Religiosity, Higher Purpose, and the Effectiveness of Intense Board Oversight

60 Pages Posted: 17 Mar 2021

See all articles by Todd T. Milbourn

Todd T. Milbourn

Washington University in Saint Louis - Olin Business School

Kingsley Wabara

Washington University in St. Louis - John M. Olin Business School

Date Written: March 15, 2021

Abstract

Using a novel measure, we study how the personal religiosity (or sense of higher purpose) of independent directors affects the effectiveness of their intense board oversight. We find that, relative to their non-religious counterparts, religious monitoring-intensive directors exhibit significantly lower sensitivity of CEO turnover to firm performance over a holding period of 1 year. However, for the more extended holding period of 2 years, this difference in sensitivity significantly switches direction, consistent with the “higher purpose, incentives, and economic performance” theory, which suggests that believers in higher purpose will tend to hold a longer-term perspective. We also find that religious monitoring-intensive directors further reduce both earnings management and excess total CEO compensation, especially when the lead independent director and/or a majority of the principal monitoring committee chairs are also religious. Overall, our findings show that religious monitoring-intensive directors differentially influence intense board oversight results and, thereby, help infuse or propagate a corporate culture consistent with an authentic organizational higher purpose.

Keywords: religion, higher purpose, board committees, board monitoring, executive incentives, CEO compensation, earnings management, educational experience

JEL Classification: G32, G34, I23, J33, M41, Z12

Suggested Citation

Milbourn, Todd T. and Wabara, Kingsley, Religiosity, Higher Purpose, and the Effectiveness of Intense Board Oversight (March 15, 2021). Available at SSRN: https://ssrn.com/abstract=3805416 or http://dx.doi.org/10.2139/ssrn.3805416

Todd T. Milbourn

Washington University in Saint Louis - Olin Business School ( email )

1 Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6392 (Phone)
314-935-6359 (Fax)

HOME PAGE: http://www.olin.wustl.edu/faculty/milbourn/

Kingsley Wabara (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

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