Board Independence and CEO Turnover

Arbeitspapier

It is widely believed that the ideal board in corporations is composed almost entirely of independent (outside) directors. In contrast, this paper shows that some lack of board independence can be in the interest of shareholders. This follows because a lack of board independence serves as a substitute for commitment. Boards that are dependent on the incumbent CEO adopt a less aggressive CEO replacement rule than independent boards. While this behavior is inefficient ex post, it has positive ex ante incentive effects. The model suggests that independent boards (dependent boards) are most valuable to shareholders if the problem of providing appropriate incentives to the CEO is weak (severe).

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper Series: Finance & Accounting ; No. 154

Classification and Topics

• Classification: Wirtschaft
• Subject: Corporate Governance ; Board Independence ; Severance Pay ; CEO Turnover ; Incentive Compensation ; Vorstand ; Aufsichtsrat ; Führungskräfte ; Arbeitsmobilität ; Leistungsorientierte Vergütung ; Shareholder Value ; Spieltheorie ; Theorie ; Commitment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Laux, Volker
• Event: Veröffentlichung
• (who): Johann Wolfgang Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften
• (where): Frankfurt a. M.
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/23419
• Last update: 10.03.2025, 11:45 AM CET