Corporate Boards and CEOs

Paper Session

Sunday, Jan. 8, 2017 1:00 PM – 3:00 PM

Hyatt Regency Chicago, Michigan 2
Hosted By: American Economic Association
  • Chair: Kathleen Farrell, University of Nebraska-Lincoln

Board Overlaps in Mutual Fund Families

Elif Sisli Ciamarra
,
Brandeis University
Abigail S. Hornstein
,
Wesleyan University

Abstract

We examine a unique characteristic of mutual fund governance: a common set of directors serving simultaneously on the boards of multiple funds within a family. Investors obtain mixed benefits from overlapping boards: higher fund returns and better fund manager quality but also higher marketing and distribution fees. Fund families, on the other hand, seem to benefit from board overlaps. Strategic performance transfer and window dressing, which have been shown to serve family preferences for the creation of star funds, are more common. We conclude that overlapping boards are not fully compatible with investors' interests.

Preoccupied Independent Directors

Emma Jincheng Zhang
,
University of New South Wales

Abstract

I provide new evidence on the economic benefits of independent directors by studying exogenous distractions that temporarily change independent director attention. Almost 21.9% of independent directors are preoccupied for more than half a year. Using matching methods and difference-in-difference analysis, I find that when independent directors are preoccupied, they become less active and less committed (lower board attendance, less trading in firm stocks and higher board departure frequencies). Preoccupied directors lead to lower firm value and performance, worse M&A profitability, lower accounting quality and CEO pay-performance sensitivity, especially when directors have important monitoring roles or firms require greater director attention.

Gender Quota Inside the Boardroom: Female Directors as New Key Players?

Gwenael Roudaut
,
Ecole Polytechnique
Antoine Reberioux
,
University of Paris 7

Abstract

This paper examines whether women's situation within French boards has improved following the adoption of a board-level gender quota in 2011, requiring a fraction of at least 20% of female directors in 2014 (and 40% in 2017). Our sample includes the listed companies belonging to the SBF120 index (i.e. the 120 largest listed firms by market capitalization on Euronext Paris) over the 2006-2014 period. We first show that the quota has succeeded in opening the doors of boardrooms to new, unseasoned female directors (not present on the director labor market before the regulation). These unseasoned female directors have distinctive characteristics as compared to other board members. They are in particular much more independent, less industry-expert and more often foreigners than seasoned or unseasoned male directors – suggesting a supply shortage effect of female directors with the standard, traditional characteristics. We then use individual fees as a measure of the role played by a given director. We show through a Blinder-Oaxaca decomposition that women support a within-firm gender fees gap of 5%, only partly explained by their peculiar characteristics. This gender fees gap is the direct result of an inner glass ceiling, with “positional” gender segregation within French boards. In particular, companies have failed so far to fully open the access to audit and nomination/compensation committees to women. These committees are the most rewarding and important within boards – and given the independence of female directors, they also would be the most appropriate for women. Overall, the quota has rather amplified the segregation process, with an increase in the average within-firm gender fees gap in the post-regulation era.

Conservatism and Career Choices: Evidence From CEOs' Political Leaning

Binay Kumar Adhikari
,
Miami University
T. Colin Campbell
,
University of Cincinnati
Shane A. Johnson
,
Texas A&M University

Abstract

We find that personal political preferences of CEOs influence their career choices. Specifically, Republican CEOs, who are likely be more financially conservative, exhibit a preference for job and pay security. These CEOs have safer compensation packages with lower Delta and Vega components, and are less invested in the firms they manage. Furthermore, Republican CEOs are more entrenched, and are less likely to be fired, especially for the reasons unrelated to performance. Firm heterogeneity explains much of the observed relation, suggesting that risk-averse CEOs select firms with greater pay and job security.

Republican Managers and Innovation

Bader Alhashel
,
Kuwait University
Mohammad Almarzouq
,
Kuwait University

Abstract

We examine how managers’ political orientations and ideologies affect a major corporate policy decision: innovative production. We conjecture that Republican managers are likely to have conservative personal philosophies that will spill over to their corporate decision-making. Using managers’ personal political contributions and the September 11 attacks as an exogenous shock to uncertainty, we find that over the 1992-2006 period, firms with Republican CEOs and managers produced less innovation, as measured by the number of patents produced. Moreover, the innovations produced by Republican managers are smaller and less varied in terms of both their impact and their originality.
JEL Classifications
  • G3 - Corporate Finance and Governance