Portal de Periódicos da CAPES

CEO Involvement in the Selection of New Board Members: An Empirical Analysis

1999; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.169528

1556-5068

David Yermack, Anil Shivdasani,

Auditing, Earnings Management, Governance

We study whether CEO involvement in the selection of new directors influences the quality of appointments to the board. When the CEO serves on the nominating committee or no nominating committee exists, firms appoint fewer independent outside directors and more gray outsiders with conflicts of interest. Stock price reactions to independent director appointments are significantly lower when the CEO is involved in director selection, and independent appointees are more likely to serve on large numbers of other boards, a practice disfavored by investor activists. Our evidence may illuminate a mechanism used by CEOs to reduce pressure from active monitoring, and we find a recent trend of companies removing CEOs from involvement in director selection.