Selection Management Research Articles

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.

Why embrace a double-edged sword? A behavioral theory of board political capital building

Firm political connections are widely recognized to have both positive and negative implications, but why do firms build political connections in the first place? Distinct from prior research that typically views firm political connections as capital stock, we focus on board political capital building—selecting new directors with political backgrounds—as a strategic decision. Drawing on the behavioral theory of the firm, we examine how board political capital building is driven by performance shortfalls based on the logic of problemistic search—seeking the potential benefits of political connections while undertaking the potential downsides. Using director selection data on Chinese listed firms, we find that firms with higher performance shortfalls are more inclined to select new independent directors with political backgrounds. We further demonstrate that it is more feasible for firms with performance shortfalls to build lower-level board political capital but infeasible for them to build upper-level political capital.

Who monitors the monitors? An examination of listed companies in an emerging market context

The growing number of corporate scandals globally highlights the importance of effective corporate governance mechanisms. Many of the corporate governance frameworks that are rooted in the agency theory advocate the election of independent non-executive directors, an independent chairperson, and a lead independent director. Shareholder voting on the election or re-election of directors (hereafter referred to as ‘director re-elections’) has been largely unexplored in South Africa—a country widely recognised as a pioneer in the corporate governance field and yet marred by several corporate scandals in recent years. In this study, an unbalanced panel data set was thus constructed comprising voting outcomes and board-level characteristics of companies listed on the Johannesburg Stock Exchange from 2014 to 2020. Significant positive relationships were noted between shareholder voting opposition to director re-elections and both board size and board tenure. Shareholders who cast opposing votes mainly did so because of their concerns about the lack of director independence, at board, committee, and nominee level. The findings of this study were explained in the context of the agency, stakeholder, stewardship, and resource dependence theories. It is recommended that nomination committees use more robust selection criteria for directors. Shareholders are also encouraged to vote more actively on director re-elections to monitor these monitors.

Attraction versus competition: A tale of two similarity effects in director selection of Chinese firms

Abstract Extant research has focused primarily on the collaborative side of chair-director similarity in director selection, whereas the potential competitive side remains underexplored. Emphasizing the dual role of directors as both collaborators and competitors, as perceived by chairs, we incorporate both the similarity-attraction logic and the similarity-competition logic in director selection and develop a collaborative-competitive framework to reconcile the tension between them. Based on new director selection data from Chinese listed firms, we find that chair-director similarity in the competitive-oriented political background is negatively related to the likelihood of the director being selected—consistent with the similarity-competition logic, whereas chair-director similarity in the collaborative-oriented technological background is positively related to the likelihood of the director being selected—consistent with the similarity-attraction logic. Furthermore, we reveal how the similarity-derived effects are contingent on within-similarity heterogeneity. Our study advances research on director selection by providing a more fine-grained understanding of chair-director similarity in director selection.

Gender Salience and Recategorization of New Directors: The Role of Political Ideology

Pressure from stakeholders has resulted in increased board gender diversity. Such diversity, however, goes against the well-accepted concept of demographic homophily. In addition, other studies find that increased board gender diversity may not unequivocally lead to better firm decisions, which does not sit well with the assumption that demographic minorities bring diverse information/ideas to the board. This study advances an explanation for these inconsistencies in the literature by integrating symbolic management and recategorization theories to assert that boards outwardly conform to greater gender diversity, whilst choosing to reinforce value homophily by recategorizing female new directors based on shared political ideology. We test our hypotheses on a sample of 13,483 new director appointments in 2,473 US firms using fractional regression analysis. The findings show that the appointment of a new female director strengthens the association between the board's and the new director's political ideology. In addition, this relationship is strengthened when there is a female CEO, or when the new female director has a less similar demographic background. Moreover, supplemental analysis considering ethnic minority new director appointments shows similar results. The study makes important contributions toward the literatures on female new director selection, recategorization and political ideology. We shed light on why research is ambivalent regarding the benefits of gender diversity since findings show that boards compensate for gender diversity by becoming more homogeneous on political ideology, a value dimension that influences board decisions.

Shareholder election of CSR committee members and its effects on CSR performance

AbstractWe examine the election of directors to corporate social responsibility (CSR) committees and whether shareholder votes influence CSR committee effectiveness. Our study is motivated by the importance that shareholders place on CSR and the responsibilities of the board in overseeing a firm's CSR practices. We find that CSR committee members receive greater shareholder support than other directors. We further find that among CSR committee members, those who are more experienced and skilled receive greater shareholder support. Furthermore, when a firm's CSR performance is poorer (better), CSR committee members receive lower (greater) shareholder support compared with other directors. Finally, we find that through voting, shareholders can increase the efficacy of the CSR committee, leading to improvements in CSR committee structure and performance. Overall, our results suggest that shareholders value the services and expertise of CSR committee members and hold them accountable for CSR performance. Shareholder votes are also effective in enhancing CSR performance.

Battle of the Classes. Social Class and Work Status in Determining Women Director Appointments

The literature on women on board of directors provides limited insights on how the social class origins of the women executives influence their selection on corporate boards and their career trajectories. Gender research in management has narrowly focused on the disadvantages women experience in the workplace. However, women's unique and complex social identities with multiple group memberships, such as social class and work status, can lead to paradoxical experiences in the workplace, with women experiencing both advantages and disadvantages. To shed new light on the role of multiple identities for women executives in gaining board directorship, I leverage the social classification based on “caste” in India. I develop a theoretical model to show the influence of social class, work status, and social class mobility in director selection market for women executives. The model predicts four distinct profiles of women executives and their outcomes in the director labor market. By using the intersectionality of social class and work status, I propose that women executives with high work status and low social class will be able to display their authority and dominance in the workplace and craft credible professional executive images at work, and hence will be buffered from the stereotypic bias of incompetence due to gender and social class. In contrast, for women directors with high social class but low work status, high social class will mitigate the adverse effects of low work status by signaling their high social capital through their homophilic kinship ties. Moreover, the director appointments of women executives with lower work status will allow upward mobility of these director profiles and improve their future career prospects in the corporate elite.

The Rejected Threat of Corporate Vote Suppression: The Rise and Fall of the Anti-Activist Pill

As disciplinary takeovers are replaced by activist shareholder campaigns, managements may well want to turn to the “anti-activist pill” as shelter from the storm. The economic shock from the widespread shutdown to combat the Covid-19 pandemic produced dozens of so-called “crisis pills.” The defense of these pills as avoiding “disruption” and “distraction” of managements can be seen as a test run for broader use of poison pills to fend off shareholder activism. The Delaware courts, first Chancery and then the Supreme Court, rejected this managerial defense tactic in a way that clarifies the role of the poison pill in corporate governance. In the context of a hostile tender offer, the pill may be legitimated as protecting the statutory “two-step” for a merger: first, screening and negotiating by the board, followed by a shareholder vote on a proposed merger. Delaware’s board-centric model relies on another statutory mechanism—a director election contest—as the appropriate avenue for managerial accountability. Various elements of the poison pill—the cap on share ownership and a definition of “beneficial owner” that goes beyond “record owner”—have unfortunate side effects on election contests but are necessary to prevent unvetted shifts in control via tender offer or the gradual accumulation of stock (a “creeping tender offer”) either directly or with confederates. An anti-activist pill converts these side effects into its very mechanism, precisely to block a successful director election contest. An election contest is different from a tender offer in this critical respect: Success requires persuasion of a shareholder majority who will remain shareholders after the event. A low pill trigger reduces the activist’s economic incentives and can reduce its credibility; a capacious definition of beneficial ownership burdens its task of persuasion. The Delaware Courts’ reaffirmation of the legitimating role of the shareholder franchise is particularly important now, as the set of shareholder activists expands to include ESG activists who will use director election contests to propose broader conceptions of corporate purpose and shareholder value pursuit.

Women’s Presence on Corporate Boards: Addressing Director Selection, Participation, and Gender Bias

Gender diversity of corporate boards is gaining attention as a global issue, but women’s presence on boards remains low despite increased numbers of qualified women. Most research compares gender diversity of boards and firm performance or corporate social responsibility compliance and reporting, ethics compliance, or other decisions impacting firm risk and success. Despite positive outcomes associated with gender diverse boards, few women directors are appointed, and progress is slow. Quotas and incentives have been considered and implemented in several countries to develop board gender diversity, but without enforced quotas, minimal change is seen. When women are appointed, they are often not present in sufficient number to impact board gender diversity. A direct focus on gender bias in director selection and board member participation is needed to provide a deeper understanding of women’s presence on boards.

Economic consequences of tax director departure

ABSTRACT This study investigates the economic consequences of the departure of a tax director. In addition, we examine whether the market reactions to such a departure are associated with the director’s gender. Using a sample of 471 U.S. firms, we find positive market reactions to the announcement of tax director departures. Our results further show lower cumulative abnormal returns for female tax directors than for male tax directors. Our findings suggest that the market values tax directors’ departure and gender. Our study has implications for practitioners in terms of the selection of tax directors.

Meet the Candidates: Division VII Director Elections [Society News

Meet the Candidates: Division VII Director Elections [Society News

Revisiting the Asian Financial Crisis: Is Building Political Ties with Emerging Political Elites Beneficial during a Crisis?

Purpose - Drawing on relational institutional theory, we explored how demographic similarity between board members of a firm and newly emerged political elites led to firms’ increased financial resource acquisition such as leverage ratio and decreased export intensity amidst the Asian financial crisis. We also studied how a firm’s leverage ratio and export intensity can further affect firm profitability and financial credit rating.
 Design/methodology - We revisited and explored a unique, unprecedented crisis that affected most Korean firms: the Asian financial crisis that coincided with a governmental shift from a conservative to a liberal party. We collected demographic information from 432 listed Korean firms’ board members and 43 political elites of the Blue House from 1998-2000 to create a demographic similarity measurement. We collected firms’ financial information, built panel data, and used ordinary least squares regression to test our theory.
 Findings - Our results showed that demographic similarity between a firm’s directors and newly emerged politicians had a positive association with a firm’s leverage ratio but a negative association with a firm’s export intensity. A firm’s leverage ratio had a negative relationship with firm performance measured by firm profitability and financial credit rating. A firm’s export intensity showed a positive effect on firm performance.
 Originality/value - We highlighted that during an economic crisis that coincided with a governmental shift and change of leading political actors, firms exerted efforts to survey the environment and build new external stakeholder relationships to cope with the changing landscape. We proposed that in an emerging market like Korea where low levels of trust and favoritism are prevalent across society, one of the relational institutional strategies that firms can employ is the selection of directors with similar demographic characteristics to political elites based on factors including birthplace and school affiliations. We examined the efforts of firms to build political networks with newly empowered political elites during a financial crisis, and the consequences of establishing such networks. We highlighted that during a financial crisis, the demographic similarity between a firm’s board members and newly emerged politicians can provide firms with access to financial resources but can also result in poor management and reduced effort to enhance its international competitiveness.

Advisory Governance Policy, Shareholder Voice, and Board Responsiveness: The Case of Majority Vote in Director Elections

This study investigates how adoption of advisory governance policy encourages firms to become more responsive to their shareholders over time. Although shareholder activism is costly and often viewed as unable to drive meaningful change, we identify increasing shareholder voice as an underlying mechanism to explain how advisory policy adoption ultimately reshapes board–shareholder relations. Drawing on signaling theory and behavioral views of board–shareholder dynamics, we test our predictions following the broad shift in corporate board voting policies from plurality to majority vote standards. While prior research shows that majority vote adoption has little to no direct impact on director elections, empirical results from 2,390 firm-year observations provide support for our hypotheses that adoption of this advisory electoral standard signals a willingness to hear shareholder concerns, leading to increased shareholder activism and, in turn, board responsiveness to shareholder proposals. Overall, our results help explain why some firms continue to fight the purely advisory policy and why an era of shareholder empowerment followed the majority vote campaign.

Preferred Characteristics of Medical Library Directors: An Analytical Network Process Modeling for Selection of Recruitment Criteria in Academic Institutions

Abstract The present study aimed to rank the factors affecting the appointment of health library at central libraries of Iranian universities of medical sciences through employing the analytic network process. The statistical population of this applied study comprised the research directors and deputies as well as managers and assistants of central libraries of three universities of medical sciences of whom 12 were selected through the census method. Data were collected via a researcher-made questionnaire and analyzed using the decision-making techniques of ANP in Super Decisions 2.0.8. Results revealed that among criteria related to occupational factors, honesty and integrity obtained a higher rank. Out of the criteria related to organizational factors, familiarity with organizational technology and perception of objectives and strategies were two high-ranked criteria. Finally, from the criteria related to environmental factors, familiarity with the customer was ranked top, while familiarity with economic factors was ranked as the least important determinant. This study was aimed at offering a framework for step-by-step ranking of major criteria in the selection and recruitment of library directors in libraries for health professions education/academic health sciences libraries.

Nomination Committees and National Sport Organizations: Designing the Way to Democracy?

The director selection processes of nonprofit national sport organizations underpin board composition and hence board and organizational performance. In the New Zealand context, this study verifies the emergence of nomination committees (NCs) and critically examines, from a democratic theory perspective, the extent to which democratic legitimacy is promoted within the NC structures of national sport organizations’ director selection processes. An analysis of national sport organization (NSO) constitutions affirms the NC emergence as a governance phenomenon and results in the development of an NC (constitutional powers-based) classification system. This NC classification contributes to a largely unexamined area of nonprofit sport governance by providing a foundational description of NC structural design features then used to reflect on the extent to which the identified design features may serve to protect member voice (community logic) in the face of increasing pressures on NSOs to adopt professionalized governance structures (corporate logic). A holistic system objectives approach to democratic theory is used to better understand how NC structural design may support such member voice. In this way, the article offers both scholars and practitioners an insight into a range of NC strategic design choices and potential implications for democratic legitimacy.

Unnatural selection of outside directors: Consequences of Japanese corporate governance reforms

AbstractWe examine how Japanese listed companies increase the number of outside directors to comply with corporate governance reforms. We find that, after the reforms, there has been an increase in the number of cases in which former company auditors (kansayaku) become outside directors in the same company. This trend is more pronounced for hitherto noncompliant firms with insufficient outside directors before the reforms. Moreover, the firms appointing company auditors as outside directors tend to change their corporate structures to maintain existing practices and minimize compliance costs. Our findings imply that Japanese reforms have increased the unnatural selection of outside directors.

Gender Composition of Board of Directors and Financial Performance: A Case of Selected Companies in Nigeria

Like some other countries, the Nigeria Security Exchange Commission in 2011 declared that all listed companies should encourage diversity in the appointment of board members and that the criteria for selection of directors should reflect gender composition, thereby allowing more women on board of listed companies. Despite these declarations there still seems to be low representation of women in mostly top executive positions of companies in Nigeria. It is also unclear whether corporate board gender balance composition improves companies’ financial performance in Nigeria given this low representation of women on board. Hence, the need for this study to examine the relationship between board gender composition and companies’ financial performance in Nigeria, as well as examining the recent trend in board gender composition of selected companies. The study employed descriptive and correlation analyses for five companies listed on the Nigeria Stock Exchange between 2010 and 2020. The study found near zero positive relationship between companies’ financial performance (profit growth rate) and board gender composition (ratio of female representation on board to board size). It revealed that though the board of directors of the companies in Nigeria are still majorly male dominated, the number of female representation on boards has increased marginally during period understudy. The study concludes that gender composition of board member has very small or no significant relationship with company’ profit and performance in Nigeria.

Examining the social pressures on voluntary CSR reporting: the roles of interlocking directors

PurposeCorporate social responsibility (CSR) reporting is a widely accepted procedure for firms to disclose their performance in multiple domains, including environmental protection, labour welfare, protection of human rights, community services, contribution to society and pursuit of product safety. This study aims to investigate whether and how board interlocks affect firms’ decisions with respect to CSR reporting. This study argues that board interlocks act as an important source of social pressure and firms are influenced by their peer firms to adopt CSR reporting.Design/methodology/approachThis paper sampled listed companies on China’s Shanghai and Shenzhen Stock Exchanges from 2009 to 2015. The data were collected from Runling database and China Stock Market and Accounting Research database. A multi-period logit model was used to conduct the main regression analysis and the propensity score matching method was used in the robustness checks.FindingsA study based on a sample of Chinese publicly listed firms from 2009 to 2015 confirms the argument and shows that sharing a common director on the board with a previous CSR reporter facilitates the firm’s engagement in CSR reporting. Furthermore, this study shows that the influence of board interlocks on CSR reporting depends on the following three characteristics: status of the interlocking director, size of the linked CSR reporter and performance implications of previous CSR activities.Research limitations/implicationsThe interpretation of the current findings should be considered in light of these limitations. First, while board interlocks are an important social aspect of institutional pressure, other types of social pressure exist. Second, the focus is on CSR reporting decisions. However, CSR reporting can also be symbolic, with little substantive quality to improve CSR-related activities. Third, this study argues that both regulatory and social pressures influence the decision to report on CSR. However, this study was unable to determine the weight of each pressure. Future research should follow this direction. Finally, the influence of certain behaviours through interlocks is stronger in the initial stage of the institutionalisation process.Practical implicationsThe findings of this study have important implications for practitioners. First, the messaging role of interlocking directors suggests that director selection should consider the effectiveness of information transfer. Knowing and analysing specific interlock and its links with the firm’s strategy is very important. Meanwhile, firms should be vigilant that the balance between the access to information and loss of autonomy because searching for information related to firms’ strategic decisions might challenge current strategy. Second, the results of the study suggest that to effectively urge companies to engage in CSR reporting, government and policy makers should consider beyond institutional pressure, but also be sensitive to the social pressure exerted upon the companies.Social implicationsThe positive role of board interlocks on corporate voluntary CSR reporting can not only make valuable contributions to the Chinese society but also, as an important participant of global economy and trade, the Chinese interlocking directors’ contribution to CSR reporting have global benefits.Originality/valueThis study extends the institutional perspective on CSR reporting by uncovering the effect of social pressure. It advances the literature on the antecedents of CSR reporting by linking board interlocks to CSR reporting. Finally, the study enriches the broader interlock literature by delineating three specific characteristics of interlocks that influence CSR reporting.

Responding to stockholder proposals, director elections and sayon- pay votes

As boards of directors of public companies prepare for their 2023 annual meetings and, relatedly, consider the voting results from 2022 annual meetings, we are being asked for advice concerning (I) the duties of directors of Maryland corporations and (II) the policies and current practices of the proxy advisory services relating to stockholder proposals, director elections, and Say-On-Pay votes.

The quality of corporate governance and directors' elections

This study aims to analyse the link between the votes cast at directors’ elections and the quality of corporate governance practices. The regression analyses on the secondary data were performed using a sample of Canadian companies listed on the Toronto Stock Exchange and included in corporate governance rankings published by the Canadian newspaper The Globe and Mail and carried out by the University of Toronto’s Clarkson Centre for Business Ethics. The results show that shareholders only slightly take the quality of a firm’s corporate governance practices into account when electing directors. Our findings also indicate that more than 96% of the votes cast are in favour of the candidates nominated and show very little variance. This study differs from previous studies by focusing directly on the election of directors rather than on stock prices to examine how shareholders express their expectations about the quality of corporate governance practices