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In Defense of Boards
Author(s) -
DominguezMartinez Silvia,
Swank Otto H.,
Visser Bauke
Publication year - 2008
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1530-9134.2008.00190.x
Subject(s) - dismissal , task (project management) , point (geometry) , simple (philosophy) , business , accounting , face (sociological concept) , public relations , law and economics , psychology , management , economics , political science , law , sociology , mathematics , social science , philosophy , geometry , epistemology
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.