient investments, as they allocate more capital to business segments with relatively low growth opportunities over segments with high growth opportunities. The adverse impact of CEO duality on investment efficiency prevails only among firms that face high agency problems, as captured by high free cash flows, staggered board structure and low board independence. Depending on the severity of the agency problem, CEO duality is associated with a decrease in industry‐adjusted investment in high‐growth segments of 1% to 2.1% over the following year, relative to that in low‐growth segments. However, CEOs’ equity‐based compensation curbs the negative effect of CEO duality on internal capital allocation efficiency. Overall, the findings of this study offer strong support for the agency theory and postulate the internal capital allocation policy as an important channel through which CEO duality lowers firm value in diversified firms.     

How do CEOs matter? The moderating effects of CEO compensation and tenure on equity ownership in international joint ventures

We propose that CEO compensation and tenure moderate the relationship between multinational corporations' (MNCs) R&D intensities and their percentages of equity ownership in international joint ventures (IJVs). Transaction cost economics (TCE) suggests a positive relationship between MNC R&D intensity and IJV equity ownership, but this relationship has not been confirmed consistently in prior research. We examine the moderating effects of CEO compensation and tenure on the relationship between MNC R&D intensity and IJV equity ownership, thereby bringing more nuanced explanations from agency theory and upper echelons theory into the discussion. Our proposed relationships were tested using a sample of 202 IJVs formed between U.S. MNCs and foreign partners in high-tech industries for the period 1993 to 2003. We found an overall positive relationship between MNC R&D intensity and the percentage of equity ownership in IJVs. Moreover, CEO tenure and bonus compensation each weaken the positive R&D intensity-equity ownership relationship in our sample, while CEO stock options compensation amplifies it. These findings indicate that CEO compensation and tenure influence decision making about equity ownership in IJVs, suggesting that scholars and boards of directors should consider these CEO-related factors when evaluating strategic decisions regarding IJVs.     

The impact of CEO turnover on firm performance around interim successions

Prior research reports that financial performance of firms that hire interim CEO successors is worse following interim CEO appointments than those that hire permanent successors. We find that this underperformance occurs only following voluntary turnover interim appointments, which represent a small fraction of all voluntary turnovers and roughly a quarter of all interim appointments. We do not observe poor performance when boards hire interim successors following instances of forced departure. Further analysis shows that poor performance during voluntary turnover interim successions are limited to using operating performance measures; market performance is not significantly worse following interim successions. Our results indicate that many interim appointments should not be viewed as value decreasing endeavors and future research on post-succession financial performance should consider the circumstances surrounding the turnover of the predecessor.     

The role,power and influence of company chairs

This paper develops an analytical framework to depict the heterogeneity that characterises the role of board chair and demonstrate the potential variability in how chairs operate boards and exercise power and influence on strategy, control and resource related tasks at board level. Theories of power and influence, as applied to top management teams and boards of directors, are explicated within the context of contemporary governance practices that are establishing the role of the board chair as distinct to that of the chief executive officer. Specifically, the paper maps sources of power and varying contemporary chair practices, including chair nomenclature (i.e. executive vs. non-executive chairs), chair origin (insider vs. outsider) and chair time (full-time vs. part-time). A number of theoretical chair-power models emerge from this analysis and are subject to empirical analysis using data collected from 160 chairs of 500 FTSE-listed companies. Theoretically and empirically, the paper complements structural approaches to studying boards with attention to behaviour on boards. By linking board structure, board process and the exercise of influence, the study reveals both differences amongst chairs in how they run the board, but also that chairs’ differ in the influence they exert on board-related tasks. Full-time executive chairs exert their greatest influence in strategy and resource dependence tasks whereas part-time, non-executive chairs seem to exert more influence over monitoring and control tasks.     

基于能力视角的创业者人力资本与新创企业绩效作用机制研究

以往关于创业者人力资本与新创企业绩效之间关系的实证研究一直没有得到一致性的结论,导致创业领域的学者们质疑创业者人力资本是否对新创企业绩效产生影响;然而在创业实践中风险投资家评估项目时却十分重视创业者的人力资本。本研究基于能力视角,尝试揭示人力资本与新创企业绩效的作用机制,论证了创业能力在创业者人力资本和新创企业绩效关系中的中介作用,采用因子分析、多元回归分析等方法,通过对173家新创企业进行问卷调查,对理论假设进行了检验。研究发现:(1)创业者人力资本对新创企业绩效的影响是通过创业能力的中间传导促成的,即创业能力发挥了中介作用;(2)不同类型的人力资本对不同的创业能力发挥作用。     

The configurational effects of board monitoring and the institutional environment on CEO compensation: a country-level fuzzy-set analysis

This study examines the causal complexity of how the effectiveness of board monitoring influences CEO compensation around the world. Previous research drawing from the managerial power theory and ‘increased career risks’ perspective offer alternative arguments for how low and high levels of effective monitoring by boards of directors influence CEO compensation. Adopting a configurational approach using fuzzy-set qualitative comparative analysis, we explore the idea that there are multiple causal paths leading to high levels of CEO compensation, such that theoretical logic from both theories may be relevant contingent upon the institutional environment in which the relationship is embedded. Our findings in a sample of 38 countries suggest that high CEO compensation is an outcome of both the presence and absence of effective board monitoring depending upon how it combines with minority investor protections and the cultural dimensions of power distance, uncertainty avoidance, and individualism, as well as the overall stock market value. Specifically, in countries with high levels of effective board monitoring, high CEO compensation will be more likely when the country’s culture is high in uncertainty avoidance, low in power distance and when there are strong protections for minority investors. Whereas in countries with low levels of effective board monitoring, high CEO compensation will be more likely when power distance is high and uncertainty avoidance is low and when there are weak protections for minority investors. Our country-level study highlights the theoretical strengths of employing a configurational approach to explore the complex interrelationships of governance mechanisms and the contexts in which they manifest.     

Institutional voids,international learning effort and internationalization of emerging market new ventures

Much of the existing scholarly works portray institutional voids (IVs) in emerging economies as impeding forces against the development of new ventures. However, little attention has been paid to how such voids generate positive outcomes in emerging market new ventures. Drawing on the institutional theory, we propose IVs as crucial enablers of new venture internationalization. In addition, we investigate both how and when IVs enhance the degree to which new ventures internationalize by examining international learning effort (ILE) as a mediator and two domestic market environmental factors (i.e., environmental dynamism and competitive intensity) as important contingencies. We test our moderated mediation model using primary data gathered from 211 new ventures from Ghana. We found that ILE mediates the relationship between IVs and new venture internationalization and that both environmental dynamism and competitive intensity moderate the indirect relationship between home-country IVs and new venture internationalization. We discuss the theoretical and practical implications of this study.     

The cost of CEO duality: Evidence from French leadership compensation

This paper aims to provide a detailed analysis of the relationship between board leadership structures and executive compensation. According to agency theory, the combined position of CEO and Chairperson of the Board (COB) entails greater compensation for the CEO in order to reduce conflicts of interest. In the literature, combined board structure is generally considered to generate additional costs for companies. However, the choice of two separate structures implies the payment of incentive compensation for the COB in addition to that defined for the CEO. This paper investigates the financial cost of duality when compensation packages are set for both leaders. Our results suggest that although combined board structure is associated with higher incentive compensation for the CEO, the overall compensation cost to the company is no higher when the chairperson's compensation is considered.     

《萨班斯法案》对美国公司董事会影响的分析

2002年度美国出台的《萨班斯法案》全方位地对安然等事件暴露出来的问题作出相应的调整性规定,必将对公司治理产生深切的影响。《萨班斯法案》对审计委员会提出了修正性和提高性要求,本文选择外部董事、女性董事、财务专家、CEO兼任董事会主席、CEO在提名委员会任职等指标进行分析。实证分析结果说明:《萨班斯法案》有效消除了董事会和管理层任人唯亲的现象,董事会的独立性和专业性均有所提高。其实,《萨班斯法案》颁布之前就有加强公司治理的要求,公司治理就有改进的趋势,但《萨班斯法案》关于审计委员会方面的明文规定加速了公司董事会的变化,使得公司治理改革超越了法律的既定要求。