Military Directorate Research Articles

The role of military directors in holding the CEO accountable for poor firm performance

AbstractResearch SummaryWhy do some boards of directors dismiss the CEO when a firm performs poorly, while others do not? We argue that military directors—outside directors with military backgrounds—on the board increase the likelihood of CEO dismissal under low‐performance conditions. Military service instills a lifelong system of values and beliefs related to accountability—the obligation to accept responsibility for one's own actions and outcomes—which leads military directors to attribute low performance to the CEO and hold the CEO strictly accountable for such performance. This argument is supported by extensive quantitative data on CEO dismissal in publicly listed firms and qualitative data obtained from interviews with military directors who have served on boards of those firms.Managerial SummaryMilitary directors—outside directors with military backgrounds—frequently occupy seats on the boards of publicly listed firms in the United States. Military service instills an enduring system of values and beliefs rooted in accountability, which, we argue, makes military directors more inclined to attribute performance shortfalls to the CEO and advocate for more rigorous CEO accountability, resulting in CEO dismissal. Our argument is supported by quantitative data on CEO dismissals within publicly listed firms and qualitative data derived from interviews with military directors who have served on boards of those firms. Our findings underscore that principles ingrained via military service may influence corporate governance, particularly one of its core components: executive accountability.

Military experience and subsequent effectiveness as a director

Wars inevitably result in an increase in the workforce of those with military experience. The military training associated with such experience promotes leadership skills and emphasizes a unique value system encompassing integrity, duty, selflessness and self-discipline. We hypothesize that directors with military experience encourage timely disclosure of firm-specific information, which leads to higher stock price informativeness. Based on a sample of listed firms in 46 countries over the period 1999–2016, we document that having a military director on board is positively related to stock price non-synchronicity, informed trading and shorter price response delay. Exploiting exogenous variations in the likelihood of having military directors that arise as a result of variations in the military talent pool, we confirm the causal inference of these results. Our findings suggest that military directors reduce corporate misconduct and improve the timely disclosure of information.

Military directors and stock price informativeness: What's all the fuss about?

AbstractExploiting a unique hand-built dataset, belonging to non-financial firms, operating in an emerging economy, this study, first of its kind, reports that stock prices of firms with military-experienced board of directors reflect more firm specific information after controlling for board attributes, agent heterogeneity and firm level variation. The results robust to alternative specifications of informativeness and military director proxy support the notion that military-trained directors may enhance transparency in public listed companies and encourage the incorporation of more firm-specific information into stock prices. Further analysis suggests that military directors may enfeeble CEO–board nexus and settle the directional variations at the corporate board level: military directors bring discipline in the board room that translates into rigorous CEO monitoring and improved corporate governance quality.

From boots to suits: do military directors protect shareholders’ wealth?

This paper explores the influence of military directors in protecting shareholders’ wealth through CEO compensation and corporate dividend payout policies. Based on manually collected data on corporate boards of non-financial companies operating in Pakistan, the results indicate a significant negative association between the presence of military directors on corporate boards and CEO compensation, thus supporting the notion that such directors are effective in monitoring and curtailing excessive rent seeking behaviour by the agents. In other words, presence of military directors on Pakistani corporate boards reduces agency costs and in turn enhances shareholders’ wealth. Results also indicate significant positive relationship between presence of military directors on boards and dividend payout, hence signifying that such directors are effective in enhancing shareholders’ wealth by reducing free cash flow opportunities that would otherwise be deployed by agents for their private benefits. We further found military directors with business education and wider networks to have significant positive association with dividend payout but not the case with CEO compensation. We control for board attributes, agent heterogeneity and firm-specific attributes in all our models. Overall, the benefits of military directors’ inclusion on corporate boards in Pakistan have far broader strategic, economic and policy implications on the nation besides resolving the principal-agent problems in the boardroom.

Military directors and audit fees

PurposeThis study investigates the relationship between companies with military directors and audit fees in Indonesia.Design/methodology/approachUsing upper echelon and audit pricing theories, the authors examine military directors' roles in the demand for and supply of auditing services. The authors use Indonesia as their research setting as their military forces have a long history of involvement in business. The study sample includes 898 firm-year observations on the Indonesia Stock Exchange during 2014–2018.FindingsThe authors find a negative relationship between military connections and audit fees. This is consistent with auditors assessing lower audit risk and charging lower audit fees to companies that have leaders with military experience. The study findings are strongest where there is military experience on the board of directors and where the military experience is from the Army.Originality/valueThis study extends the literature on the benefits of military experience in company leadership, especially in the context of auditing research. The study findings also have implications for the selection of board candidates and auditor risk assessments.

Military directors, governance and firm behavior

We build a large dataset of board of directors with military experience and document a substantial and persistent presence of independent military directors serving on corporate boards. We find that firms with independent military directors are associated with better monitoring outcomes, including less excessive CEO compensation, greater forced CEO turnover–performance sensitivity, and less earnings management.

Elite directors, London finance, and British overseas expansion: Victorian railway networks, 1860–1900†

AbstractThis article considers how international economic expansion impacts on the composition of elite groups on boards of companies. We examine, why, at the height of the British Empire, boards of national, imperial, and international railway companies, financed from London, were dominated by elites drawn differentially from the aristocracy, the military, finance, and politics. To investigate the reasons for these differences, we conduct a social network analysis of railway company boards in three countries during the second half of the nineteenth century. Results reveal that aristocratic directors were dominant in Britain, military directors in India, and financier directors in Argentina, suggesting that their influence drew on local knowledge, resource access, and network connections. They did not serve on boards for merely ornamental purposes.

The legacy of wars around the world: Evidence from military directors

This study estimates the effects of wars on countries and firms. We first show immediate negative effects of wars on economic and financial development as well as legal institutions. Using a cross-country sample of 93,697 firm-year observations, we further argue and show that (i) wars increase the supply of military directors in corporate boards; and (ii) military directors reduce firm performance as measured by Tobin’s Q and return on assets (ROA). We interpret these lingering effects as military directors possessing social capital but lacking business expertise. Our results are robust to a matched sample, a lagged difference model, a dynamic general method of moments model and to the control of country, industry and year fixed effects.

The Legacy of Wars around the World: Evidence from Military Directors

This study estimates the effects of wars on countries and firms. We first show immediate negative effects of wars on economic and financial development as well as legal institutions. Using a cross-country sample of 93,697 firm-year observations, we further argue and show that (i) wars increase the supply of military directors in corporate boards; and(ii) military directors reduce firm performance as measured by Tobin's Q and return on assets (ROA). We interpret these lingering effects as military directors possessing social capital but lacking business expertise. Our results are robust to a matched sample, a lagged difference model, a dynamic general method of moments model and to the control of country, industry and year fixed effects.

A Comparison of the Somatometric Measurements of Adolescent Males With and Without Idiopathic Scoliosis

Prospective study comparing the somatometric measurements of young males with normal spinal curves and with adolescent idiopathic scoliosis (AIS) with respect to the severity of AIS. To assess the somatometric measurements of young males with normal spinal curves and with AIS using the conscription data. The progression of AIS is closely correlated with longitudinal growth during puberty. Although abnormal growth in female AIS patients has been well investigated, the growth of male AIS patients has not been well reported. During Korean conscription, 409 adolescent males with a normal spinal curvature and 420 adolescent males with AIS were enrolled. Those with AIS were grouped according to the severity of scoliosis using Cobb angles, according to the guidelines issued by the Korean military directorate. Group somatometric measurements, such as body height, corrected body height (corrected using Bjure's equation), body weight, and body mass index (BMI) were compared. Uncorrected heights were insignificantly different (P=0.234), but corrected heights, body weights, and BMIs were all significantly different between the normal and all AIS groups (P<0.001) (in AIS, corrected height was greater and body weight and BMIs corrected or uncorrected for height were lower). Cobb angles were not related to corrected body height or BMI, but was related to weight. Body weight was significantly less in the severe AIS group (Cobb angle >40 degrees) than in the mild or moderate AIS group (P<0.042). In Korean male AIS patients, significantly different somatometric results were observed: namely, a greater corrected height and a lower body weight and BMIs corrected or uncorrected for height. Furthermore, body weight was significantly lower in the severe group than in the moderate group. This study shows that abnormal growth is observed in male AIS patients and that body weight is closely correlated with AIS severity.

Lumbar disc screening using back pain questionnaires: oswestry low back pain score, aberdeen low back pain scale, and acute low back pain screening questionnaire.

ObjectiveTo evaluate the usefulness of back pain questionnaires for lumbar disc screening among Korean young males.MethodsWe carried out a survey for lumbar disc screening through back pain questionnaires among the volunteers with or without back pain. Three types of back pain questionnaire (Oswestry Low Back Pain Score, Aberdeen Low Back Pain Scale, and Acute Low Back Pain Screeing Questionnaire) were randomly assigned to the examinees. The authors reviewed lumbar imaging studies (simple lumbar radiographs, lumbar computed tomography, and magnetic resolutional images), and the severity of lumbar disc herniation was categorized according to the guidelines issued by the Korean military directorate. We calculated the relationship between the back pain questionnaire scores and the severity of lumbar disc herniation.ResultsThe scores of back pain questionnaires increased according to the severity of lumbar disc herniation. But, the range of scores was very vague, so it is less predictable to detect lumbar disc herniation using only back pain questionnaires. The sensitivity between the back pain questionnaires and the presence of lumbar disc herniation was low (16-64%).ConclusionScreening of lumbar disc herniation using only back pain questionnaires has limited value.

Interlocking Directorates as Corporate Governance in Third World Multinationals: Theory and Evidence from Thailand

Given the paucity of corporate governance research on Third World multinational enterprises (MNEs), we provide an exploratory description of the patterns of interlocking directorates as corporate governance in Thailand-based MNEs in this study. Specifically, we raise a key question: Do the interlocks network attributes and individual board directors of MNEs differ systematically from those of non-MNEs? Drawing upon resource dependence theory, we hypothesize that, compared with non-MNEs, MNEs in Thailand (1) have more densely connected interlocks, (2) occupy more central locations in the interlocks network, (3) have more ethnic Chinese directors, and (4) appoint more military directors. Data from the top 200 listed firms in Thailand support three of the four hypotheses, and suggest a number of implications and future research directions.

Education, Income, and Ability

Current estimates of the contribution of education to economic growth have been questioned because they ignore the interaction of education with ability. Whether the neglect of ability differences in the analyses of the income-education relationship results in estimates that are too high was considered in an earlier paper by one of the authors (Griliches 1970), and a negative answer was conjectured. In this paper, we pursue this question a bit further, using a new and larger body of data. Unfortunately, a definitive answer to this question is hampered both by the vagueness and elasticity of "education" and "ability" as analytical concepts and by the lack of data on early (preschooling) intelligence. The data examined in this paper are based on a 1964 sample of U.S. military veterans. The variables measured include scores on a mental ability test, indicators of parental status, region of residence while growing up, school years completed before service, and school years completed during or after service. These have allowed us to inquire into the separate effects of parental background, intelligence, and schooling. The basic problem and analytical framework can be set out very simply. Let income be a linear function of education and ability, or, Y a + P1E + P(2G + u, where Y is income, E is education, G is ability,