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CEO Stakes and Board Composition in Small Private Firms

Author

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  • Mark K. Fiegener
  • Bonnie M. Brown
  • Dirk R. Dreux IV
  • William J. Dennis Jr.

Abstract

CEOs of small firms must reconcile two countervailing interests with respect to their board composition choices. Boards with substantial representation by “Independent†directors—individuals who are not linked to the CEO via personal or professional relationships—may be more effective in providing good counsel and linkages to external resources, but may also limit CEO discretion. This study investigates whether CEO ownership, family, and generational “stakes†in the business—indicators of CEO desire to protect discretion from board interference—are related to board composition. The results (survey of 2365 small private firms) indicate that CEOs with greater ownership and family stakes have less independent board compositions.

Suggested Citation

  • Mark K. Fiegener & Bonnie M. Brown & Dirk R. Dreux IV & William J. Dennis Jr., 2000. "CEO Stakes and Board Composition in Small Private Firms," Entrepreneurship Theory and Practice, , vol. 24(4), pages 5-24, July.
    • Handle: RePEc:sae:entthe:v:24:y:2000:i:4:p:5-24
    DOI: 10.1177/104225870002400401
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    2. Stockmans, Annelies & Lybaert, Nadine & Voordeckers, Wim, 2013. "The conditional nature of board characteristics in constraining earnings management in private family firms," Journal of Family Business Strategy, Elsevier, vol. 4(2), pages 84-92.
    3. Michael Carney & Marc Van Essen & Eric R. Gedajlovic & Pursey P.M.A.R. Heugens, 2015. "What do we know about Private Family Firms? A Meta–Analytical Review," Entrepreneurship Theory and Practice, , vol. 39(3), pages 513-544, May.
    4. Woods, Jeremy A. & Dalziel, Thomas & Barton, Sidney L., 2012. "Escalation of commitment in private family businesses: The influence of outside board members," Journal of Family Business Strategy, Elsevier, vol. 3(1), pages 18-27.
    5. Webb Cooper, Elizabeth, 2009. "Monitoring and governance of private banks," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(2), pages 253-264, May.
    6. Gramén, Ilkka & Kauranen, Ilkka, 2019. "[Withdrawn at the request of the authors.]," 7th International OFEL Conference on Governance, Management and Entrepreneurship: Embracing Diversity in Organisations (Dubrovnik, 2019), in: 7th International OFEL Conference on Governance, Management and Entrepreneurship: Embracing Diversity in Organisations. April 5th - 6th, 2019, Dubrovn, pages 11-26, Governance Research and Development Centre (CIRU), Zagreb.
    7. Goel, Sanjay & Mazzola, Pietro & Phan, Phillip H. & Pieper, Torsten M. & Zachary, Ramona K., 2012. "Strategy, ownership, governance, and socio-psychological perspectives on family businesses from around the world," Journal of Family Business Strategy, Elsevier, vol. 3(2), pages 54-65.
    8. Ryan Federo & Yuliya Ponomareva & Ruth V. Aguilera & Angel Saz‐Carranza & Carlos Losada, 2020. "Bringing owners back on board: A review of the role of ownership type in board governance," Corporate Governance: An International Review, Wiley Blackwell, vol. 28(6), pages 348-371, November.
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