Academy of Management Journal2014-07-08 5:58 PM

How Directors' Prior Experience with Other Demographically Similar CEOs Affects Their Appointments onto Corporate Boards and the Consequences for CEO Compensation

Abstract
In recent years, new director appointments have increasingly posed a dilemma for corporate leaders: while CEOs prefer individuals who have similar backgrounds to them, they face increased pressure to appoint new directors who have a different demographic profile. We suggest that CEOs may resolve this dilemma by appointing new directors who have prior experiences working with other demographically similar CEOs. We then explain why this tendency is stronger when new directors are demographically more different from CEOs. Moreover, we posit that new directors' prior experiences with other similar CEOs will reduce the negative effect of their demographic differences from the CEO on CEO compensation. Longitudinal analysis of Fortune 500 companies' new director appointments and subsequent CEO compensation provided support for our theoretical expectations. This study identifies an important new role that interlock ties to other CEOs can play in corporate governance and leadership. In particular, we suggest that such ties are a means by which CEOs evaluate whether a new director will support their leadership and decision making. In explaining the role of directors' ties to other CEOs in influencing director appointments and CEO compensation, this study also highlights the important influence of triads on CEO-director dyadic relations.

Full Article
http://amj.aom.org/content/57/3/791.full 

KEYWORDS

SHARE & LIKE

COMMENTS

ABOUT THE AUTHOR

Academy of Management Journal

The Academy of Management Journal (AMJ) is the flagship empirical journal in management, and has been indispensable reading for management scholars for more than five decades. AMJ articles test, extend, or build theory and contribute to management practice using a variety of empirical methods.

0 Following 16 Fans 0 Projects 13 Articles

SIMILAR ARTICLES

AbstractDrawing on alternative perspectives about the automaticity of dispositional judgments, we examine whether the motivation to attract the other (

Read More

AbstractWe introduce the concept of “CEO career variety”—defined as the array of distinct professional and institutional experiences an executive has h

Read More

AbstractWe develop and test a theoretical model of multilevel moderated mediation in which organizational justice serves as an intervening mechanism th

Read More

AbstractIn this study, we examine how foreign direct investment (FDI) spillovers to domestic firms in an emerging market occur over time. From the orga

Read More

AbstractResearch in the field of behavioral ethics has traditionally viewed ethical decision making as rational and deliberate. However, some recent re

Read More

AbstractThis paper investigates the relationship between managerial exit from advertising agencies and advertisers and the dissolution of dyadic market

Read More

AbstractThe dynamic systems view of voluntary turnover rates advocated in context-emergent turnover theory is used to explore how and why human capital

Read More

AbstractIn recent years, new director appointments have increasingly posed a dilemma for corporate leaders: while CEOs prefer individuals who have simi

Read More

AbstractUsing a multi-year qualitative study, I explain how employees at a fast-growing retail organization used creative resourcing—that is, the manip

Read More

AbstractSecurities analysts' predictions of firms' earnings per share constitute important performance targets for those firms. Firm managers attempt t

Read More