Social capital, human capital, and board appointments

This study investigates whether who a director knows is more important than what they know when it comes to gaining additional board seats. Specifically, we investigate the relative impact of human capital (a director's experiences, skills, and knowledge) and social capital (a director's connections to other directors) in gaining additional directorships. We employ a uniquely constructed index to measure human capital and Social Network Analysis to estimate a director's connectivity to other directors to proxy for social capital. We apply these to a sample of directors from publicly listed companies in New Zealand between 2000 and 2015. We observe that both human and social capital are positively related to acquiring additional board seats. Additionally, we find that directors gaining additional human capital are more likely to acquire additional board seats. We conclude that both human and social capital are important in determining which directors gain additional board seats, although directors should focus on acquiring additional human capital to enhance their chances of further appointments.