Abstract
This study focuses on the impact of social relations on the efficiency of the governance structure. Social capital which accrues from the dyadic and network relationships between the CEO, the board of directors and corporate owners is argued to have multiple and very different effects on the likelihood of dismissing a poorly performing CEO than has financial capital as captured by the actors’ level of shareholdings and the amount of their voting rights. Data from a sample of Swiss companies collected over the period 2000-2004 were employed. Results indicate that poorly performing companies are more likely to dismiss their CEO in the event of proximity and strong ties between the CEO and corporate owners and in the event of highly heterogeneous ownership structure.
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