Unveil the benefit of independent leadership structure on employee welfare

Thanh Dung Nguyen, Thuong Harvison and Ali Ashraf

International Journal of Managerial Finance, 2024, vol. 20, issue 5, 1244-1268

Abstract: Purpose - Employees play a vital role in the success of a corporation. While boards of directors are created to protect shareholders’ interests, it is unclear if these directors also ensure employee welfare. In this vein, our paper examines the relationship between board leadership structure and employee well-being. Design/methodology/approach - The authors employ several analysis techniques, including univariate analysis, ordinary least squares (OLS) regressions, two-stage least squares (2SLS) regressions, propensity score matching methodology, the Heckman Selection model and difference-in-differences analysis. The sample comprises USA public firms for the period 1998–2018. Findings - Our findings indicate that having an independent chairperson can significantly benefit the welfare of employees, especially for firms with overly powerful chief executive officers (CEOs) and during times of financial distress. Originality/value - Independent leadership structure is one of the crucial board characteristics that have not been examined to explain employee welfare at firms. We find that an independent chairperson can mitigate the negative effect of overly powerful CEOs on employee benefits. Importantly, independent chairpersons are beneficial for employees in difficult times and when CEOs are busy with daily activities.

Keywords: Board of directors; Independent chairperson; CEO duality; Employee welfare; Stakeholder; Corporate social responsibility; G32; G34; J28 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:ijmf-11-2023-0582

DOI: 10.1108/IJMF-11-2023-0582

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