Director Networks Research Articles

Are Fat Cats Copycats? Evidence from Director and Consultant Network Dynamics

Prior literature identifies great similarity in executive compensation packages of firms and has succeeded in hypothesizing but not in substantiating the responsible channel or channels. We introduce dynamic stochastic network techniques to directly analyze the following three possible channels simultaneously for the first time: sharing directors, sharing compensation consultants, and sharing industry membership. Using the dynamic technology, we show that package similarity is achieved by sharing directors and industry membership rather than by sharing compensation consultants. Moreover, boards with fewer females are more likely to include higher proportions of options compensation, and higher fixed compensation deters tie formation.

Spillover Effects of Women on Boards

This paper presents evidence that female directors can influence fellow male directors and that their influence can spillover to the male director's other directorships. When working on the same board as women, male directors who also work alongside women within their wider directorship networks are shown to have better attendance records, suggesting that they are more conscientious in their monitoring duty. Accordingly, the more male directors interact with women, the more we find higher CEO turnover sensitivity to poor performance and lower equity risk. Based on conversion theory from the psychology literature, our findings suggest that female directors can exert influence on firm-level decisions despite their minority status in the boardroom.

Do Director Networks Help Managers Plan and Forecast Better?

I examine whether directors' superior access to information through their board network improves the accuracy of firms' forecasting. Managers may benefit from well-connected directors (i.e., board centrality) as they may have limited insight into market developments or decision-making processes of other firms beyond knowledge specific to their firm. Employing a sample of U.S.-listed companies, I separately examine the effect of within-firm variation in direct and indirect board connections on management earnings forecast accuracy. The study contributes by showing that higher-degree connections can have an economically significant effect on the accuracy of management forecasts, regardless of firms' board interlocks. Further analyses point toward well-connected directors' ability to provide managers with valuable advice in a forecasting context, which complements directors' more extensively studied role in preventing managerial expropriation.

Social capital, networks and interlocked independent directors: a Mexican case

Purpose– The purpose of this paper is to investigate whether a pattern of interlocking directorates is emerging following reforms in Mexican corporations, and who, if any, are the powerful actors in this network. Drawing on the Bourdieusian notion of social capital, the paper also analyses theoretically the interlocking directorates, networks and powerful actors, and their influences on and potential implications for corporate governance mechanisms.Design/methodology/approach– The data used in the study consisted of 1,442 internal and external board members of the population of 126 Mexican corporations trading on the Mexican Stock Market as of January 2011. Use of social network analysis (SNA) demonstrates individuals’ links with corporations and allows the production of spatial maps to visualise the network structure of interlocking boards.Findings– Using the measures of SNA developed by Freeman (1979 and Bonacich (1972), the authors identify the most powerful and influential directors in the network structure of board members in Mexico. Board members with the greatest number of connections occupy central positions in the network. The authors also find a catalogue of corporate governance scandals. The inclusion of independent directors seems to have had no influence in ensuring better corporate governance.Research limitations/implications– Mapping out the directors’ links might offer excellent opportunities for policy makers to see how many companies a single director represents, how they share boards, and the implications for minority shareholders of sharing boards, and to understand the workloads of directors in carrying out the monitoring tasks expected of them.Originality/value– This paper makes an important contribution by employing SNA to illustrate interlocking directorates and the positions of powerful and influential actors. Examining networks of directors from a “social capital” point of view also provides an understanding of why the role of independent directors remains toothless in family-dominated corporations.

Director network resources and firm performance: Evidence from Indian corporate governance reforms

Drawing on resource-dependence theory, we hypothesized that in an emerging economy characterized by weak underdeveloped institutions, director interlocks would be a conduit of resources external to the firm. Using data from 651 large Indian firms for the years 2006–2012, we found that directors’, especially independent directors’, social capital and industry-level expertise enhanced firm performance. Our findings contribute by providing evidence of the beneficial role of directors in providing resources through their interlocks, contrary to the basic tenet of corporate governance that independent directors are chosen for their monitoring role to reduce agency costs.

Helping Basic Scientists Engage With Community Partners to Enrich and Accelerate Translational Research.

Engaging basic scientists in community-based translational research is challenging but has great potential for improving health. In 2009, The Rockefeller University Center for Clinical and Translational Science partnered with Clinical Directors Network, a practice-based research network (PBRN), to create a community-engaged research navigation (CEnR-Nav) program to foster research pairing basic science and community-driven scientific aims. The program is led by an academic navigator and a PBRN navigator. Through meetings and joint activities, the program facilitates basic science-community partnerships and the development and conduct of joint research protocols. From 2009-2014, 39 investigators pursued 44 preliminary projects through the CEnR-Nav program; 25 of those became 23 approved protocols and 2 substudies. They involved clinical scholar trainees, early-career physician-scientists, faculty, students, postdoctoral fellows, and others. Nineteen (of 25; 76%) identified community partners, of which 9 (47%) named them as coinvestigators. Nine (of 25; 36%) included T3-T4 translational aims. Seven (of 25; 28%) secured external funding, 11 (of 25; 44%) disseminated results through presentations or publications, and 5 (71%) of 7 projects publishing results included a community partner as a coauthor. Of projects with long-term navigator participation, 9 (of 19; 47%) incorporated T3-T4 aims and 7 (of 19; 37%) secured external funding. The CEnR-Nav program provides a model for successfully engaging basic scientists with communities to advance and accelerate translational science. This model's durability and generalizability have not been determined, but it achieves valuable short-term goals and facilitates scientifically meaningful community-academic partnerships.

Director networks and informed traders

We provide evidence that sophisticated investors like short sellers, option traders, and financial institutions are more informed when trading stocks of companies with more connected board members. For firms with large director networks, the annualized return difference between the highest and lowest quintile of informed trading ranges from 4% to 7.2% compared to the same return difference in firms with less connected directors. Sophisticated investors better predict outcomes of upcoming earnings surprises and firm-specific news sentiment for companies with more connected directors. Changes in board connectedness are positively associated with changes in measures of adverse selection.

Corporate Directors and Informed Traders

We provide evidence that sophisticated investors like short sellers, option traders, and financial institutions are more informed when trading stocks of companies with more connected board members. For firms with large director networks, the annualized return difference between the highest and lowest quintile of informed trading ranges from 4% to 7.2% compared to the same return difference in firms with less connected directors. Sophisticated investors better predict outcomes of upcoming earnings surprises and firm-specific news sentiment for companies with more connected directors. Changes in board connectedness are positively associated with changes in measures of adverse selection.

Directors as Connectors: The Impact of the External Networks of Directors on Firms

The external networks of directors significantly impact firm value and decisions. Surrounding close gubernatorial elections, local firms with directors connected to winners increase value by 4.1% over firms connected to losers. Director network’s value increases with network strength and activities, and is not due to network homophily. Connected firms are more likely to receive state subsidies, loans, and tax credits. They obtain better access to bank loans, borrow more, pay lower interest, invest and employ more, and enjoy better long-term performance. Network benefits are concentrated on connected firms, possibly through quid pro quo deals, and unlikely spread to industry competitors.

An Attempt to Disperse the Italian Interlocking Directorship Network: Analyzing the Effects of the 2011 Reform

The purpose of this paper is to analyze the effects on the Italian directorship network of the corporate governance reform that was introduced in Italy in 2011 to prevent interlocking directorships in the financial sector. Interlocking directorships are important communication channels among companies and may have anticompetitive effect. We apply community detection techniques to the analysis of the networks in 2009 and 2012 to ascertain the effect of the reform. We find that, although the number of interlocking directorships decreases in 2012, the reduction takes place mainly at the periphery of the network whereas the network core is stable, allowing the most connected companies to keep their strategic position.

Director Networks and Credit Ratings

We explore the impact of director social capital on credit ratings. Social capital is often associated with trust and cultivated through one’s personal networks. We show that firms which employ well-connected directors benefit with a higher credit rating. This result is amplified for firms that add connected directors to a board with lower social capital. The benefit is also shown to be greater during times of economic uncertainty. Furthermore, connected boards lead a firm to higher rating than their Z-scores would otherwise predict. Finally, we show that the results are pronounced around the investment grade threshold. Taken together, this paper shows the economic benefits firms enjoy when they hire connected directors to their board. Our results confirm that the causality runs from the connected boards to firm credit rating.

The Spanish corporate structure through interlocking directorates

The aim of this paper is to determine to what extent globalization pressures are changing interlocking directorate networks modeled on continental capitalism into Anglo-Saxon models. For this purpose we analyse the Spanish network of interlocks, comparing the present structure (2012) with that of 1993 and 2006. We show how, although Spanish corporative structure continues to display characteristics of the continental economies, some major banks are significantly reducing industrial activity. Nevertheless, the financial organizations continue to maintain a close relationship with sectors such as construction and services. The analysis of the network of directorates shows a retreat in activity of industrial banking in Spain. Two large Spanish financial institutions, BSCH and La Caixa, continue to undertake activities of industrial banking in 2006, but this activity is significantly reduced in 2012. According to the theories on the role of the interlocking directorates, the companies in these sectors assure their access to banking credit by incorporating advisors from financial organizations to their board of directors. We cannot conclude that the structure of the Spanish corporate network has become a new case of Anglo-Saxon structure, but we got indications that are becoming less hierarchic as banks seem to slowly abandon centrality positions. This is especially salient if we compare the networks of 2006 and 2012, which show a continuing decrease of the role of banks and insurance companies in the network.

Exploring the Community Structure of Complex Networks

Regarding complex networks, one of the most relevant problems is to understand and to explore community structure. In particular it is important to define the network organization and the functions associated to the different network partitions. In this context, the idea is to consider some new approaches based on interval data in order to represent the different relevant network components as communities. The method is also useful to represent the network community structure, especially the network hierarchical structure. The application of the methodologies is based on the Italian interlocking directorship network.

이사 네트워크와 기업가치 사이의 관계 : 롯데그룹을 중심으로

이사 네트워크와 기업가치 사이의 관계 : 롯데그룹을 중심으로

Do Well-Connected Directors Improve Firm Performance?

Results have been mixed regarding whether, and how much, board of director connectedness is beneficial to firm value. Some prior research shows that overly busy directors are ineffective monitors, but these same “busy” directors can be valuable sources of information and other resources. For example, directors who are centrally located within a network can obtain information faster and those who are connected to other highly connected directors can access larger quantities of information. The information can take many forms including market trends, business innovations, and effective corporate practices and is available through these director network channels. However, increased information transfer speed (network centrality) and quantity (connections to highly-connected others) may not always balance out the negative effects of overcommitted directors, information overload, and the propagation of poor business practices. Using social network analysis, we investigate whether well-connected directors increase firm value and find that firms with well-connected directors have higher market value, after controlling for their operating cycle, investment opportunity sets and market competition. We also find that well-connected outside directors (independent) have a bigger impact on increasing firm value than well-connected inside directors.

The small world phenomenon and assortative mixing in Polish corporate board and director networks

This paper investigates the corporate board and director networks in the Polish capital market in 2014. We examined real board and director networks in comparison with networks that were randomly constructed. Through empirical analyses, we demonstrated that the real networks have the characteristics of small-world networks. In addition, the networks are assortative and highly clustered, which imposes certain behaviors on them.

The interaction between inter-firm and interlocking directorate networks on firm's new product development outcomes

This paper explores the interaction between a prominent board of directors and the network of inter-firm relationships on new product development. Specifically, we posit a positive interaction effect between a prominent board and the inter-firm network and structural holes positions on the number of new products developed by the firm. We test the theoretical framework on a sample of 1758 agreements among 1890 biopharmaceutical firms over the period 2006–2010. We find that by filtering, complementing and legitimizing information coming from the inter-firm network, a prominent interlocking directorate network can improve the inter-firm network's effects on new product development. We discuss important implications for how inter-personal networks (such as the board interlock directorate network) help to develop the effectiveness of inter-firm relationship networks in achieving new product development outcomes.

Special issue on main results of Call‐off Order 3 (CoO3) in SatNEx III

Special issue on main results of Call‐off Order 3 (<scp>CoO3</scp>) in <scp>SatNEx</scp> III

Molecular Types of Methicillin-Resistant Staphylococcus aureus and Methicillin-Sensitive S. aureus Strains Causing Skin and Soft Tissue Infections and Nasal Colonization, Identified in Community Health Centers in New York City.

In November 2011, The Rockefeller University Center for Clinical and Translational Science (CCTS), the Laboratory of Microbiology and Infectious Diseases, and Clinical Directors Network (CDN) launched a research and learning collaborative project with six community health centers in the New York City metropolitan area to determine the nature (clonal type) of community-acquired Staphylococcus aureus strains causing skin and soft tissue infections (SSTIs). Between November 2011 and March 2013, wound and nasal samples from 129 patients with active SSTIs suspicious for S. aureus were collected and characterized by molecular typing techniques. In 63 of 129 patients, the skin wounds were infected by S. aureus: methicillin-resistant S. aureus (MRSA) was recovered from 39 wounds and methicillin-sensitive S. aureus (MSSA) was recovered from 24. Most-46 of the 63-wound isolates belonged to the CC8/Panton-Valentine leukocidin-positive (PVL(+)) group of S. aureus clone USA300: 34 of these strains were MRSA and 12 were MSSA. Of the 63 patients with S. aureus infections, 30 were also colonized by S. aureus in the nares: 16 of the colonizing isolates were MRSA, and 14 were MSSA, and the majority of the colonizing isolates belonged to the USA300 clonal group. In most cases (70%), the colonizing isolate belonged to the same clonal type as the strain involved with the infection. In three of the patients, the identity of invasive and colonizing MRSA isolates was further documented by whole-genome sequencing.

Executive Compensation, Fat Cats, and Best Athletes

Income gains in the top 1 percent are the primary cause for the rapid growth in U.S. inequality since the late 1970s. Managers and executives of firms account for a large proportion of these top earners. Chief executive officers (CEOs), in particular, have seen their compensation increase faster than the growth in firm size. We propose that changes in the macro patterns of the distribution of CEO compensation resulted from a process of diffusion within localized networks, propagating higher pay among corporate executives. We compare three possible explanations for diffusion: director board interlocks, peer groups, and educational networks. The statistical results indicate that corporate director networks facilitate social comparisons that generate the observed pay patterns. Peer and education network effects do not survive a novel endogeneity test that we execute. A key implication is that local diffusion through executive network structures partially explains the changes in macro patterns of income distribution found in the inequality data.