Disciplining and Screening Top Executives

Silvia Dominguez-Martinez (), Otto Swank () and Bauke Visser

No 06-054/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Boards of directors face the twin task of disciplining and screening executives. To perform these tasks directors do not have detailed information about executives' behaviour, and only infrequently have information about the success or failure of initiated strategies, reorganizations, mergers etc. We analyse the nature of (implicit) retention contracts boards use to discipline and screen executives. Consistent with empirical observation, we find that executives may become overly active to show their credentials; that the link between bad performance and dismissal is weak; and that boards occasionally dismiss competent executives.

Keywords: board of directors; turnover; retention contracts; selection; moral hazard; empire building (search for similar items in EconPapers)
JEL-codes: G30 G34 (search for similar items in EconPapers)
Date: 2006-06-19
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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