- In defense of boards
- Journal of Economics and Management Strategy
- Volume | Issue number
- 17 | 3
- Pages (from-to)
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
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.
- go to publisher's site
- This is the pre-peer reviewed version of the following article: In defense of boards, S. Dominguez-Martinez, O.H. Swank, B. Visser, Journal of Economics & Management Strategy, vol. 17(3), Copyright ©2008 the authors, which has been published in final form at http://dx.doi.org/10.1111/j.1530-9134.2008.00190.x.
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