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Mechanisms of Board Turnover: Evidence from Backdating

37 Pages Posted: 11 Aug 2011 Last revised: 10 Oct 2014

Frederick L. Bereskin

University of Delaware

Clifford W. Smith Jr.

Simon Graduate School of Business, University of Rochester

Multiple version iconThere are 2 versions of this paper

Date Written: April 24, 2014

Abstract

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.

Suggested Citation

Bereskin, Frederick L. and Smith, Clifford W., Mechanisms of Board Turnover: Evidence from Backdating (April 24, 2014). Available at SSRN: https://ssrn.com/abstract=1908172 or http://dx.doi.org/10.2139/ssrn.1908172

Frederick L. Bereskin (Contact Author)

University of Delaware ( email )

Alfred Lerner College of Business and Economics
Newark, DE 19716
United States

Clifford W. Smith Jr.

Simon Graduate School of Business, University of Rochester ( email )

Carol Simon Hall 3-202C
Rochester, NY 14627
United States
585-275-3217 (Phone)
585-442-6323 (Fax)

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