Does the Rolodex Matter? Corporate Elite's Small World and the Effectiveness of Boards of Directors
EFA 2006 Zurich Meetings Paper, WFA 2007 Big Sky Resort Meetings Paper
34 Pages Posted: 15 Mar 2006 Last revised: 28 Apr 2012
Date Written: February 26, 2011
This paper investigates the impact of social ties on the effectiveness of boards of directors. When the CEO and a number of directors belong to the same social networks, the CEO is less likely to be dismissed for poor performance. The results are robust to different measures of performance and networks, consistent after controlling for CEO ability, and not due to connected boards’ superior information. Socially connected CEOs are also more likely to find new and better employment after a forced departure. Evidence from the paper suggests that close social ties among board members impact the workings of the board of directors.
Keywords: Social Ties, CEO Turnover to Performance, Board of Directors, Corporate Governance
JEL Classification: G3, G30
Suggested Citation: Suggested Citation