Board Games: How CEOs Adapt to Increases in Structural Board Independence from Management

Abstract

This study was generously funded by the State Farm Companies Foundation. I am very grateful to Edward Zajac for his ongoing guidance, and thanks also to Gautam Ahuja, James Anderson, Mason Carpenter, James Fredrickson, Ranjay Gulati, Paul Hirsch, David Jemison, Mark Shanley, Brian Uzzi, Robert Wiseman, and seminar participants at Arizona State University, the Massachusetts Institute of Technology, the University of Michigan, the University of North Carolina at Chapel Hill, the University of Notre Dame, the University of Texas at Austin, the University of Washington, and Washington University for their helpful comments on an earlier version of this article. The paper has also benefited from the helpful comments of Daniel Brass and three anonymous reviewers for ASQ, as well as the editorial assistance of Linda Johanson. This paper presents a model that incorporates the behavior of chief executive officers (CEOs) into an explanation of how boards of directors affect organizational outcomes. Hypotheses are tested with archival data on corporate strategy, CEO compensation, board structure, and demographics, together with data from an original survey of both CEOs and outside directors from 221 largeand medium-sized U.S. corporations. The findings indicate that (1) changes in board structure that increase the board's independence from management are associated with higher levels of CEO ingratiation and persuasion behavior toward board members, and (2) such influence behaviors, in turn, serve to offset the effect of increased structural board independence on corporate strategy and CEO compensation policy. Implications for theory and research on CEO-board power and effectiveness and the larger literature on power and influence are discussed.'