Appointment Of Directors Research Articles

Courtesy calls for reciprocity: Appointment of uncertificated independent directors in China

AbstractResearch Question/IssueUsing regulatory qualification requirements for being an independent director in China, we examine the effect of explicit norms of reciprocity between uncertificated independent directors (UIDs), who are not qualified at the beginning of their appointment, and insiders.Research Findings/InsightsWe find that UIDs are less likely to cast dissenting votes after their appointment, especially after they are qualified, and that firms with UIDs exhibit more expropriation and information opacity. Our main results are robust to alternative explanations and endogeneity tests.Theoretical/Academic ImplicationsOur study contributes to the literature on reciprocity theory by presenting a new reciprocity norm under the rules of ID qualification and documenting that independent directors who highly value board appointment reciprocate with less independence.Practitioner/Policy ImplicationsThis study offers insights to policy makers regarding how to effectively establish and enhance regulations for qualification for independent directors throughout the world.

Gender spillovers from supervisory boards to management boards

This study investigates gender spillovers from women on supervisory boards to women on management boards in a two‐tier system with employee codetermination. The supervisory board consists of a nominating committee mainly responsible for the appointment of directors in the management board. By combining similarity attraction theory with power theory, we predict that only female shareholder representatives who serve on the nominating committee drive the positive effect on the presence of women on management boards. The results of the correlated random effects models in a sample of 95 German codetermined and publicly listed companies (2009–2016) confirm the predicted relationship.

Strategic Director Appointments

ABSTRACTRecent corporate governance scandals have been attributed to a lack of board independence because of the influence CEOs have over their boards. However, CEOs can also affect board efficacy without compromising its independence by strategically choosing directors. We offer a theoretical framework to examine how CEOs can strategically choose director characteristics (such as expertise and skill set) to influence the inner workings of the board. We examine how director expertise affects the board's equilibrium voting strategies and show that some “passivity” on the part of directors can in fact be desirable equilibrium behavior. More importantly, we show that managers can strategically appoint independent outside directors to influence board voting in their favor. Surprisingly, contrary to what we might expect, we find that opportunistic (principled) managers may not always appoint the least (most) able directors to the board. We also examine whether CEOs would prefer a “captured” board (i.e., an insider‐dominated board) and show that the value of director input (i.e., the board's advising role) and the financial markets can discourage CEOs from pursuing such appointments.

Female directors and CSR disclosure in Bangladesh: the role of family affiliation

PurposeThis paper aims to investigate the impact of female director affiliations to governing families on corporate social responsibility (CSR) disclosures in the context of Bangladeshi firms.Design/methodology/approachThis study uses a quantitative empirical research method grounded in Socioemotional Wealth (SEW) theory. Data was sourced from Bangladeshi publicly listed non-financial sector companies’ annual reports and stock exchange trading and publication reports and consists of 2,637 firm-year observations from 1996 to 2011. Pooled multivariate regression models are used to test the association between corporate social and environmental disclosure and female directors, and the family affiliation (or not) of those directors.FindingsThe findings provide strong evidence that female directors who are affiliated to the governing family, founders and other board members reduce CSR disclosure in family firms; unaffiliated female board directors enhance CSR disclosure, and this effect is significant in both family and non-family firms.Research limitations/implicationsDefinitions of family firms and affiliated directors may lead to over-generalization in the results.Originality/valueThe study highlights variation in the nature of female board appointments in emerging market family-controlled firms. The findings bring attention to the role of affiliated female director appointments in family ownership structures and speak directly to family business owners, advisors and policy makers about the importance of unaffiliated female directors as catalysts of improved CSR disclosure in family and non-family firms.

Foreign Ownership, Appointment of Independent Directors, and Firm Value: Evidence from Japanese Firms

We investigate the effects of foreign ownership on a key monitoring mechanism, the appointment of independent directors, for a sample of Japanese firms after the Tokyo Stock Exchange passed rules requiring appointment of at least one independent director or an independent statutory auditor. We find that foreign ownership is significantly positively associated with the appointment of independent directors and firm value respectively. We also find, using path analysis, that foreign ownership affects firm value via the appointment of independent directors. In robustness tests, we also examine whether foreign ownership affects a monitoring outcome (earnings management). We find that foreign ownership is significantly negatively related to benchmark beating using both accrual and real earnings management. Overall, our evidence suggests that despite their smaller shareholdings, foreign investors enhance firm value through improving monitoring of managers.

THE DUTIES AND CONFLICTS OF NOMINEE DIRECTORS: THE LEGAL POSITION IN MALAYSIA

There are different factors and basis for appointment of directors in a company’s board. Some of them are appointed based on their expertise in the respective sectors or industries as independent directors in the board, while others may be appointed by creditors or major shareholders or interest group as nominee director. Just like all directors, nominee directors are expected to act in the best interests of the company to which they are appointed. Further, they also owe the same legal fiduciary duties to the company similar to other directors. Nominee directors bears additonal expectation as they do not only manage and perform in the company’s board, but they are commonly expected by their appointers to represent the interest of the appointers in any commercial decisions made by the board of the company and also to update the appointers on the company’s performance from time to time. The objective of this paper is to study the duties owed by nominee directors in the event of conflicts of interest that possibly occurs between the company where they are sitting as board members and their appointers. The study will focus on the law governing them in Malaysia. This research adopted qualitative analytical method in which books, article journals, internet sources and other relevant documents are analysed. It was found that it is very crucial for the nominee directors to observe certain rules pertaining to their duties and involvement in decision making in order to mitigate such conflicts.

Corporate Governance Mechanisms and Firm Performance in Saudi Arabia

This paper examines the impact of corporate governance mechanisms including board size, independence, and meeting frequency, audit committee size and meeting frequency, CEO duality and ownership concentration on the operational, financial and market performance of Saudi listed firms using a contingent theoretical-based framework drawing on agency theory, stewardship theory and resource dependence theory. This study examines 210 listed Saudi Stock Exchange firms over the timeframe 2017 to 2019. The paper applies both a manual content and regression analysis approach. The results show that firm performance deteriorates with board size and independence, audit committee and meeting frequency, and the presence of CEO role duality, while performance improves with board meeting frequency and ownership concentration. Thus, Saudi firms should respond by maintaining smaller boards and more frequent meetings, keeping the Chair and CEO roles separate, and maintaining smaller audit committees with more focused meetings. Further, the appointment of independent directors only makes a meaningful contribution to firm performance where they are truly independent. Finally, more concentrated ownership tends to encourage better firm performance due to the regime of monitoring and discipline concomitant with more powerful shareholders. The implications of this paper are threefold. First, the implementation by Saudi Arabia of the latest corporate governance regulations and IFRS adoption almost certainly impact firm performance markedly. Second, corporate governance regulations should recognize the role of more frequent board meetings and more concentrated ownership in enhancing corporate performance. Third, stakeholders should apply pressure on investee firms to maintain smaller boards, engage genuinely independent directors, separate the role of Chairman and CEO, and maintain smaller audit committees with fewer and more effective meetings. The results should help corporate boards when deciding on the best corporate governance mechanisms to enhance firm performance. Further, the study should provide policy makers with a better understanding of the corporate governance structures required to promote better performance by drawing on existing theories and the empirical modelling, in an emerging economy setting such as Saudi Arabia, a new and broader data set, thereby informing better future policy and protecting shareholders’ interests.

Strategic Nepotism in Family Director Appointments: Evidence from Family Business Groups in South Korea

Controlling families of family firms strive to preserve their socioemotional wealth (SEW) through family involvement in company leadership. Prior research points to a potential trade-off of family ...

Director appointments, boardroom networks, and firm environmental performance

Using BoardEx (2000{2017), we create a dynamic network connecting firms and board directors for the United States. We use the Environmental Protection Agency's Toxic Release Inventory to measure environmental performance at the director and rm-level. We examine how a candidate's environmental performance and networks affect director appointments. This allows us to endogenize the effect of directors' environmental experience when studying the impact on firms' chemical releases. We show that firms are likely to appoint influential directors with good environmental records and similar characteristics. Further, boards with good environmental performance and with diverse environmental backgrounds improve firms' environmental performance.

The Carrot and the Stick: Bank Bailouts and the Disciplining Role of Board Appointments

We empirically examine the Capital Purchase Program (CPP) used by the US government to bail out distressed banks with equity infusions during the Great Recession. We find strong evidence that a feature of the CPP - the government's ability to appoint independent directors on the board of an assisted bank that missed six dividend payments to the Treasury - helped attenuate bailout-related moral hazard. Banks were averse to these appointments - the empirical distribution of missed payments exhibits a sharp discontinuity at five. Director appointments by the Treasury led to improved bank performance, lower CEO pay, and higher stock market valuations.

How Deep is the Labor Market for Female Directors? Evidence from Mandated Director Appointments

We examine the depth of the labor market for female directors following an exogenous shock to demand caused by California Senate Bill 826. Despite a surge in female appointments, new female director qualifications remain stable when benchmarked to control groups, indicating a deep labor market. Relative to the same control groups, we likewise find little evidence that investors view female director appointments more negatively following the law. However, stock returns to new female director appointments do not offset negative returns to the 2018 enactment of the law, suggesting that overall, investors still anticipate negative effects.

The dispute surrounding Babi Yar

In Kyiv, a centre to commemorate the victims of the Shoah is to be created: the Babi Yar Holocaust Memorial Center (BYHMC) was founded in September 2016. Since then, it has been the subject of criticism, either because of funding for the project by businessmen based in Russia, or because of the type of content presented. The appointment of the scandal-ridden Russian film director, Ilya Khrzhankovsky, as artistic director, and his concept for the memorial centre, has led to open conflict. International museum specialists and historians walked out of the preparations for the memorial centre in protest. They fear that the memorial centre will become a Holocaust Disneyland, with no space for any serious museum education or remembrance. A lack of transparency and involvement of Ukrainian civil society further exacerbated the conflict.

Does Gender Diversity on Board Promote Corporate Social Responsibility? An Empirical Analysis of Sustainable Development Goals

Recent regulatory changes in India require the firms to improve the appointment of female directors on corporate boards, and it is believed that such a regulation would prove to be a boon in terms of strategic decision making. The Board Capital Theory advocates that the appointment of women directors on board shall enhance various dimensions of the board capital breadth and help in better decision making. With growing consciousness for sustainable practices throughout the globe, it is pertinent to see whether the gender diverse boards can promote corporate social responsibility and create a business case for their upsurge, as it would give room for policy implications. This study investigates the impact of gender diverse boards on promoting corporate social responsibility, using multivariate regression with a sample of NIFTY 50 Index for the period 2014-2019. The study found insignificant positive relation among gender-diverse boards and sustainability. To check for the robustness of the study, we have used two diversity indices, Blau & Shannon index, to supplement our results.

Corporate social irresponsibility and boards: The implications of legal expertise

In this study, we examine whether Corporate Social Irresponsibility (CSIR) affects the appointment of directors with legal expertise on the board and whether the presence of legal directors has implications for the CSIR-stock return relationship. Using a large sample of publicly traded U.S. firms, we find that firms involved more in CSIR have more directors with legal expertise on the board in subsequent years. Our additional tests suggest that this relationship is not driven by omitted variables or reverse causality. We further find that board legal expertise helps to mitigate the negative stock performance arising from CSIR. Overall, our findings suggest that boards with legal expertise are better able to respond to CSIR and mitigate its damage.

Corporate Governance and Performance of Deposit Money Banks in Nigeria

This study looks at the relationship between corporate governance and the financial performance of deposit money banks in Nigeria. Ex-post facto resign design was used for the study. The population of this study is all deposit money banks listed on the Nigeria stock exchange as at 31st December 2019. Using judgmental sampling techniques, 10 listed deposit money banks were selected and their annual reports of 10 years (2009 – 2018) were used to collect needed data. Three (3) hypotheses were formulated and tested using multiple regression approach. The findings of the study revealed that board size has a significant positive impact (β= 0.006; p < 0.05) on financial performance (measured as ROA) of deposit money banks. Also, board independence has a negative significant effect on financial performance (β = -0.010; p < 0.05). While board meeting frequency has no significant influence on financial performance. The study suggests that the CBN policy on board size should be maintained and also recommends that having better level of experience and knowledge in banking and financial matters should be a major consideration in the appointment of non-executive directors.

The impact of the 2012 NZX listing rule change on board composition and company performance

PurposeThis study aims to examine the impact of December 2012, New Zealand (NZ) stock exchange operator listing rule change that introduced compulsory disclosure about gender diversity on NZ boards.Design/methodology/approachA quasi-natural experiment setting with a clearly identifiable exogenous event.FindingsThe rate of growth in female-held directorships increased significantly after the introduction of the new rule, resulting in, by 2016, the average female board representation being more than double what it had been in 2012. However, this paper finds no relationship between this response and company performance.Research limitations/implicationsThis study cannot attribute causality to the observed jump in female directorships following the 2012 listing rule change due to the absence of a control group of firms not subject to this change.Practical implicationsThe results are consistent with an efficient director appointment process in NZ.Originality/valueLow-key regulatory changes can have a significant impact on company behaviour.

Analysing corporate governance and accountability practices from an African neo-patrimonialism perspective: Insights from Kenya

• We critically examine corporate governance and accountability practices in Kenya. • We investigate how corporate sector reforms are constrained by neo-patrimonialism. • Data includes 29 semi-structured interviews, field observations and documents. • Neo-patrimonialism influences director appointments and board composition. • Neo-patrimonial systems supplant formal institutions leaving them as facades. This paper examines corporate governance (CG) and corporate accountability practices in the African context, by focusing on the case of Kenya. Our data comprises a combination of 29 semi-structured interviews, field observations and archival evidence. We reveal how western-originated CG and accountability reforms are constrained or subverted by a vigorous neo-patrimonial regime. The Kenyan corporate sector has well defined legal-rational structures, including an elaborate corporate sector regulatory framework, professionals (i.e. accountants and auditors) and corporate boards. In contrast, however, informal networks and patronage interfere with the nomination and work of non-executive board members, thereby hindering the possibility of an independent monitoring of executive management. A conflictual and inadequately resourced regulatory framework plays a more symbolic than an effective regulative role in enforcing CG and accountability practices. We also find a widespread rent-seeking culture that significantly hinders the exercise of corporate accountability. Furthermore, external auditor independence is problematic due to conflicts of interest and the auditors’ dependence on advisory fees, thereby favouring a clientelist association with auditee firms. Overall, our findings reveal that CG and accountability practices, while ostensibly present in Kenya, are largely ineffective due to the influence of neo-patrimonial realities on the mind-set and actions of corporate actors.

Board feminization and innovation through corporate venture capital investments: The moderating effects of independence and management skills

The purpose of this paper is to investigate the relationship between board feminization and innovation through corporate venture capital (CVC) investments, as well as the moderating effects on this relationship of independence and management skills. This study relies on a set of unique data to measure CVC activity for all French-listed companies that undertook a CVC strategy between 2000 and 2018. We found that the appointment of female independent directors impeded CVC investments, whereas the appointment of female directors with management backgrounds enhanced such investments. Our findings are robust to alternative measures of board feminization. Overall, our results enrich the debate on the usefulness of these innovation vehicles for the French economy.

Board Diversity and Shareholder Voting

The lack of board diversity across gender and race has been one of the most controversial topics in corporate board governance in recent years. Given the central role that shareholders have in approving director appointments, we investigate whether shareholders value diversity on corporate boards by analyzing their voting patterns in director elections. Despite many shareholders’ public commitments of supporting board diversity, we show that shareholders have not historically been proactive in using their votes to motivate companies to increase diversity among corporate boards. This finding persists over time and across key shareholders who have been some of the most outspoken proponents of board diversity.

Assessing the Quality of Bank Boards: Evidence from the Indian Banking Industry

The article employs hand-collected data on 14 board characteristics for the period from 2004–2005 to 2016–2017 to empirically assess the evolution of board governance practices in the Indian banking industry. For this, we construct a comprehensive index for board governance and four sub-indices of board effectiveness. The study sheds light on how various characteristics of Indian bank boards have evolved over time. The mean value of the board index rose 33 per cent during the period of analysis, indicating a significant improvement in board governance practices of banks. The improvement in practices is primarily due to a considerable transition in the sub-dimensions of board structures and board independence. The transition in board structure results from the larger number of banks appointing different persons as CEOs and chairpersons; the change in board independence has principally emanated from the larger number of banks providing training to their independent directors, declarations and conducting separate meetings. Yet, our findings recommend room for further improvement in various aspects of board governance, including appointment of non-executive chairpersons, female directors and board independence. JEL Classification: G21, G34, C23