Director Reputation, Settling-Up, and the Market for Boardroom Talent

Abstract

We examine how individual directors’ reputation affects their career outcomes in the labor market for boardroom talent. Using unique data on prestigious director awards, we find that individuals who experience positive reputational shocks tend to be rewarded with new board seats at firms that rank high in terms of size or public prestige. In addition, consistent with theories of career concerns and labor-market signaling, we find that these reputational effects are greater for younger directors and for non-overboarded directors. Overall, our findings provide new, clear-cut evidence of strong reputational rewards and ex post settling-up in the market for boardroom talent.

Keywords: Boards, directors, reputation, director awards, settling-up, career concerns, external labor markets

JEL Classification: G30, G31, G34