 The incentives of grey directors: Evidence from unexpected executive and board chair turnoverKenneth A. Borokhovich, Thomas J. Boulton, Kelly R. Brunarski and Yvette S. Harman Journal of Corporate Finance, 2014, vol. 28, issue C, 102-115 Abstract: We study the stock market's reaction to the unexpected death of a top executive or board chair for insight into grey director incentives. Whereas there is little debate as to the motives of inside and strict outside directors, the allegiance of grey directors is less certain. We find that grey directors' dominant incentive depends on whether the firm has a succession plan or not. In firms with a succession plan, grey directors' primary motive is to maintain their business ties to the firm. Absent a succession plan, the stock market expects grey directors to use their influence to hire a higher quality replacement, particularly when these directors hold a large equity stake. Our findings suggest that grey directors place their interests as shareholders first when a replacement decision is likely to weaken their business ties with the firm. Grey directors appear to influence the choice of a higher quality replacement whether that person is an insider or outsider. Keywords: Board of directors; Corporate governance; Executive turnover (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:28:y:2014:i:c:p:102-115 DOI: 10.1016/j.jcorpfin.2013.11.015 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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