Affiliated Directors: Puppets of Management or Effective Directors?
57 Pages Posted: 8 Oct 2008
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Affiliated Directors: Puppets of Management or Effective Directors?
Date Written: January 1998
Abstract
This paper examines four non-mutually-exclusive hypotheses behind the inclusion of different types of directors and the impact they have on firm performance. Strong associations are found between the specific economic needs of companies and the incidence of directors most likely to fulfill these needs. In particular, theoretical and empirical evidence is presented that most affiliated directors are not puppets of management, but are placed on boards to serve specific, strategic needs of firms. In addition, no systematic relation is found between various measures of performance and director type. In total, it appears that, on average, boards of directors are constructed in a rational manner.
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