Are CEOs judged on their companies' social reputation?

How consequential is social reputation for a CEO's career? We find that the CEOs of those firms with greater strengths (controversies) on corporate social responsibilities (CSR) are more (less) likely to serve on external boards, and they hold more (fewer) outside directorships. CEOs lose board seats after the media expose their companies in negative environmental and social news. More nuanced analyses show that workplace diversity and supply-chain human rights are most consequential among the social and environmental dimensions of CSR. Our study demonstrates that CEOs are judged on their companies' social reputation in the director labor market. Our results also suggest that social reputation plays an important role in promoting CSR.     

It Takes Two: The Incidence and Effectiveness of Co‐CEOs

This study examines the phenomenon of co‐CEOs within publicly traded firms. Although shared executive leadership is not widespread, it occurs within some very prominent firms. We find that co‐CEOs generally complement each other in terms of educational background or executive responsibilities. Our results show that firms most likely to appoint co‐CEOs have lower leverage, a more limited firm focus, less independent board structure, fewer advising directors, lower institutional ownership, and greater levels of merger activity. The governance structure of co‐CEO firms suggests that co‐CEOships can serve as an alternative governance mechanism, with co‐CEO mutual monitoring substituting for board or external monitoring and co‐CEO complementary skills substituting for board advising. An event study indicates that the market reacts positively to appointments of co‐CEOs while a propensity score analysis shows that the presence of co‐CEOs increases firm valuation.     

The power of the pen and executive compensation

We examine the press’ role in monitoring and influencing executive compensation practice using more than 11,000 press articles about CEO compensation from 1994 to 2002. Negative press coverage is more strongly related to excess annual pay than to raw annual pay, suggesting a sophisticated approach by the media in selecting CEOs to cover. However, negative coverage is also greater for CEOs with more option exercises, suggesting the press engages in some degree of “sensationalism.” We find little evidence that firms respond to negative press coverage by decreasing excess CEO compensation or increasing CEO turnover.     

Why do firms appoint CEOs as outside directors?

Companies actively seek to appoint outside CEOs to their boards. Consistent with our matching theory of outside CEO board appointments, we show that such appointments have a certification benefit for the appointing firm. CEOs are more likely to join boards of large established firms that are geographically close, pursue similar financial and investment policies, and have comparable governance to their own firms. The first outside CEO director appointment has a higher stock-price reaction than the appointment of another outside director. Except for a decrease in operating performance following the appointment of an interlocked director, CEO directors do not affect the appointing firm's operating performance, decision-making, and CEO compensation.     

Beyond narrative disclosure tone: The upper echelons theory perspective

This study investigates the key drives of narrative tone in the UK context where managers have more flexibility to frame narratives with stakeholders. While prior studies examined firm-specific characteristics as determinants of narrative tone, the current study employs the upper echelons theory and focusses on top managers' characteristics. Using computerised textual analysis, our findings suggest that both observed and unobserved CEOs characteristics drive positive tone in the UK context and this relationship is moderated by corporate governance attributes. Specifically, older, female and financial expert CEOs display less positive tone. Considering psychological features, we find that narcissistic CEOs are more likely to display positive tone compared with non-narcissistic CEOs, however, this relationship declines in firms that have a higher independent board. Moreover, we found audit committee and board independence are negatively associated with positive tone. Additionally, we found more females on board increases the negative relationship between female CEOs and positive tone. These results have significant implications for top management, policy makers, regulators and the users of financial reporting.     

Media coverage,board structure and CEO compensation: Evidence from Taiwan

This paper investigates the relationship between CEO cash compensation and media coverage of firms, analyst forecasts and board structure using data from the Taiwan Stock Exchange. We find that, other things being equal, CEO cash compensation is much higher for firms with greater media coverage, firms with more positive news, firms with more analyst forecasts, and firms with larger institutional holdings. There is little evidence that board size and board independence affect CEO cash compensation, and CEO duality is negatively associated with CEO cash compensation     

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.     

CEO gender and managerial entrenchment

This paper investigates the effect of gender on managerial authority and control over firms. The study examines S&P 1500 firms for the period of 1999–2014. Our findings suggest that accounting performance, firm value, CEO age, firm age, and board size reduce the likelihood of appointing female managers. On the other hand, the appointment of female CEOs is directly associated with the percentage of female directors, board independence, and beta. The study confirms the notion that female CEO appointments are generally associated with firms facing adverse conditions, and shows that female CEOs are more entrenched as compared to male CEOs. We find that the presence of female CEO decreases the turnover-performance sensitivity, increases the E-index, and inflates CEO compensation. Our research suggests that the level of female CEOs’ entrenchment provides them with greater job security, higher level of control, and inflated pay that compensate the risk of accepting the appointment in a high risk and poor performing firm.     

Politically connected CEOs,corporate governance,and Post-IPO performance of China's newly partially privatized firms

Almost 27% of the CEOs in a sample of 790 newly partially privatized firms in China are former or current government bureaucrats. Firms with politically connected CEOs underperform those without politically connected CEOs by almost 18% based on three-year post-IPO stock returns and have poorer three-year post-IPO earnings growth, sales growth, and change in returns on sales. The negative effect of the CEO's political ties also show up in the first-day stock return. Finally, firms led by politically connected CEOs are more likely to appoint other bureaucrats to the board of directors rather than directors with relevant professional backgrounds.     

The impact of firm prestige on executive compensation

We show that chief executive officers (CEOs) of prestigious firms earn less. Total compensation is on average 8% lower for firms listed in Fortune’s ranking of America’s most admired companies. We suggest that CEOs are willing to trade off status and career benefits from working for a publicly admired company against additional monetary compensation. Our identification strategy is based on matched sample analyses, difference-in-differences regressions, and a regression discontinuity design. We perform several robustness checks and exclude many alternative explanations, including that firm prestige just proxies for better corporate governance or for increased exposure of the pay-setting process to media attention.     

CEO DIRECTORS,EXECUTIVE INCENTIVES,AND CORPORATE STRATEGIC INITIATIVES

I study how directors who are chief executive officers (CEOs) of other firms affect board effectiveness. I find that CEOs are paid more and their compensation is less sensitive to firm performance when other CEOs serve as directors. This is not an employment risk premium because CEO directors are not associated with higher turnover‐performance sensitivity. Also, CEO directors have no effect on corporate innovation but are associated with higher acquisition returns, especially for complex deals. My results suggest that the advisory benefits of CEO directors must be balanced against the distortions in executive incentives associated with their board service.     

Corporate governance when founders are directors

We examine chief executive officer (CEO) compensation, CEO retention policies, and mergers and acquisition (M&A) decisions in firms in which founders serve as a director with a nonfounder CEO (founder-director firms). We find that founder-director firms offer a different mix of incentives to their CEOs than other firms. Pay-for-performance sensitivity for nonfounder CEOs in founder-director firms is higher and the level of pay is lower than that of other CEOs. CEO turnover sensitivity to firm performance is also significantly higher in founder-director firms compared with nonfounder firms. Overall, the evidence suggests that boards with founder-directors provide more high-powered incentives in the form of pay and retention policies than the average US board. Stock returns around M&A announcements and board attendance are also higher in founder-director firms compared with nonfounder firms.     

CEO incentive plans and corporate liquidation policy

To investigate CEOs' incentives to liquidate their firms, we examine the effects of insider ownership and compensation in stock options on 30 voluntary liquidation decisions by industrial firms in the period 1975–1986. We find that liquidation decisions are influenced by CEO incentive plans and increase shareholder value. Firms with more outside board members, smaller market-to-book ratios, and attempts by outsiders to gain control are more likely to be liquidated. Although few top executives of liquidating firms subsequently take comparable jobs, at least 41% of CEOs who downsize are made better off by liquidation.     

Firstborn CEOs and credit ratings

Our study examines whether CEOs’ birth order can predict firms’ credit ratings. Consistent with studies that document a positive relationship in the general population between being firstborn and being conservative, our study finds that firms managed by firstborn CEOs tend to have higher credit ratings than those managed by later-born CEOs. Our results are robust to controlling for additional personal CEO traits, such as political identity, and to using a propensity score matching sample. A change analysis supports the causality of the firstborn effect. We suggest that return on assets and free cash flow are possible channels through which firstborn status affects credit ratings. Cross-sectional analyses show that the positive association is less (more) pronounced for firstborn CEOs who have a pilot license (run firms in less competitive industries). These results suggest that managerial conservatism may be an important factor in credit rating agencies’ credit risk assessments.     

CEO incentive plans and corporate liquidation policy

To investigate CEOs' incentives to liquidate their firms, we examine the effects of insider ownership and compensation in stock options on 30 voluntary liquidation decisions by industrial firms in the period 1975–1986. We find that liquidation decisions are influenced by CEO incentive plans and increase shareholder value. Firms with more outside board members, smaller market-to-book ratios, and attempts by outsiders to gain control are more likely to be liquidated. Although few top executives of liquidating firms subsequently take comparable jobs, at least 41% of CEOs who downsize are made better off by liquidation.     

The Impact of the Sarbanes-Oxley Act on the Structure of REIT Boards of Directors

The changes in the board structure for REITs for the period 1999?C2005 are presented. Post-SOX REIT boards have changed primarily in the form of greater independence, as fewer REIT boards are led by their CEOs due to SOX. In the relation between Post-SOX board structure and performance, the results show no improvement in performance for REITs whose boards have a majority of preferred features. That is, REITs with small boards, majority of outside directors, and not led by their CEOs do not perform better than their counterparts. These results provide additional fuel for the debate on the benefits and costs of SOX.     

Board composition as the outcome of an internal bargaining process: empirical evidence

The traditional financial economics view of the determinants of board composition is based on outside shareholders' demand for external monitoring of management. In comparison, Hermalin and Weisbach (American Economic Review, 88 (1998) 96) model board composition as the outcome of a bargaining process between the CEO and the rest of the board. The model predicts, inter alia, that the bargaining power of the CEO relative to the rest of the board of directors will determine the level of independence of the board and the extent of board monitoring. This study tests Hermalin and Weisbach's model using a random sample of companies that are subject to limited regulatory constraints in relation to board composition and a common set of corporations regulations that may indirectly affect board composition. There is strong evidence that representation by outside directors varies inversely with CEO bargaining power, which is proxied by CEO tenure and inside shareholdings. An extension of the argument of Hermalin and Weisbach to board leadership is also tested. The results indicate that the appointment of the chairman of the board is also the outcome of a bargaining process between the CEO and the rest of the board with more powerful CEOs likely to hold the position of Chairman of the board. Together, these results suggest that more “powerful” CEOs are relatively entrenched and face fewer constraints and less monitoring than other CEOs. This evidence has potential relevance to current debates in relation to the need to control the number or proportion of outside directors.     

External Networking and Internal Firm Governance

We use panel data on S&P 1500 companies to identify external network connections between directors and CEOs. We find that firms with more powerful CEOs are more likely to appoint directors with ties to the CEO. Using changes in board composition due to director death and retirement for identification, we find that CEO‐director ties reduce firm value, particularly in the absence of other governance mechanisms to substitute for board oversight. Moreover, firms with more CEO‐director ties engage in more value‐destroying acquisitions. Overall, our results suggest that network ties with the CEO weaken the intensity of board monitoring.     

Board Ties and the Cost of Corporate Debt

We examine the impact of firms’ board ties on bond yield spreads. Prior literature associates board connectedness with improved access to resources due to visibility and reputation arising from greater board capital. Consistent with the board capital hypothesis, we find that better connected firms are associated with greater media coverage and more ties to financial firms. Additionally, greater connectedness is linked with statistically and economically significant lower bond yield spreads, especially for firms with high information asymmetry. Our main result appears robust and includes significant negative (positive) changes in yield spreads to announcements of additions (departures) of highly connected directors.     

CEO internal experience and voluntary disclosure quality: Evidence from management forecasts

Internally‐promoted CEOs should have a deep understanding of their firm's products, supply chain, operations, business climate, corporate culture, and how to navigate among employees to get the information they need. Thus, we argue that internally‐promoted CEOs are likely to produce higher quality disclosure than outsider CEOs. Using a sample of US firms from the S&P1500 index from 2001 to 2011, we hand‐collect whether a CEO is hired from inside the firm and, if so, the number of years they worked at the firm before becoming CEO. We then examine whether managers with more internal experience issue higher quality disclosures and offer three main findings. First, CEOs with more internal experience are more likely to issue voluntary earnings forecasts than those managers with less internal experience as well as those managers hired from outside the firm. Second, CEOs with more internal experience issue more accurate earnings forecasts than those managers with less internal experience as well as those managers hired from outside the firm. Finally, investors react more strongly to forecasts issued by insider CEOs than to those issued by outsider CEOs. In additional analysis, we find no evidence that these results extend to mandatory reporting quality (i.e., accruals quality, restatements, or internal control weaknesses), perhaps because mandatory disclosure is subjected to heavy oversight by the board of directors, auditors, and regulators. Overall, our findings suggest that when managers have work experience with the firm prior to becoming the CEO, the firm's voluntary disclosure is of higher quality.