Araştırma Makalesi
WHAT FACTORS PREVENT INDEPENDENT DIRECTORS FROM PROTECTING INTERESTS OF SHAREHOLDERS IN CASES OF CONFLICT OF INTEREST?
Öz
One way to mitigate agency conflicts between shareholders and managers in publicly traded companies with dispersed ownership is supplementation of independent outside directors to the board, who can monitor the top executives and prevent them from malfeasances. However, in conflict of interest situations, independent board members are not always enabled to oppose senior managers, particularly CEOs, who put their personal interests above those of shareholders. In such cases, the efforts of independent directors to monitor managers will be unsuccessful, which, in turn, may result in the latter receiving unjustified personal benefits at the expense of shareholders. Active participation of independent directors in resolving situations where interests of these groups do not align ensures the mitigation of tension and the proper functioning of the company. Thus, the establishment of cases where independent outsiders cannot fulfill their basic duties of shielding shareholders appears to be rather a significant issue.
Anahtar Kelimeler
Kaynakça
- BAO, J., and EDMANS A., 2011, Do Investment Banks Matter for M&A Returns?, The Review of Financial Studies, 24 (7), 2286-2315.
- BEBCHUK, L.A. and FRIED J.M., 2004, Pay without Performance: The Unfulfilled Promise of Executive Compensation [online], http://www.law.harvard.edu/faculty/bebchuk/pdfs/performance-part1.pdf (Date Accessed: 16 December 2019).
- BYRD, J.W., and HICKMAN K.A., 1992, Do Outside Directors Monitor Managers? Evidence from Tender Offer Bids, Journal of Financial Economics, 32 (2), 195-221.
- CHADAM, A.A., 2018, Does the Structure of the Board of Directors Improve M&A Performance, International Journal of Synergy and Research, 7, 15-31.
- COTTER, J.F., SHIVDASANI A., and ZENNER M., 1997, Do Independent Directors Enhance Target Shareholder Wealth during Tender Offers?, Journal of Financial Economics, 43 (2), 195-218.
- DIKOLLI, S., MAYEW W.J., and NANDA D., 2014, CEO Tenure and the Performance-Turnover Relation, Review of Accounting Studies, 19 (1), 281-327.
- DSOUZA, D., 2019, Top 10 Highest Paid Executives for 2018, [online], https://www.investopedia.com/highest-paid-ceos-2019-4687532 (Date Accessed: 17 December 2019).
- GRAHAM, J.R., KIM H., and LEARY M.T., 2017, CEO Power and Board Dynamics, Working Paper, Duke University, Cornell University, and Washington University.
- GRAHAM, J.R., KIM H., and LEARY M.T., 2019, CEO-Board Dynamics, [online], https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2938120 (Date Accessed: 5 December 2019).
- HARFORD, J., and SCHONLAU R.J., 2013, Does the Director Labor Market Offer Ex Post Settling‐Up for CEOs? The Case of Acquisitions, Journal of Financial Economics, 110 (3), 18-36.
- HARTZELL, J., OFEK E., and YERMACK D., 2004, What’s In It for Me? CEOs Whose Firms Are Acquired, Review of Financial Studies, 17 (1), 37-61.
- HERMALIN, B.E., 2005, Trends in Corporate Governance, The Journal of Finance, 60 (5), 2351-2384.
- HUANG, Q., JIANG F., LIE E., and YANG K., 2014, The Role of Investment Banker Directors in M&A, Journal of Financial Economics, 112 (3), 269-286.
- JENTER, D., and LEWELLEN K., 2015 CEO Preferences and Acquisitions, Journal of Finance, 70 (6), 2813-2852.
- KRAAKMAN, R., et al., 2016, The Anatomy of Corporate Law. A comparative and Functional Approach: Third Edition, Oxford University Press, Oxford.
- MAIN, B., O'REILLY C.A., and WADE J., 1995, The CEO, the Board of Directors, and Executive Compensation: Economic and Psychological Perspectives, Industrial and Corporate Change, 4 (2), 293-332.
- MALMENDIER, U., and TATE G., 1990, Who Makes Acquisitions? CEO Overconfidence and the Market’s Reaction, Journal of Financial Economics, 89 (1), 20-43.
- MASULIS, R.W., and GUO L., 2015, Board Structure and Monitoring: New Evidence from CEO Turnovers, The Review of Financial Studies, 28 (10), 2770-2811.
- MCDONALD, M.L., WESTPHAL J.D., and GRAEBNER M.E., 2008, What Do They Know? The Effects of Outside Director Acquisition Experience on Firm Acquisition Performance, Strategic Management Journal, 29 (11), 1155-1177.
- MOBBS, S., 2013, CEOs Under Fire. The Effects of Competition from Inside Directors on Forced CEO Turnover and CEO Compensation, Journal of Financial and Quantitative Analysis, 48 (3), 669-698.
- MOELLER, S.B., SCHLINGEMANN F.P, and STULZ R.M., 2005, Wealth Destruction on a Massive Scale? A Study of Acquiring-Firm Returns in the Recent Merger Wave, The Journal of Finance, 60 (2), 757-782.
- MURPHY, K.J., and ZÁBOJNÍK J., 2007, Managerial Capital and the Market for CEO, [online], https://papers.ssrn.com/sol3/papers.cfm?abstract_id=984376 (Date Accessed: 18 December 2019).
- OECD, 2019, OECD Corporate Governance Factbook 2019, [online], http://www.oecd.org/corporate/Corporate-Governance-Factbook.pdf (Date Accessed: 21 December 2019).
- SORKIN, A.R., 2002, Executive Pay: A Special Report; Those Sweet Trips to the Merger Mall, New York Times, [online], https://www.nytimes.com/2002/04/07/business/executive-pay-a-special-report-those-sweet-trips-to-the-merger-mall.html (Date Accessed: 11 December 2019).
- SPENCER STUART. 2019, 2018 United States Spencer Stuart Board Index, [online], https://www.spencerstuart.com/-/media/2019/july/ssbi_2018_new.pdf (Date Accessed: 7 December 2019).
- STEIN, G., and PLAZA S., 2011, The Role of Independent Directors in CEO Supervision and Turnover, [online], https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1782707 (Date Accessed: 6 December 2019).
- SUN, J., and CAHAN S., 2009, The Effect of Compensation Committee Quality on the Association between CEO Cash Compensation and Accounting Performance, Corporate Governance: An International Review, 17 (2), 193–207.
- TAYLOR, L. A., 2010, Why Are CEOs Rarely Fired? Evidence from Structural Estimation, Journal of Finance, 65 (6), 2051-2087.
- WEISBACH, M., 1988, Outside Directors and CEO Turnover, Journal of Financial Economics, 20 (1), 431-460.
WHAT FACTORS PREVENT INDEPENDENT DIRECTORS FROM PROTECTING INTERESTS OF SHAREHOLDERS IN CASES OF CONFLICT OF INTEREST?
Öz
One way to mitigate agency conflicts between shareholders and managers in publicly traded companies with dispersed ownership is supplementation of independent outside directors to the board, who can monitor the top executives and prevent them from malfeasances. However, in conflict of interest situations, independent board members are not always enabled to oppose senior managers, particularly CEOs, who put their personal interests above those of shareholders. In such cases, the efforts of independent directors to monitor managers will be unsuccessful, which, in turn, may result in the latter receiving unjustified personal benefits at the expense of shareholders. Active participation of independent directors in resolving situations where interests of these groups do not align ensures the mitigation of tension and the proper functioning of the company. Thus, the establishment of cases where independent outsiders cannot fulfill their basic duties of shielding shareholders appears to be rather a significant issue.
Anahtar Kelimeler
Kaynakça
- BAO, J., and EDMANS A., 2011, Do Investment Banks Matter for M&A Returns?, The Review of Financial Studies, 24 (7), 2286-2315.
- BEBCHUK, L.A. and FRIED J.M., 2004, Pay without Performance: The Unfulfilled Promise of Executive Compensation [online], http://www.law.harvard.edu/faculty/bebchuk/pdfs/performance-part1.pdf (Date Accessed: 16 December 2019).
- BYRD, J.W., and HICKMAN K.A., 1992, Do Outside Directors Monitor Managers? Evidence from Tender Offer Bids, Journal of Financial Economics, 32 (2), 195-221.
- CHADAM, A.A., 2018, Does the Structure of the Board of Directors Improve M&A Performance, International Journal of Synergy and Research, 7, 15-31.
- COTTER, J.F., SHIVDASANI A., and ZENNER M., 1997, Do Independent Directors Enhance Target Shareholder Wealth during Tender Offers?, Journal of Financial Economics, 43 (2), 195-218.
- DIKOLLI, S., MAYEW W.J., and NANDA D., 2014, CEO Tenure and the Performance-Turnover Relation, Review of Accounting Studies, 19 (1), 281-327.
- DSOUZA, D., 2019, Top 10 Highest Paid Executives for 2018, [online], https://www.investopedia.com/highest-paid-ceos-2019-4687532 (Date Accessed: 17 December 2019).
- GRAHAM, J.R., KIM H., and LEARY M.T., 2017, CEO Power and Board Dynamics, Working Paper, Duke University, Cornell University, and Washington University.
- GRAHAM, J.R., KIM H., and LEARY M.T., 2019, CEO-Board Dynamics, [online], https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2938120 (Date Accessed: 5 December 2019).
- HARFORD, J., and SCHONLAU R.J., 2013, Does the Director Labor Market Offer Ex Post Settling‐Up for CEOs? The Case of Acquisitions, Journal of Financial Economics, 110 (3), 18-36.
- HARTZELL, J., OFEK E., and YERMACK D., 2004, What’s In It for Me? CEOs Whose Firms Are Acquired, Review of Financial Studies, 17 (1), 37-61.
- HERMALIN, B.E., 2005, Trends in Corporate Governance, The Journal of Finance, 60 (5), 2351-2384.
- HUANG, Q., JIANG F., LIE E., and YANG K., 2014, The Role of Investment Banker Directors in M&A, Journal of Financial Economics, 112 (3), 269-286.
- JENTER, D., and LEWELLEN K., 2015 CEO Preferences and Acquisitions, Journal of Finance, 70 (6), 2813-2852.
- KRAAKMAN, R., et al., 2016, The Anatomy of Corporate Law. A comparative and Functional Approach: Third Edition, Oxford University Press, Oxford.
- MAIN, B., O'REILLY C.A., and WADE J., 1995, The CEO, the Board of Directors, and Executive Compensation: Economic and Psychological Perspectives, Industrial and Corporate Change, 4 (2), 293-332.
- MALMENDIER, U., and TATE G., 1990, Who Makes Acquisitions? CEO Overconfidence and the Market’s Reaction, Journal of Financial Economics, 89 (1), 20-43.
- MASULIS, R.W., and GUO L., 2015, Board Structure and Monitoring: New Evidence from CEO Turnovers, The Review of Financial Studies, 28 (10), 2770-2811.
- MCDONALD, M.L., WESTPHAL J.D., and GRAEBNER M.E., 2008, What Do They Know? The Effects of Outside Director Acquisition Experience on Firm Acquisition Performance, Strategic Management Journal, 29 (11), 1155-1177.
- MOBBS, S., 2013, CEOs Under Fire. The Effects of Competition from Inside Directors on Forced CEO Turnover and CEO Compensation, Journal of Financial and Quantitative Analysis, 48 (3), 669-698.
- MOELLER, S.B., SCHLINGEMANN F.P, and STULZ R.M., 2005, Wealth Destruction on a Massive Scale? A Study of Acquiring-Firm Returns in the Recent Merger Wave, The Journal of Finance, 60 (2), 757-782.
- MURPHY, K.J., and ZÁBOJNÍK J., 2007, Managerial Capital and the Market for CEO, [online], https://papers.ssrn.com/sol3/papers.cfm?abstract_id=984376 (Date Accessed: 18 December 2019).
- OECD, 2019, OECD Corporate Governance Factbook 2019, [online], http://www.oecd.org/corporate/Corporate-Governance-Factbook.pdf (Date Accessed: 21 December 2019).
- SORKIN, A.R., 2002, Executive Pay: A Special Report; Those Sweet Trips to the Merger Mall, New York Times, [online], https://www.nytimes.com/2002/04/07/business/executive-pay-a-special-report-those-sweet-trips-to-the-merger-mall.html (Date Accessed: 11 December 2019).
- SPENCER STUART. 2019, 2018 United States Spencer Stuart Board Index, [online], https://www.spencerstuart.com/-/media/2019/july/ssbi_2018_new.pdf (Date Accessed: 7 December 2019).
- STEIN, G., and PLAZA S., 2011, The Role of Independent Directors in CEO Supervision and Turnover, [online], https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1782707 (Date Accessed: 6 December 2019).
- SUN, J., and CAHAN S., 2009, The Effect of Compensation Committee Quality on the Association between CEO Cash Compensation and Accounting Performance, Corporate Governance: An International Review, 17 (2), 193–207.
- TAYLOR, L. A., 2010, Why Are CEOs Rarely Fired? Evidence from Structural Estimation, Journal of Finance, 65 (6), 2051-2087.
- WEISBACH, M., 1988, Outside Directors and CEO Turnover, Journal of Financial Economics, 20 (1), 431-460.
Toplam 29 adet kaynakça vardır.
Ayrıntılar
| Birincil Dil | İngilizce |
|---|---|
| Bölüm | Araştırma Makalesi |
| Yazarlar | |
| Yayımlanma Tarihi | 15 Ağustos 2020 |
| Yayımlandığı Sayı | Yıl 2020 |