Deciding Who Will Rule: Examining the Influence of Outside Noncore Directors on Executive Entrenchment

Eugene Kang () and Mark Kroll ()
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Eugene Kang: Nanyang Business School, Nanyang Technological University, Singapore 639798
Mark Kroll: College of Business, University of Texas at Brownsville, Brownsville, Texas 78520

Organization Science, 2014, vol. 25, issue 6, 1662-1683

Abstract: We examine the contingencies that sway independent noncore directors of S&P 500 firms to heed the norms of the corporate elite or the disciplining forces of the efficient directorial labor market in the context of executive entrenchment. We find support for the corporate elite perspective as the number of independent noncore directors is positively associated with an entrenchment index score. However, the positive association is moderated by contextual factors that influence whether these directors reflect the expectations of the corporate elite or the efficient directorial labor market. Specifically, this study shows that the association becomes more positive when these directors are highly embedded in the corporate elite network or have shorter board tenure but less positive when independent chief executive officer directors’ equity ownership is high. We also found a crossover interaction effect where the association is negative (positive) when firm performance is low (high). These results shed light on an underexplored group of independent directors that play an increasing role in the effective governance of publicly listed firms.

Keywords: corporate governance; boards of directors; corporate elite; directorial labor market; executive entrenchment (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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