The Role of Networks in the CEO and Director Labor Market
抄録
The dissertation investigates the role of networks and connectedness on CEO and director labor market outcomes. I develop new measures of degree, closeness, betweenness, and eigenvector centrality using a new database of executive connections based on executive and director biographical information supplied by BoardEx. I then study the influence of networks and connectedness on CEO labor market outcomes, including new CEO appointments, CEO termination, and CEO compensation. I distinguish between the pairwise specific CEO-board connectedness and the strength and structure of the CEO's overall connectedness. I find that both types of connectedness add to traditional turnover and compensation variables in distinct and economically significant ways. Specific connectedness increases CEO entrenchment. Greater overall CEO connectedness on the employment network results in greater likelihood of CEO departure, greater turnover-performance sensitivity, and more rapid re-employment of a departed CEO. The existence of specific links between the CEO candidate and the board of directors enhances the chances of appointment in the event a company chooses to appoint an outsider as the CEO. Finally, CEOs with better overall connectedness enjoy higher total compensation. The evidence suggests that the general connectedness of a CEO in the employment network has significant and distinct economic effects beyond those of the connections between the CEO and the board in the current firm.
In the paper "On the Independence of Independent Directors", I examine director appointment and replacement decisions after a new CEO assumes office. A new incoming CEO can make many changes in the size and structure of the board and influence on the types of individuals that populate it. I assess the role played by prior connections between the CEO and outside directors, including the overlaps established through common employment history, educational background, and other activities. I also test the nature of these changes in specifications that model CEO and director changes jointly. I find that with a higher proportion of professionally connected outside directors on the board, the CEO is more likely to stay. New CEOs reshape the board in the early years of their tenure rather than later years when they may have more power and influence. Conditional on CEO continuation, outside directors that are of similar age to the CEO and share common employment antecedents with the CEO are less likely to be replaced. Replacements of unconnected directors are accompanied by appointments of connected directors. I discuss the implications of the findings for research and practice.