Portal de Periódicos da CAPES

Director Reputation, CEO-Board Power, and the Dynamics of Board Interlocks

1996; SAGE Publishing; Volume: 41; Issue: 3 Linguagem: Inglês

10.2307/2393940

1930-3815

Edward J. Zajac, James D. Westphal,

Management and Organizational Studies

This study advances research on CEO-board relationships, interlocking directorates, and director reputation by examining how contests for intraorganizational power can affect interorganizational ties.We propose that powerful top managers seek to maintain their control by selecting and retaining board members with experience on other, passive boards and excluding individuals with experience on more active boards.We also propose that powerful boards similarly seek to maintain their control by favoring directors with a reputation for more actively monitoring management and avoiding directors with experience on passive boards.Hypotheses are tested longitudinally using CEO-board data taken from 491 of the largest U.S. corporations over a recent seven-year period.The findings suggest that variation in CEO-board power relationships across organizations has contributed to a segmentation of the corporate director network.We discuss how our perspective can reconcile contrary views and debates on whether increased board control has diffused across large U.S. corporations.' Haveboards of directors of large U.S. corporations recently moved toward greater control of top managers?Recent discussions of corporate governance practices in the U.S. seem to vary widely in their answer to this question.For every research study or business press editorial pointing toward increasingly active boards, there appears to be a corresponding study or editorial arguing the opposite (Lorsch and Maciver, 1989; Davis, 1991; Fortune, 1993; Wall Street Journal, 1995a).The theoretical explanations used to support one or the other perspective range from a belief that public discourse and investor pressures have led to the diffusion of greater board independence across U.S. corporations (Useem, 1992; Wall Street Journal, 1995b) to the managerialist belief that managerial entrenchment and the cooptation of boards by powerful chief executive officers (CEOs) remain as strong as ever (Pfeffer, 1992; Wall Street Journal, 1995c).Rather than debate the relative merits of such sweeping and rather one-sided perspectives on corporate governance, we suggest instead that a theory is needed that can simultaneously explain the coexistence and persistence of both board-controlled and CEO-controlled firms.We develop and test a theory that can explain such variation, based on an analysis of director appointments, whereby powerful actors in the CEO-board relationship affect the diffusion of board independence through the selection and retention of directors whose prior directorship experiences suggest differential sympathy for their interests.For instance, we propose that more powerful CEOs will avoid director candidates who have participated as directors in increasing the level of board monitoring and control over CEOs on other boards, while favoring new director candidates with prior directorship experience in protecting or bolstering CEO control.