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Managerial Influencing of Boards of Directors

39 Pages Posted: 11 Jul 2007 Last revised: 8 Jun 2009

George Drymiotes

Texas Christian University

Date Written: June 7, 2009

Abstract

In this paper, I examine issues relating to managers' ability to influence their performance evaluation. In contrast to conventional wisdom, I show that such influencing is not necessarily deleterious to shareholder welfare, despite the fact that it is aimed at maximizing the managers' compensation. In particular, I show that the managers' influencing actions can, under some conditions, improve the performance evaluation process. This mitigates the control problem between the boards of directors and managers and lowers managerial compensation costs. I also show that the managers' influencing actions can alleviate the need for costly board equity awards -- to align board interests with those of the shareholders. This suggests that boards with smaller equity stakes may not necessarily have weaker incentives to monitor managers.

Keywords: Board of directors, corporate governance, influencing, monitoring

JEL Classification: D80, G34, M40, M41, M46, J33

Suggested Citation

Drymiotes, George, Managerial Influencing of Boards of Directors (June 7, 2009). Journal of Management Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=999394

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)

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