Board Appointments Research Articles

Assessing the market performance of US corporate spin-offs: effects of directors’ age and external board appointments along with their interaction

Assessing the market performance of US corporate spin-offs: effects of directors’ age and external board appointments along with their interaction

Gender quotas influence the appointment of women to precarious leadership positions: A signalling approach

AbstractIn this research we address the ongoing debate about the existence of the glass‐cliff phenomenon by investigating boundary conditions and mechanisms influencing its persistence and decline. Drawing on signalling theory, we hypothesize that the glass‐cliff's presence fluctuates with the clarity of signals associated with appointing women board members at various stages of quota policy implementation. In Study 1, we analyzed a dataset of 258 board appointments in German‐listed companies from 2003 to 2020. We found that women executives were more likely to be appointed following periods of declining performance during Stage 1 (pre‐quota announcement) and Stage 3 (post‐quota enforcement), but not in Stage 2 (post‐announcement, pre‐enforcement). In Study 2, an experiment with 476 respondents, we tested for changes in signal clarity as an underlying mechanism. Results indicate that signal clarity associated with appointing women following performance decline is influenced by quota policies. Signal clarity was highest during stages 1 and 3, but diminished in Stage 2. These findings support the signalling explanation for the glass‐cliff, highlighting that its occurrence is influenced by country‐level policies and emphasizing that the symbolic value of appointing women to board positions as indicators of change depends on the clarity of these signals.

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 and its implications for regulatory policy. 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—had a significant effect on bank behavior. Banks were averse to these appointments—the empirical distribution of missed payments exhibits a sharp discontinuity at five. Director appointments by the Treasury were associated with improved bank performance and lower CEO pay. (JEL G21, G28, G32, G34, G35, G38, H81)

Partnering With Nurse Inventors and Entrepreneurs: A Guide for Nursing Professional Development Leaders.

Health care innovation and entrepreneurship are key drivers of transformation in health care, re-shaping the way care is delivered, managed, and experienced. Innovation in health care spans a range of areas, including digital health, bio-technology, medical devices, tele-health, and health information systems. Entrepreneurs are leveraging technology to create solutions to improve patient outcomes, reduce costs, and address inefficiencies. Nurse inventors and entrepreneurs are blazing new trails that require nursing professional development leaders to consider new opportunities for collaboration. For nursing professional development leaders, fostering relationships with nurse entrepreneurs can unlock numerous benefits, from improving patient safety to enhancing nursing practice and facilitating advisory board appointments. [J Contin Educ Nurs. 2024;55(11):517-519.].

CORPORATE GOVERNANCE REFORM AND SUSTENANCE OF STATE-OWNED ENTERPRISES (SOES) IN ZIMBABWE

The study sought to ascertain corporate governance reforms that foster sustenance of the SOEs in Zimbabwe and how such reforms can be implemented. This study has used a mixed-methods technique and a pragmatist philosophy. A cross-sectional survey design was employed, whereby structured questionnaires and interviews were used to collect data. Top and middle management, board members, board chairpersons, and CEOs of Zimbabwe’s SOEs made up the target population. For quantitative data, a sample size of 351 people was obtained using the sample process created by Krejcie and Morgan (1970). Interviews were done with sixteen (16) people until saturation was achieved. Stratified random sampling was used in the study to choose respondents for the quantitative data collection. To choose interview subjects for the qualitative data, purposeful sampling was applied. The quantitative and qualitative data were analyzed using SPSS version 23 and NVivo version 12, respectively. According to the study, the primary corporate governance reforms for the survival of the SOEs in Zimbabwe included the following: open nomination processes for the SOEs; removal and resignation of directors who did not comply with best corporate governance practices; limitations on board member compensation; and changes to the executive directors’ terms of service. This research has shown that best corporate governance practices in the SOEs are brought about by reforming the Board Appointments Board (RAB). In order to ensure that corporate governance reforms are implemented effectively, the present study has suggested that term limits, with a maximum of ten (10) years, in Chief Executive Officer Employment contracts be strictly enforced.

Do CFO Outside Directorships Benefit or Harm Home Firm Financial Reporting Quality?

SYNOPSIS Demand for chief financial officer (CFO) service on corporate boards has grown substantially in recent years, leading to questions about how outside board appointments affect a CFO’s ability to fulfill their home firm responsibilities. In this paper, we focus on the CFO’s core responsibility of overseeing home firm financial reporting quality, and we explore the types of situations where outside board service may lead to either learning opportunities or pressure to shirk on home firm duties. Our results should interest investors, auditors, and board members considering the implications of CFO outside board service because, although we observe no negative impacts on home firm financial reporting quality arising from outside board service, we find only limited situations where significant benefits accrue. Data Availability: All data are publicly available from sources cited in text. JEL Classifications: G34; M40; M41.

Gender equity in academic dermatology: Problems aplenty, yetpaths ahead.

Efforts to achieve gender equity of health professionals should be a priority in all fields of medicine, including academic dermatology. This review aimed, first, to summarize available evidence about the status of gender equity in various domains of academic dermatology-headship positions, salary, editor and editorial board appointments, publications, conference presentations, receipt of research grants and academic prizes-second, to identify challenges to achieving gender equity and, third, to articulate the components of a multifaceted strategy for gender parity. A variety of databases were searched. Manual searching of reference lists and searching of grey literature were also undertaken. It was found that, despite improvements in some domains, the gender inequity persists in all of the above-mentioned areas of academic dermatology. Challenges to achieve gender parity include time in pregnancy, disproportionate participation in childrearing and domestic tasks compared with men, suboptimal legislation in many jurisdictions for parenting and childcare leave, and unconscious biases about women. Elements of a multipronged approach include strengthening women's dermatology societies that advocate for women in academia; celebrating the careers of distinguished female academic dermatologists; mentoring; promoting leadership courses; striving for a greater representation of women among editors-in-chief, authors, and conference presenters, among others; seeking better pay, leave conditions and other work entitlements; conducting high-quality research about gender inequity in academic dermatology; imposing sanctions for violations of gender equity; supporting dermatologists' health; and learning from the experience of other fields of academic medicine.

Female Board Representation and Corporate Performance: A Review and New Estimates for Australia1

Despite a conventional wisdom that female board members positively impact firm performance, a thorough examination of the research to date reveals no consensus that female board members have either a positive or negative effect on firm financial performance. We build the largest dataset of Australian board appointments assembled to date. We use our data to demonstrate how difficult it is to replicate existing research, with one example from Australia and one from the USA. Using event studies and regression analyses, we demonstrate that there is little evidence that female board representation affects firm financial performance.

Small worlds: Institutional isomorphism and Australia’s corporate elite, 1910–2018

The study of corporate elites is crucial for understanding power in society. This article uses prosopography to examine the gender, race, class and social composition of Australia’s top interlocked directors between 1910 and 2018. Applying institutional theory, it analyses the way the consolidation of managerial capitalism influenced the board appointment procedures of large Australian companies. Institutional isomorphisms have increased both the dominance of professionals in company leadership, and the professional standards of board members, meaning those with the necessary education, accreditation, experience and time to dedicate to company directorships came from an increasingly narrow set of life histories. At the same time, the ‘destructuration’ of the elite’s gender norms has increased the appointment of women in recent decades. This highlights the way institutional pressures can simultaneously encourage and stagnate change, and the importance of considering business elites – and the appointment procedures of their companies – holistically.

A path to success: educational board diversity and its influence on MENA banks’ efficiency and stability

PurposeThis paper aims to examine how the diversity of educational levels within bank boards influences the efficiency and stability of banks operating in the Middle East and North Africa (MENA) region. Unlike previous studies, this analysis also investigates the role of board gender diversity in moderating the relationship between board educational level diversity and bank efficiency and financial stability in MENA.Design/methodology/approachIn this study, a sample of 77 banks in the MENA region spanning the years 2011 to 2018 is used. The relationship between the presence of highly educated directors on the board, bank efficiency and stability is assessed using the ordinary least squares method. Additionally, the authors use the Generalized Method of Moments technique to correct endogeneity problem.FindingsThis study establishes a positive association between the presence of directors with advanced educational backgrounds on bank boards and bank efficiency and stability. Furthermore, the inclusion of women on the board strengthens this relationship.Practical implicationsThese findings have important implications for policymakers and regulators in the MENA region, suggesting that promoting diversity policies that encourage the participation of highly educated directors on bank boards can contribute to enhanced efficiency and financial stability. Policymakers may also consider implementing quotas or guidelines to improve gender diversity in board appointments, thereby fostering bank performance in the region.Originality/valueThis study stands out for its innovation and distinctiveness, as it delves into the connection between board educational level diversity and bank efficiency in the MENA region. Notably, it surpasses previous research by investigating the moderating role of board gender diversity, thus offering valuable insights into the complex interplay between these two facets of board diversity. This contribution enriches the existing literature by providing novel perspectives on board composition dynamics and its influence on bank efficiency and stability.

Are Audit Committees Overloaded? Evidence from the Effect of Financial Risk Management Oversight on Financial Reporting Quality

Audit committee (AC) responsibilities have increased over time, prompting concerns that overloading the AC with too many duties may impair the AC’s ability to oversee financial reporting. Using new AC charter-based proxies to measure AC responsibilities, we find that an emphasis on the AC overseeing financial risk management (which is a noncore AC duty) is associated with worse financial reporting quality, as proxied by restatements—consistent with the argument of AC overload by distraction. This overload effect is attenuated when an AC has more directors to share duties or when the AC retains an expert auditor who can serve as a substitute for AC oversight. This overload effect is accentuated when AC members are busy with multiple board appointments or when the external auditor is busy with other audits. We also find that AC financial risk oversight is associated with more AC meetings and greater turnover of AC directors, consistent with the notion of overload. In sharp contrast, we find that greater AC oversight over internal controls (which is a core AC duty) is associated with improved financial reporting quality. Overall, we document that the nature of AC duties impacts the AC’s ability to promote financial reporting quality and that noncore duties may overload ACs. This paper was accepted by Suraj Srinivasan, accounting. Funding: The authors are grateful for funding provided by the Eller College of Management at the University of Arizona, the Broad College of Business at Michigan State University, and the Carson College of Business at Washington State University. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2022.00360 .

Fast Tracks to Boardrooms: Director Supply and Board Appointments 

Fast Tracks to Boardrooms: Director Supply and Board Appointments 

Institutional isomorphic pressures: the impact for women on boards

Purpose This study aims to analyze the connection between institutional isomorphic pressures and both women serving on boards and women’s influence on boards within large American firms. Design/methodology/approach This study examines a longitudinal panel data set of all Standard and Poor’s (S&P) 500 organizations across a seven-year period from 2009 to 2015. Findings The analyses affirm that institutional isomorphic pressures impact the prevalence and influence of women on boards. Evidence suggests that coercive and normative pressures strongly impact the number of women serving as corporate directors, whereas the power of women directors is linked only to mimetic pressures. Practical implications The research suggests that to increase the number of women serving as directors, the industry must first increase the overall number of women serving in senior management roles. Once women directors gain a critical mass of three women on the board, the association with the total number of women directors, the number of boards upon which they concurrently serve, the power of women directors being selected to board leadership and the influence of women directors increase. Originality/value This paper extends existing board diversity work by examining institutional pressures at the international, national and firm levels. By examining the relationship between coercive, normative and mimetic pressures on both the prevalence of women on boards and the influence of women on boards, the authors illuminate certain mechanisms that shape the likelihood of board appointment and placement in more powerful positions.

Tainted Executives as Outside Directors

ABSTRACT We examine outside board appointments of executives allegedly involved in governance failures—“tainted” executives—to shed light on appointing firms’ underlying motivations. Less attractive firms and those with greater advising needs are more likely to appoint tainted executives to their boards than other firms are. Tainted appointees are less likely to be placed on the nominating and governance committees than nontainted appointees. Tainted appointees have similar or better skill sets compared with nontainted appointees. Firms that appoint tainted executives to their boards display an improvement in operating performance in the postappointment period relative to the preappointment period and relative to a matched control sample. We do not find evidence of poor monitoring outcomes for these firms. Overall, our evidence suggests that board needs, not a conspicuous attempt to weaken monitoring, drive the appointment of tainted executives to boards. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G34; K22; M41.

Director foreign experience: Geographic specificity and value implication

This paper introduces the concept of geographic specificity to director foreignness. We argue that the geographic location of a director’s foreign experience affects her board appointment by multinational firms and her subsequent contribution to firm value. We test our hypotheses using a sample of U.S. multinational firms with detailed firm foreign subsidiary data collected from Exhibit 21 files and director foreign work experience data from BoardEx. The regression results show that firms with more foreign subsidiaries in a particular region tend to hire more independent directors with foreign work experience from that region. Furthermore, foreign-experienced directors contribute to increased firm performance in terms of ROA and Tobin’s Q, but only when their foreign experience is geographically matched with their firm’s foreign operations. The contribution is even more pronounced, when the institutional distance between the foreign host country and the home country is long. We also find that foreign-experienced directors are more likely to sit on advisory committees than monitoring committees, indicating their heavier contribution through advisory roles. Lastly, we conduct a difference-in-difference analysis using director exogenous departures to address potential endogeneity concerns. Overall, our paper suggests that geographic factors play an important role in the selection and contribution of foreign directors, and sheds new light on the previous mixed evidence on value implication of foreign directors.

Interrogating diversity: Feminism and the destructuration of Australian board appointment practices

AbstractResearch Question/IssueHow have social movements influenced the diversity of Australian corporate leadership? Although board diversity is crucial for corporate governance, the research in this topic is bifurcated between studies examining interlocking directorates and the presence of boardroom gender diversity.Research Findings/InsightsIn this study, we use a novel dataset and method to understand board diversity. We integrate the analysis of social diversity (structural connections) and demographic diversity among ASX50 boards in 2019 and 2023. Social network analysis (SNA) reveals a closely connected corporate community, with prosopography data identifying a narrow range of “acceptable” demographic characteristics.Theoretical/Academic ImplicationsWe extend institutional theory by examining the role of global social movements (GSMs) for the destructuration of board appointment practices and the resulting uneven progress on equality. Activism from the global feminist movement has applied multi‐dimensional coercive and normative pressures to develop a “pipeline” and “catalyst” for women's board appointments. Simultaneously, the absence of targeted action on other diversities and the intensification of directors' professional requirements have institutionalized the group's social and demographic profile.Practitioner/Policy ImplicationsThese findings are relevant to policymakers and corporations, highlighting the role of social movements for disrupting the status quo and the multidimensional institutional pressures needed to destructure entrenched appointment practices.

CEO power and the strategic selection of accounting financial experts to the audit committee

AbstractWe examine the role of CEO power in the appointment of accounting financial experts (AFEs) to firm audit committees. Our results show that firms with powerful CEOs have a lower likelihood of appointing AFEs to their audit committees. In addition, effective AFEs—those characterized by experience, high status, and social independence from the CEO—are less likely to be appointed in firms with powerful CEOs. In the presence of powerful CEOs, effective AFEs are also less likely to be designated audit committee chair. The absence of effective AFEs is associated with the use of accounting discretion by powerful CEOs to meet or just beat analyst earnings forecasts. We find no evidence that AFEs choose to avoid serving on the boards of firms with powerful CEOs. Our findings are consistent with powerful CEOs influencing board appointments post‐Sarbanes‐Oxley Act through informal channels, including through their social ties with nominating committees. Our results suggest that current regulations prohibiting CEO involvement in the director nomination process and specifying who qualifies as a financial expert may be insufficient to ensure audit committee effectiveness and financial reporting quality.

Continuity and Complexity: A Study of Patronage Politics in State-owned Enterprises in Post-authoritarian Indonesia

ABSTRACT This study explores the role of patronage in Indonesian State-Owned Enterprises (SOEs) by analyzing board appointments between 2004 and 2019 under two different presidential administrations—those of Susilo Bambang Yudhoyono and Joko Widodo. The study is based on a content analysis of board members and their political affiliations in fifteen of the largest Indonesian SOEs and in-depth, semi-structured interviews with a former minister, high-ranking officials in the government, political party members, CEOs, and SOE board members. The study identifies how key patrons influence board appointments and how the sitting president, a pivotal patron in the post-authoritarian context, strategically uses patronage for power consolidation and political stability. Given the financial significance and power of SOEs, placing loyalists on boards serves the interests of ruling political parties and elites. This also enables elites to produce even more patronage, which is beneficial for their personal political machinery. This intricate interplay sustains the presence of patronage in Indonesia’s democratic landscape.

Director awards and board effectiveness

AbstractWe explore the impact of prestigious director awards on effectiveness in setting CEO compensation. Consistent with the positive announcement effect for firms with awardees, CEO compensation aligns more closely with shareholder interest and includes enhanced risk‐taking incentives for boards with awardees. The effect is most pronounced when the awardee is on the compensation committee or a committee chair, and results are robust to a 2SLS estimation using an instrumental variable based on connections to prior award winners. We find evidence that both additional prestigious board appointments and enhanced scrutiny of firms with awardees are channels for improvements in CEO compensation.

Network‐based appointments and board diversity

AbstractThis paper investigates the occurrence of network‐based appointments and its impact on board diversity. I use data on independent board appointments between 2006 and 2012 in large publicly listed firms in the USA, and exploit directors' CVs to uncover past social connections between candidates and current directors along various dimensions—from employment, education, army and social activities. I first estimate the probability of obtaining a board seat when being socially connected to members of the recruiting board. Using different assumptions to recreate the unobserved pool of candidates, I find that being socially connected to someone on the board increases the chances of obtaining the board seat between 35.8 and 41.1 percentage points, after controlling for a large set of firm and director characteristics together with firm and director fixed effects. I then study the change in board diversity following these appointments. While appointments of new independent directors affect board diversity positively, those that are made through networks are not significantly different. However, this is likely the result of appointing directors from a significantly homogeneous sample of individuals, whether connected or not, and suggests that in order to increase board diversity, efforts should be directed towards increasing diversity in the pool of candidates.