Board Seats Research Articles

Network Connections and Board Seats: Are Female Networks Less Valuable?

We investigate how sizes of professional networks affect the probability of appointment to a supervisory board and whether the effect is gendered. Using an employer-employee data set of the Danish labor market, 1995–2011, we find larger networks to associate with a higher probability of becoming a first-time director. The effect is larger for men. One explanation is that men, compared with women, have more connections to larger and listed firms and to other males—attributes that increase the appointment probability. Women who have connections to incumbent directors before being appointed director have more labor market experience than other directors.

Effects of proxy solicitation and director ownership on directors’ career consequences

This study investigates how proxy solicitation and director ownership jointly affect directors' career consequences in Taiwan. We report that assent votes partly arising from proxies without shareholder voice increase the likelihood of departure for directors with higher ownership in firms soliciting proxies, especially for busy directors. Since proxy votes do not build extra reputation, this generates no spillover effect for both non-busy and busy directors. Overall, we support the arguments based on prior studies that votes holding information on shareholder voice have implications on directors’ careers. Furthermore, different board seats provide unequal incentives for busy directors.

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.

Does the academic profession really matter in board monitoring? Evidence from individual director voting

ABSTRACT This study examines the voting behaviour of independent directors from academia based on manually collected voting data. We find that academic independent directors are less likely to dissent on board proposals than other independent directors, especially the directors who have fewer industry-specific experiences or have a relatively higher pay from the focal firm. The academic directors are also more likely to lose board seats after dissension, consistent with their concern of less job security as they are easily replaced. Lastly, although academic directors generally have weaker incentives to vote against insiders, they are more likely to dissent on proposals concerning related-party transactions. Overall, our study sheds new light on the role of academic independent directors in board monitoring effectiveness.

Venator gets challenge from investor

One of the largest shareholders in Venator Materials, the Czech investment fund J&T, is demanding two seats on the board of the former Huntsman pigment business, which it sees as underperforming. J&T owns a 14.3% stake in Venator, making it the second-largest shareholder, behind the private equity firm SK Capital, which owns about 40%. In a letter to Venator’s current board, Martin Seyček, a director of J&T, points out that Venator’s stock has declined 96% since its initial public offering in 2017. It now trades at less than $1 per share and faces potential delisting from the New York Stock Exchange. J&T also says Venator’s current board is stacked with executives with links to SK and Huntsman. In response, Venator says in a statement that it has been reducing costs and is divesting its iron oxide business to Cathay Industries for $140 million. “Beyond its demand for board seats, J&T

Activist Directors: Determinants and Consequences

This paper examines the determinants and consequences of hedge fund activism with a focus on activist directors, i.e., those directors appointed in response to demands by activists. Using a sample of 1,969 activism events over the period 2004–2012, we identify 824 activist directors. We find that activists are more likely to gain board seats at smaller firms and those with weaker stock price performance. Activists remain as shareholders longer when they have board seats, with holding periods consistent with conventional notions of “long-term” institutional investors. As in prior research, we find positive announcement-period returns of around 4–5% when a firm is targeted by activists, and a 2% increase in return on assets over the subsequent one to five years. We find that activist directors are associated with significant strategic and operational actions by firms. We find evidence of increased divestiture, decreased acquisition activity, higher probability of being acquired, lower cash balances, higher payout, greater leverage, higher CEO turnover, lower CEO compensation, and reduced investment. With the exception of the probability of being acquired, these estimated effects are generally greater when activists obtain board representation, consistent with board representation being an important mechanism for bringing about the kinds of changes that activists often demand.

Board Capital and Firm Performance

This study examines the influence of board capital on firm performance. Annual reports are used as the main sources for data collection. This study finds that firm performance decreases with gender diversity. Next, the interlocking directorate is not associated with firm performance. The findings would be useful to Malaysian policy-makers in deliberating the board’s role as a governance mechanism in strengthening the board structure. The results suggest selecting a director with relevant knowledge and perspective rather than simply meeting the number of board seats.

StockWatch: Icahn Pursues Illumina Board Seats, and a Sell-Off of Grail

GEN EdgeVol. 5, No. 1 BiomarkersStockWatch: Icahn Pursues Illumina Board Seats, and a Sell-Off of GrailBellicum, Lifecore tumble on review of strategic alternatives; Esperion sinks on milestone dispute with Daiichi Sankyo; Provention nearly quadruples on planned $2.9B Sanofi acquisition; ThermoGenesis nearly triples on new facilityAlex PhilippidisAlex PhilippidisSearch for more papers by this authorPublished Online:17 Mar 2023https://doi.org/10.1089/genedge.5.1.47AboutSectionsView articleView Full TextPDF/EPUB Permissions & CitationsPermissionsDownload CitationsTrack CitationsAdd to favorites Back To Publication ShareShare onFacebookTwitterLinked InRedditEmail View articleFiguresReferencesRelatedDetails Volume 5Issue 1Jan 2023 Information© 2023 by GEN PublishingTo cite this article:Alex Philippidis.StockWatch: Icahn Pursues Illumina Board Seats, and a Sell-Off of Grail.GEN Edge.Jan 2023.241-248.http://doi.org/10.1089/genedge.5.1.47Published in Volume: 5 Issue 1: March 17, 2023PDF download

이사 후보에 대한 의결권 반대 사유와 이사회 효율성 및 기업가치와의 관계

We examine the relationship between dissent in director elections and board effectiveness. In our analysis, we categorize reasons for dissenting in board votes into prior irresponsible behavior, lack of independence, lack of past attendance, and serving on multiple board seats. We find that having a director who faced dissent on a board of directors reduces board effectiveness, especially in cases involving inside directors who have prior irresponsible behavior on their records, inside directors who serve on multiple boards, and outside directors who lack independence. Moreover, having a director who faced dissent on a board is negatively associated with corporate value. We also find that having a nominating committee that is composed only of outside directors has a moderating effect on this negative association between dissent in director elections and board effectiveness(firm value). We find similar results in an analysis of proxyvoting advice offered by an advisory firm. Our results suggest the importance of incorporating a wider range of board-member characteristics beyond such commonly used measures as outside director ratios and gender diversity.

Foreign Donations in the Higher Education Sector of the United States and the United Kingdom: Pathways for Reputation Laundering

We explore how the influx of foreign funding into the higher education sectors of the United States and United Kingdom has raised the challenge of “reputation laundering”—when foreign donors and individuals use donations to prestigious universities to boost their international public image and offset negative images or reported controversies back in their home country. We outline four pathways for reputation laundering—donations for academic programs/schools, naming rights, honorary degrees and board seats; and the offer of favorable admissions decisions—and examine the variety of policies, practices and safeguards that have been adopted by U.K. and U.S. universities in response. We present evidence, drawn from a survey of U.K. development officers, that university diligence procedures, which usually focus on compliance with the law, often are inadequate for filtering or deterring most types of reputation laundering.

Soft regulation of women on boards: Evidence from Canada

AbstractIn this study, I examine the effectiveness of a national board gender diversity disclosure requirement, which is, arguably, on the “soft” end of the continuum of boardroom interventions. Using a panel dataset of 1847 hand‐collected corporate disclosures from 2015 to 2018, I perform a post‐event, historical trend analysis of the efficacy of Canada's 2014 intervention. I find evidence of real progress in the 4 years following intervention against several benchmarks. Specifically, improvements in critical mass are documented, with the proportion of boards with three of more women reaching 18.8% in 2018. Tokenism remains an issue with very little change in the number of Canadian boards with only one woman. Further analyses using a sorting methodology and panel regression analysis reveal that progress toward board gender diversity is achieved by those with board gender targets, board seat renewal policies, and written board diversity policies. In addition, I find that larger companies achieve greater progress and that progress is clustered by industry.

Female directors and the firm's cost of debt: Evidence from a quasi-natural experiment

Whereas in 2001 women held around 5% of board seats in Norway, in 2007 their representation increased to more than 40%. This extraordinary change was the result of a board-gender quota regulation enacted in 2006. This study leverages this unique research setting and implements difference-in-differences estimations to investigate whether the appointment of female directors affects the firm's cost of debt. The treated group in the empirical analysis consists of Norwegian public companies affected by the new regulation, while the control group includes similar firms from neighboring Scandinavian countries that were not affected by any gender quota. If, as most previous-related studies conclude, female directors contribute to reduce the cost of debt, such an effect should necessarily be observed in our research setting. However, the results of the empirical analysis show no significant differences in the cost of debt before and after the appointment of a large number of female directors. This result appears robust as it holds across several sensitivity analyses. The implications of this finding for the corporate governance literature are discussed.

We are under attack: Terrorist attacks and director turnover

Motivated by the challenge in the director turnover literature to distinguish between board-initiated dismissals (i.e., ‘clean house’) and director-initiated departures (i.e., ‘jump ship’), we study director turnover in firms local to terrorist attacks (hereafter, TA firms). We argue that director turnover following a terrorist attack is more likely to reflect directors' ‘jump ship’ decision rather than a board's ‘clean house’ decision. We find that directors have a disproportionately greater tendency to leave TA firms after an attack. Further analyses reveal that director turnover is lower when directors perceive the larger benefits or lower costs of staying in TA firms. We also find that directors' decisions to exit or stay are economically meaningful to TA firms and directors themselves. Specifically, by retaining directors, TA firms can reduce their post-attack stock return volatility; by remaining with TA firms, directors will receive more future board seats and committee roles. Overall, our results suggest that the act of staying, in and of itself, signals directors' superior quality within the labour market, and the labour market tends to assess directors' abilities through their turnover decisions after terrorist attacks.

Imprinting the economy: The structural power of venture capital

This article analytically links asset management and the digital economy by analyzing the structural power of venture capital (VC) investors. Therefore, I propose the notion of imprinting, which describes how financial actors, enabled by their structural position, shape businesses according to their specific logic. Concretely, I argue that VCs’ logic is one of assetization, whereby VCs turn startups into assets for themselves and their capital providers. To do so, VCs seek hypergrowth, selecting only companies with the potential to grow fast and large and decouple financial value from business fundamentals. Instead of the threat of exit, VCs establish direct and indirect channels of control: legally, via preferred shareholder rights, board seats, and payout conditionality; and as participatory capital, offering operational advice and access to their network. The article contributes to a nuanced understanding of financial sector power in contemporary capitalism.

No Representation Without Compensation: The Effect of Interest Groups on Legislators' Policy Area Focus.

Interest groups seek to influence parliamentarians' actions by establishing exchange relationships. We scrutinize the role of exchange by investigating how interest groups impact parliamentarians' use of individual parliamentary instruments such as questions, motions, and bills. We utilize a new longitudinal dataset (2000-2015) with 524 Swiss parliamentarians, their 6342 formal ties to interest groups (i.e., board seats), and a variety of 23,750 parliamentary instruments across 15 policy areas. This enables us to show that interest groups systematically relate to parliamentarians' use of parliamentary instruments in the respective policy areas in which they operate-even when parliamentarians' time-invariant (fixed effects) and time-variant personal affinities (occupation, committee membership) to the policy area are accounted for. Personal affinities heavily moderate interest groups' impact on their board members' parliamentary activities. Moreover, once formal ties end, the impact of interest groups also wanes. These findings have implications for our understanding of how interest groups foster representation in legislatures.

Women and Local Politics: How Different Offices Affect Female Candidacies

Women’s office seeking has been the subject of considerable research, but how likely a female candidate is to seek one office over another has not. Using a unique data set of office seeking in California local governments between 1996 and 2019, we address the likelihood that women will seek certain types of offices over others; and whether and how female office seeking is affected by the context of local elections. In general, we find that women are most likely to seek citywide administrative offices, followed by school board seats. Local office-seeking by women, however, also varies by jurisdiction size, political context, and over time, particularly for county-level offices. Our focus on offices as a key part of female candidate entry sheds important new light on candidate behavior and the prospects for greater descriptive representation in local government.

Executives’ Prior Employment Ties to Interlocking Directors and Interfirm Mobility

This paper explores how executives’ prior employment ties to interlocking directors, or those who hold additional board seats or executive positions at outside firms, influence individual executive interfirm mobility. As organizational boundary spanners, interlocking directors may be able to influence executive outcomes both within and outside of executives’ current firms. But given natural constraints on internal promotion for executives, we suggest most executives will tend to leverage ties to interlocking directors to access external opportunities, as manifested by movement to outside firms. Analysis of interfirm mobility among a sample of Standard & Poor’s 1500 executives between 2000 and 2014 offer support for this idea. We find a positive association between individual executives’ prior employment ties to interlocking directors and their hazard of movement to outside firms, including to the other firms where these directors serve. At the same time, we argue and find that the strength of this latter relationship will further depend on directors’ competing motivations owing to their specific positions in the focal and interlocking firms. Whereas holding a lead position on the focal firm’s board (i.e., as chairperson or lead independent director) weakens this relationship, holding the position of chief executive officer in the interlocking firm strengthens it. Our theory and findings highlight the unique and important role of interlocking directors in executive interfirm mobility and, in doing so, contribute novel insights regarding how ties to boundary spanners can influence individual outcomes for those to whom they are linked.Supplemental Material: The e-companion is available at https://doi.org/10.1287/orsc.2022.1638 .

Does public scrutiny on corporate tax decisions affect directors? Effects of responsible (irresponsible) corporate tax practices on director reputation

In 2004, the Citizens of Tax Justice (CTJ) released a report that significantly raised public awareness of corporate tax avoidance practices in the companies that it scrutinised in the study. Using a six-year period straddling the CTJ event, we compare over time changes in external board seats held by incumbent directors serving scrutinised firms against those of their counterparts serving control firms with comparable tax practices but that were not scrutinised in the CTJ study. Incumbent directors in scrutinised firms with minimal tax avoidance practices gained more external board seats after the CTJ event than did board members in control firms. However, directors in scrutinised firms with aggressive tax avoidance practices neither gained nor lost more external board seats after the CTJ event than did directors in control firms. These findings provide little evidence that constituents in the corporate sector overwhelmingly favour tax minimisation practices as acceptable practices of conducting business operations. Rather, they provide evidence that corporate constituents, like their social peers, are somewhat attuned to the expectation for socially responsible tax practices. Lastly, we find that directors in scruitised firms with minimal tax avoidance practices are more likely to gain board seats from like-minded firms with responsible tax practices.

Insider Filing Violations and Illegal Information Delay

AbstractWe document that a significant number of insiders violate the Securities and Exchange Commission (SEC) reporting requirements by filing open market transactions after the legally required deadline. Prior to the Sarbanes–Oxley Act (SOX), 29% of transactions fell outside the required reporting window. Following SOX, 8% are delinquent. Violations cluster in periods of high information asymmetry, incentivizing insiders to keep trades private and earn abnormal returns. Collectively, these findings suggest that a subgroup of insiders personally benefit from violating SEC disclosure requirements. Evidence also suggests that blockholders provide governance for violations. Guilty insiders experience a reduction in board seats and an increased likelihood of turnover.

Financial services security risks and remediations

Cybercrime routinely targets financial services, which in kind spend lavishly to protect themselves — with notable success, as cyberattacks are often less successful against financial service industries (FSI) than other sectors. Yet the excessive costs of cyber security could be less, and not all FSIs have the resources to pursue an escalating cybercrime conflict. There are several areas that FSIs can focus on to improve their cyber security posture while keeping budgets in check. They can look beyond compliance checks as an acceptable level of protection. They can police access to their networks by supply chain providers with more nuance. They can use prevention to curtail successful attacks that can create astronomical remediation costs. Lastly yet perhaps most crucially, they can encourage board participation by articulating security issues as strategic business considerations. FSIs must look beyond the checks and balances of traditional compliance and governance, and risk questionnaires. They should avoid construing unknown risks due to a lack of IT visibility as acceptable risks, and they must consider creating space for technology and security experts at the highest levels of management, such as mandatory board seats. At a technical level, they should adopt the zero trust security framework of ‘Never Trust, Always Verify’, enhanced monitoring of all IT areas, and unplanned audits to encourage compliance as a continual project. This paper focuses on where FSIs face security risks and how to address them.