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Corporate board dynamics: Directors voting for directors

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  • Schmeiser, Steven

Abstract

I propose a model in which corporate directors perform firm tasks (such as monitoring management) and elect new directors. Elections introduce a dynamic element – the incumbent board's willingness to hire a candidate depends on how the candidate will vote in future hiring rounds. Lack of a commitment mechanism means directors do not always choose board compositions that maximize shareholder value. I use the model to analytically and numerically investigate the effects of stock exchange rules governing board composition and director elections. I find that the regulations benefit shareholders in a dynamic environment, but not in a static environment.

Suggested Citation

  • Schmeiser, Steven, 2012. "Corporate board dynamics: Directors voting for directors," Journal of Economic Behavior & Organization, Elsevier, vol. 82(2), pages 505-524.
    • Handle: RePEc:eee:jeborg:v:82:y:2012:i:2:p:505-524
    DOI: 10.1016/j.jebo.2012.03.006
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    References listed on IDEAS

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    More about this item

    Keywords

    Board of directors; Voting for voters; Corporate governance;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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