Session Chair: Markus Schmid, University of St. Gallen
How Costly is Forced Gender-Balancing of Corporate Boards?
Espen Eckbo1, Knut Nygaard2, Karin Thorburn3
1Dartmouth College; 2Oslo and Akershus University College of Applied Sciences; 3NHH Norwegian School of Economics
Discussant: Miriam Schwartz-Ziv (Michigan State University)
In 2005, Norway became the first country to mandate gender-balanced corporate boards. We hypothesize that a gender quota reduces director CEO experience and increases board independence. Contrary to prior research, our robust performance estimates fail to reject an overall value-neutral effect of the quota, even for firms with all-male boards. We also show that, while boards lost some CEO experience, firms did not increase board size (to retain key male directors) or change legal form (to avoid the quota), and managed to maintain board network power. We conclude that investors and firms alike viewed the quota as a relatively low-cost constraint.
Board Changes and the Director Labor Market: The Case of Mergers
David A. Becher1, Ralph A. Walkling1, Jared Ian Wilson2
1Drexel University; 2Indiana University
Discussant: Felix Meschke (University of Kansas)
We provide benchmarks for board changes over time and in response to the evolution of firm structure. Boards are more stable in the modern era. At the same time, shifts made around mergers are substantial and significantly different than those at non-merging firms. Changes to acquiring boards reflect firm needs, increased demand for executive and merger experience and bargaining between targets and acquirers, rather than agency motives. Conversely, director selection at non-merging firms is driven by general skills and diversity. Our analyses provide insight into the dynamic nature of board structure and characteristics demanded in the director labor market.
Do Lead Directors Enhance Board Monitoring? Evidence from Forced CEO Turnover
Han Ma, Mark Chen
Georgia State University
Discussant: Peter Limbach (University of Cologne)
A widespread practice among U.S. public firms is the designation of an outside board member as lead director to help counterbalance the power of a CEO/Chair. We examine whether lead directors matter for the effectiveness of board monitoring as measured by the performance-sensitivity of forced CEO dismissals. Using two exogenous reforms and unique board structure data from 2000-2015 to identify causal effects, we document that having a lead director increases the likelihood of forced CEO turnover after poor performance. We also use detailed data covering over 30 different types of lead director duties to examine possible channels of effect. The results show that duties related to the control of board meetings and the flow of information matter most for the sensitivity of forced CEO turnover to performance. Overall, our findings suggest that lead directors improve board monitoring in a manner consistent with theories of how boards communicate and operate.