EconPapers    
Economics at your fingertips  
 

Endogenously Chosen Boards of Directors and Their Monitoring of the CEO

Benjamin Hermalin and Michael Weisbach

Microeconomics from University Library of Munich, Germany

Abstract: A fundamental issue in governance research is how boards can be chosen through a process partially controlled by the CEO but yet can still be somewhat effective in monitoring the CEO. We offer an answer based on a model in which board effectiveness is a function of the board's independence. This, in turn, is a function of negotiations (implicit or explicit) between the existing directors and the CEO over who will fill vacancies on the board. We show how the CEO's bargaining power over the board-selection process depends on his perceived ability. Many empirical findings about board structure and performance arise as equilibrium phenomena in this model.

Keywords: Boards of Directors; Endogenous Monitoring (search for similar items in EconPapers)
JEL-codes: D21 D23 G30 L20 (search for similar items in EconPapers)
Pages: 42 pages
Date: 1996-02-16, Revised 1996-10-09
Note: Type of Document - Postscript; prepared on IBM PC -- Scientific Workplace; pages: 42 ; figures: none
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/9602/9602001.pdf (application/pdf)
https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/9602/9602001.ps.gz (application/postscript)

Related works:
Journal Article: Endogenously Chosen Boards of Directors and Their Monitoring of the CEO (1998) Downloads
Working Paper: Endogenously Chosen Boards of Directors and Their Monitoring of the CEO (1996) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpmi:9602001

Access Statistics for this paper

More papers in Microeconomics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).

 
Page updated 2025-03-31
Handle: RePEc:wpa:wuwpmi:9602001