Corporate board dynamics: Directors voting for directors

Steven Schmeiser

Journal of Economic Behavior & Organization, 2012, vol. 82, issue 2, 505-524

Abstract: I propose a model in which corporate directors perform firm tasks (such as monitoring management) and elect new directors. Elections introduce a dynamic element – the incumbent board's willingness to hire a candidate depends on how the candidate will vote in future hiring rounds. Lack of a commitment mechanism means directors do not always choose board compositions that maximize shareholder value. I use the model to analytically and numerically investigate the effects of stock exchange rules governing board composition and director elections. I find that the regulations benefit shareholders in a dynamic environment, but not in a static environment.

Keywords: Board of directors; Voting for voters; Corporate governance (search for similar items in EconPapers)
JEL-codes: D7 G3 L5 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:82:y:2012:i:2:p:505-524

DOI: 10.1016/j.jebo.2012.03.006

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