Board co-option and employee welfare

Abstract

PurposeThe purpose of this paper is to investigate the relationship between corporate board co-option and employee welfare practices.Design/methodology/approachThe authors employ several analysis techniques including univariate analysis, OLS regressions, Poisson regressions, and propensity score matching methodology. The sample consists of US public firms for the period of 1996–2017. The variables of interest are the employee welfare index (EWI) proposed by Ghaly et al. (2015) and the co-option ratio proposed by Coles et al. (2014).FindingsThe authors find that firms with a higher fraction of co-opted directors on their boards are less committed to the firms' employee well-being. The empirical results support the argument that the interests of co-opted directors are more closely aligned with the interests of the CEO who had an influence on selecting them to the board, which compromises their monitoring role.Originality/valueThis paper contributes in several ways to the literature on corporate governance and corporate social responsibility (CSR) by linking board co-option to employee welfare. By focusing on board co-option to explain the degree of firms' involvement in employee welfare, which is one of the crucial components of CSR performance, the authors provide pinpointed and detailed findings on a timely issue of CSR.