Board Social Connections and their Corporate Governance Effect: A Comparison of US and Foreign Firms Listed in the US
Year: 2011
Type: dissertation
Abstract: Securities and Exchange Commission (SEC) regulations require the majority of directors of a board to be independent. However, the current definition of “independent director” remains vague when a director is socially connected to the top management through many links such as past work experience, education background, nonprofessional organizational, etc. This paper studies the corporate governance effect of social connections of CEOs and directors by comparing a group of U.S.-listed Israeli firms to their matched U.S. firms. As a result, I find while Israeli boards are more social connected to each other than U.S. firms, Israeli directors have similar degree of social connection to their CEOs as U.S. directors. I find for both Israeli and U.S. firms, the firms are larger when their CEOs and directors have more social connections. I find for U.S. firms, CEO’s compensation is higher when the CEO has more social connections, and when the CEO is more connected to the directors, but I didn’t find significant results for Israeli firms. On the contrary, for Israeli firms, I find the total compensation of all executives and directors is higher when the directors are more connected to their CEOs, but the results are not significant for U.S. firms.
Author: Shao Han
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W131221118