Strategic Director Appointments

56 Pages Posted: 18 Feb 2021

Multiple version iconThere are 2 versions of this paper

Date Written: January 14, 2021


Recent corporate governance scandals have been attributed to a lack of board independence due to the influence CEOs have over their boards. However, CEOs can also affect board efficacy without compromising its independence by strategically choosing directors. We offer a theoretical framework to examine how CEOs can strategically choose director characteristics (such as expertise and skill set) to influence the inner workings of the board. We examine how director expertise affects the board's equilibrium voting strategies and show that some "passivity" on the part of directors can in fact be desirable equilibrium behavior. More importantly, we show that managers can strategically appoint independent outside directors to influence board voting in their favor. Surprisingly, contrary to what we might expect, we find that opportunistic (principled) managers may not always appoint the least (most) able directors to the board. We also examine whether CEOs would prefer a "captured" board (i.e., an insider-dominated board) and show that the value of director input (i.e., the board's advising role) and the financial markets can discourage CEOs from pursuing such appointments.

Keywords: Board of directors, corporate governance, majority voting, rubberstamping, deferring, abstaining, director appointments

JEL Classification: D80, G34, M40

Suggested Citation

Drymiotes, George and Sivaramakrishnan, Shiva, Strategic Director Appointments (January 14, 2021). Available at SSRN: or

George Drymiotes (Contact Author)

Texas Christian University ( email )

M.J. Neeley School of Business
TCU Box 298530
Fort Worth, TX 76129
United States
817 257 5448 (Phone)

Shiva Sivaramakrishnan

Rice University ( email )

6100 South Main Street
Houston, TX 77005-1892
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics