Mechanisms of Board Turnover: Evidence from Backdating
Frederick L. Bereskin
University of Delaware
Clifford W. Smith Jr.
Simon Graduate School of Business, University of Rochester
April 24, 2014
We analyze board-turnover of firms implicated in stock-option backdating to assess the effectiveness of board elections within the corporate governance process. Despite high reelection rates among nominated directors, board-turnover was substantial. Critically, these turnover decisions were affected by the anticipated outcome of a potential shareholder vote. Thus, reelection rates are of limited value in assessing the effectiveness of shareholder voting. Independent and inside directors departed though different mechanisms: independent directors primarily were not renominated, while inside directors generally resigned. Finally, directors who were involved in backdating experienced reductions in both the number and prestige of their directorships.
working papers series
Date posted: August 11, 2011 ; Last revised: April 25, 2014
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