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In Defense of Boards

  • Silvia Dominguez-Martinez
  • Otto H. Swank
  • Bauke Visser

"It is often assumed that bad corporate performance means a bad CEO. The task of a board of directors is then simple: dismiss the executive. If it fails to do so, the board is said to be indolent. We take a kinder approach to observed board behavior and point to the problems even well-intended boards would encounter. They face the twin task of disciplining and screening executives. We analyze the nature of the retention contract a board uses to discipline and screen executives. Consistent with empirical observation, we find that executives may become overly active to show their credentials, and that the link between bad performance and dismissal is weak." Copyright (c) 2008, The Author(s) Journal Compilation (c) 2008 Wiley Periodicals, Inc..

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Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 17 (2008)
Issue (Month): 3 (09)
Pages: 667-682

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Handle: RePEc:bla:jemstr:v:17:y:2008:i:3:p:667-682
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