Outside Directors on Corporate Boards: Background and Behavior

KDI FOCUS October 23, 2015

12 Pages Posted: 22 Apr 2016

See all articles by Jaehoon Kim

Jaehoon Kim

Korea Development Institute (KDI)

HwaRyung Lee

Korea Development Institute (KDI)

Date Written: October 23, 2015

Abstract

The substantial influence of CEOs diminishes the oversight function of the board of directors. Many outside directors have social ties with CEOs and their behavioral patterns are inconsistent with those of vigilant monitors. Dissents are rare, and those who do dissent are highly likely to be replaced. Further, the director ratio tends to be lower when more supervisory items are on the board agenda. In order for the outside director system to operate properly, the voting rights of minority shareholders should be respected, outside directors and agenda selection must remain independent from CEOs, and objective evaluation and disclosure of outside directors’ board activities must ensue.

Suggested Citation

Kim, Jaehoon and Lee, HwaRyung, Outside Directors on Corporate Boards: Background and Behavior (October 23, 2015). KDI FOCUS October 23, 2015 , Available at SSRN: https://ssrn.com/abstract=2767429

Jaehoon Kim (Contact Author)

Korea Development Institute (KDI) ( email )

263 Namsejong-ro
Sejong-si 30149
Korea, Republic of (South Korea)

HwaRyung Lee

Korea Development Institute (KDI) ( email )

263 Namsejong-ro
Sejong-si 30149
Korea, Republic of (South Korea)

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