Regulation and the Evolution of Corporate Boards: Monitoring, Advising or Window Dressing?

35 Pages Posted: 30 Dec 2003

See all articles by Eric Helland

Eric Helland

Claremont McKenna College - Robert Day School of Economics and Finance; RAND

Michael E. Sykuta

University of Missouri at Columbia - Division of Applied Social Sciences

Multiple version iconThere are 2 versions of this paper

Date Written: July 2003

Abstract

It is generally agreed that boards are endogenously determined institutions that serve both an oversight and advisory role in a firm. While the oversight role of boards has been extensively studied, relatively few studies have examined the advisory role of corporate boards. We examine the participation of political directors on the boards of natural gas companies between 1930 and 1998. We focus on the expansion of federal regulation of the natural gas industry in 1938 and 1954 and subsequent partial deregulation in 1986. Using datasets covering the periods from 1930 to 1990 and 1978 to 1998, we test whether regulation and deregulation altered the composition of companies' boards as the firms' environment changed. In particular, did regulation cause an increase and deregulation a decrease, in the number of political directors on corporate boards? We find evidence that the number of political directors increases as firms shift from market to political competition. Specifically, the regulation of natural gas is associated with an increase in the number of political directors and deregulation is associated with a decrease in the number of political directors on boards.

Keywords: Corporate governance, deregulation, political directors

JEL Classification: G34, G38, K22

Suggested Citation

Helland, Eric A. and Sykuta, Michael E., Regulation and the Evolution of Corporate Boards: Monitoring, Advising or Window Dressing? (July 2003). CORI Working Paper No. 03-05. Available at SSRN: https://ssrn.com/abstract=481962 or http://dx.doi.org/10.2139/ssrn.481962

Eric A. Helland

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

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Michael E. Sykuta (Contact Author)

University of Missouri at Columbia - Division of Applied Social Sciences ( email )

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