Examining Antecedents and Consequences of Effective LIDs: The Quad Model Approach

Abstract

This paper examines a relatively new contribution to board leadership, the Lead Independent Director (LID) which has not received much attention in the corporate governance literature. From an agency theory perspective, this leadership position should enhance board monitoring. However, according to symbolic management theory, LID may make no significant changes to the board’s monitoring mechanism. Using the quad model, we explore the antecedents and consequences of having an effective LID on the board. Using a sample of S&P 500 firms, we found that underperforming firms were more likely to select an effective LID. We also found that when firms adopted effective LIDs, board meetings in the following year had higher attendance, and problem directors on boards were more likely to be dismissed.