A game of thrones—Dynamics of internal CEO succession and outcome

We examine the implications of chief executive officer (CEO) succession methods for firm outcomes and executive incentives. Focusing on internal CEO successions, we find that the largest U.S. firms typically rely on two types of succession methods, namely, heir apparent and horse race successions. Although heir apparent and horse race CEO candidates have similar qualifications, the consequences of these two succession methods differ significantly. We find that horse race successions induce conflict and are detrimental to firm performance but not necessarily to the newly appointed CEOs. Our findings suggest succession method influences firm performance, executive incentives and CEO labour markets.     

On REIT CEO Compensation: Does Board Structure Matter?

In a perfect world where the board of directors is independent of CEO influence, CEO pay-for-performance compensation contracts should be a function of performance only. If the CEO can influence board structure through his ownership of company stock or chairmanship of the board, however, performance contracts are sub-optimal and agency problems arise, which allow the CEO to extract rent and demand compensation in excess of the equilibrium level. As such, models of compensation contracts must include board and ownership structure variables, in addition to the traditional economic determinants. Our analyses with REITs corroborate this notion. Our data demonstrate that the structure of REIT boards are not independent of CEO influence, and significant agency problems exist allowing the CEO to design boards that reward him at the cost of shareholder wealth. CEO compensation in REITs depends significantly on the usual economic measures of performance including firm size and return on assets; more importantly, CEO compensation is higher in REITs where the board is weak in monitoring because of large size, and older directors; the effect of a blockholder is adverse, however. This study provides additional evidence to the growing literature that observed board structures are ineffective in monitoring and governance.     

Determinants of board members' financial expertise — Empirical evidence from France

Very few countries require directors to be financially literate. This article investigates the determinants of boards' financial expertise using a sample of 95 nonfinancial French listed firms. We construct a measure of financial expertise based on educational and career background data for 943 individuals occupying 1140 posts in our sample and explore the determinants of average per-firm financial expertise using a Tobit analysis. We find that average financial expertise is negatively associated with board type (two-tier versus one-tier) and growth opportunities and positively associated with board independence, ownership concentration, and institutional ownership. These findings are robust to sensitivity analyses.     

Corporate Governance, Board Diversity, and Firm Value

This study examines the relationship between board diversity and firm value for Fortune 1000 firms. Board diversity is defined as the percentage of women, African Americans, Asians, and Hispanics on the board of directors. This research is important because it presents the first empirical evidence examining whether board diversity is associated with improved financial value. After controlling for size, industry, and other corporate governance measures, we find significant positive relationships between the fraction of women or minorities on the board and firm value. We also find that the proportion of women and minorities on boards increases with firm size and board size, but decreases as the number of insiders increases.     

银行董事会特征、CEO报酬与银行绩效——基于对11家股份制银行的数据分析

本文通过采集2005～2008年11家已上市的全国股份制商业银行的数据,实证分析了银行董事会独立性与CEO报酬之间的关系,并在考虑银行CEO报酬内生性基础上,进一步检验了银行董事会独立性、CEO报酬和银行绩效的关系。研究结果显示:长任期的CEO、CEO兼任董事长、较大比例的内部董事和较大的董事会规模构成了中国上市银行的监管障碍。银行CEO的高薪酬是不足为奇的,因为高薪酬对应的是银行业绩的显著增长。CEO报酬是银行公司治理的强化机制,授予银行CEO合理的激励报酬可以克服银行监管障碍,提高银行治理水平。     

Undoing the powerful anti-takeover force of staggered boards

We examine cases where managers announce an intention to de-stagger their boards via proxy proposals or board action. The literature has established the staggered board as the most consequential of all takeover defenses and one that destroys wealth. Thus, dismantling staggered boards benefits shareholders. We study the wealth effects and motives behind this change in governance within a conditional event study. We find that de-staggering the board creates wealth and that shareholder activism is an important catalyst for pushing through this change. Moreover, in the period preceding Sarbanes–Oxley, investor reaction indicates a perception that de-staggering firms are more likely to be takeover targets.     

Board Composition in New Zealand: An Agency Perspective

This paper looks at board composition determinants in New Zealand. We document that the proportion of outside board members is inversely related to insider equity ownership supporting the notion that these variables are substitute mechanisms in controlling agency problems. We also find that board composition is directly related to debt, ownership concentration, and profitability and inversely related to growth and firm size. There is evidence that firms with influential CEOs have lower outside board representation. Finally, we document that the passage of the legislation reforming company and securities laws in 1993 was associated with increased outside members on the board.     

建立独立董事制度 完善公司治理结构

为了规范上市公司的法人治理结构，使董事会更公正地代表股东利益尤其是中小股东的利益，借鉴国际市场经验，笔者认为，在上市公司中引入独立董事制度是完善中国上市公司治理结构的重要步骤。     

The Nature of Board Nominating Committees and Their Role in Corporate Governance

This study examines the association between the employment and composition of nominating committees with board and ownership characteristics. First, the results suggest that the likelihood of using a nominating committee is inversely related to the level of inside ownership and positively weakly, related to the independence, but not the number, of outside board members. Second, the percentage of insiders participating in the committee is positively related to inside ownership, and negatively related to proxies for outside director quality. Finally, outside directors are more likely to serve on the nominating committee the more outside directorships they hold, and the longer their tenure in the firm. The likelihood of insider committee membership rises with a director's equity investment, with board tenure, and with other committee memberships. Taken together, the results are consistent with nominating committees substituting inside ownership in controlling management, mostly improving board quality, and being staffed with independent, experienced, and knowledgable members.     

Is an Outside Chair Always Better? The Role of Non‐CEO Inside Chairs on Corporate Boards

Proponents of separating the CEO and chairman positions advocate having an outside chairperson, although having an inside chairperson can be valuable for some firms. I find inside chairs are more likely where firm‐specific human capital is more important and, in these firms, inside chairs are associated with higher firm valuation and better operating performance. Furthermore, skilled inside chairs increase forced CEO turnover sensitivity to performance. The evidence suggests that certain inside chairs can be valuable when firm‐specific information is important for monitoring and an outside chair may be costly.     

The Increasing Use of Non-Executive Directors: Its Impact on UK Board Structure and Governance Arrangements

The last decade has seen a sharp increase in the number of non-executive directors (NEDs) on the boards of UK listed firms. Using a sample period spanning the publication of the Cadbury Report (1992), this paper evaluates the implications of this increase. The main findings can be summarised as follows. First, the increased demand for NEDs has been more pronounced for firms classified as having proportionately too many executive board members in the pre-Cadbury period. Secondly, the probability of compliance with the Cadbury Report's proposal for a minimum of three NEDs is positively related to the magnitude of the expected net benefits of adding further non-executives to the board. Finally, there is little evidence that the increased use of NEDs caused firms to make costly adjustments to other elements of their control systems in an attempt to re-equilibrate their governance portfolios. These findings are consistent with claims that the recent trend towards greater NED representation on UK boards may have helped to raise general governance standards.     

Director Quality and Firm Performance

Many financial economists argue that the board of directors' efficacy in the monitoring of managerial behavior depends upon the quality of the directors. Assuming that there is a link between the stock performance of target firms and the quality of their directors, we empirically categorize directors receiving additional directorships following a takeover as “above average” and “below average.” We then follow the stock performance of firms hiring new directors for three years after their hiring. We match the two categories of directors with the performance of hiring firms after a director's appointment. Accounting for other contemporaneous effects, we regress the hiring firms' post‐performance on director quality and other attributes. The results indicate that directors of “above average” quality are related to hiring firms with “above average” post‐performance.     

公司治理结构存在问题及对策

在经济全球化进程日趋加快的新形势下 ,加强公司治理已成为国际潮流 ,受到国际企业界的普遍高度重视。本文从简述目前公司治理结构存在的问题着手 ,在此基础上 ,提出几点完善设想 ,以期对公司治理问题展开进一步讨论。     

The differential CEO dominance-compensation and corporate governance-compensation relations: Pre- and post-SOX

We examine the relationship between corporate governance (as measured by traditional corporate governance variables and a new measure of corporate governance, called CEO dominance) and executive compensation, pre- and post-SOX. We conceptualize CEO dominance as a measure of a CEO's power and define it as the difference between CEO pay and the next highest executive's pay divided by the CEO's pay. We argue that for traditional corporate governance variables, the inverse governance-compensation relation that exists pre-SOX will improve post-SOX. On the other hand, we expect a strong and positive CEO dominance-compensation relation to exist both pre- and post-SOX. Consistent with expectations, our results indicate that SOX has changed the relationship between CEO duality and compensation relation, but it has not changed the CEO dominance-compensation relation. This suggests that SOX regulatory reforms do not limit the ability of CEO power to obstruct traditional corporate governance mechanisms in extracting compensation-related rents.     

Determination of Executive Compensation in an Emerging Economy. Evidence from India

Most studies of the determination of executive compensation are based on the experience of developed countries, and mainly focus on Chief Executive Officer (CEO) compensation. Determination of board compensation is relatively ignored in the literature. This paper examines the effect of corporate governance, firm performance, and corporate diversification on the board, as well as CEO compensation and its components, in the context of an emerging economy-India-where a managerial market has yet to develop. Data for 462 firms for 1997-2002 in the Indian manufacturing sector have been used. This paper finds that board compensation largely depends on current- and past-year performance and diversification of the firm, whereas CEO compensation depends on current-year firm performance only. Among the personal attributes of the CEO, only in-firm experience has significant influence on CEO compensation. This finding contradicts the existing studies, where current- and past-year firm performance, as well as age, experience, and education of the CEO are important factors in determining CEO compensation.     

中国上市银行独立董事制度的运行效率

以往的公司治理研究并没有考虑银行业的特殊性,因此对银行的治理问题不能简单地套用以往的研究结论.本文在充分考虑银行业治理的特殊性基础上,通过建立模型实证考察独立董事在银行中的运行效率.研究证实,由于银行股权制衡能力比较强,独立董事的监督职能被弱化,但是银行独立董事由于其专业背景以及广泛的社会关系,能够提高董事会决策效率,促进银行业绩的提升.研究还发现,独立董事的作用是有滞后性的.当期的独立董事能够明显地促进银行下一期的绩效.独立董事制度在国内上市银行中具有效率,能够促进银行的进一步发展.