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Do Director Elections Matter?

Vyacheslav Fos¹; Kai Li²; Margarita Tsoutsoura³

¹ Carroll School of Management, Boston College · ² Sauder School of Business, University of British Columbia · ³ Samuel Curtis Johnson Graduate School of Management, Cornell University

Using a hand-collected sample of election nominations for more than 30, 000 directors over the period 2001–2010, we construct a novel measure of director proximity to elections called Years-to-election. We find that the closer directors of a board are to their next elections, the higher CEO turnover-performance sensitivity is. A series of tests, including one that exploits variation in Years-to-election that comes from other boards, supports a causal interpretation. Further analyses show that other governance mechanisms do not drive the relation between board Years-to-election and CEO turnover-performance sensitivity. We conclude that director elections have important implications for corporate governance. Received March 10, 2016; editorial decision May 19, 2017 by Editor Itay Goldstein.

DOI

10.1093/rfs/hhx078

Volume

31 (4)

Pages

1499-1531

Language

en

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