CEO Networks and the Labor Market for Directors

56 Pages Posted: 21 Mar 2018 Last revised: 8 Mar 2020

See all articles by Rüdiger Fahlenbrach

Rüdiger Fahlenbrach

Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute; European Corporate Governance Institute (ECGI)

Hyemin Kim

Nanyang Technological University - Division of Banking & Finance

Angie Low

Nanyang Technological University - Division of Banking & Finance

Date Written: March 2, 2020

Abstract

Directors are more likely to obtain additional directorships, especially at prestigious firms, if the CEOs of their current boards are well-connected. Recommended directors do not become beholden to the CEO, as CEO compensation is unaffected and an analysis of appointment announcement returns and director election results show that shareholders are unconcerned by such recommendations. Instead, reciprocity is an important determinant because CEOs are more likely to recommend their directors if they recently received help from their network filling vacant board positions. Overall, there is little evidence that network recommendations of directors lead to inefficiencies in the director labor market.

Keywords: board of directors, network connections, director labor market, CEO rolodex

JEL Classification: G30, G34

Suggested Citation

Fahlenbrach, Rüdiger and Kim, Hyemin and Low, Angie, CEO Networks and the Labor Market for Directors (March 2, 2020). Swiss Finance Institute Research Paper No. 18-28, Available at SSRN: https://ssrn.com/abstract=3144216 or http://dx.doi.org/10.2139/ssrn.3144216

Rüdiger Fahlenbrach

Ecole Polytechnique Fédérale de Lausanne ( email )

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Swiss Finance Institute

c/o University of Geneva
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CH-1211 Geneva 4
Switzerland

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Hyemin Kim

Nanyang Technological University - Division of Banking & Finance ( email )

Singapore, 639798
Singapore

Angie Low (Contact Author)

Nanyang Technological University - Division of Banking & Finance ( email )

Singapore, 639798
Singapore

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