Status spillover and director labor market outcomes following organizational misconduct

Abstract

Can status generate a halo effect that creates spillover consequences for similar others? In this paper, we ask if it is possible for status to spill over to one’s peers, improving the outcomes of actors whose identities might be diminished by a connection to organizational misconduct. We unpack the consequences of misconduct for corporate directors by studying the change in the prominence of directors’ affiliations following revelations of misconduct on one of the boards on which they serve. Using a sample of U.S. companies restating earnings between 1996 and 2003, we find that one’s status, as well as the status of others actors who have the same relationship to the misconduct firm, can moderate the negative effect of association with misconduct on the status a director’s subsequent affiliations. Our findings suggest that the collective status of a group of similar actors buffers the focal actor’s social position. Thus, we find evidence of a halo spillover effect created by the collective status of a gr...