Keeping Directors in Line: Social Distancing as a Control Mechanism in the Corporate Elite

Administrative Science Quarterly, Vol. 48, pp. 361-398, 2003, Copyright

Ross School of Business Paper No. B008

39 Pages Posted: 12 Jan 2005

See all articles by James D. Westphal

James D. Westphal

University of Michigan - Stephen M. Ross School of Business

Poonam Khanna

University of Texas at San Antonio, Department of Management

Abstract

In this study, we consider the social process by which the corporate elite may have resisted pressure from stakeholders to adopt changes in corporate governance that limit managerial autonomy. We examine (1) how directors who participate in corporate governance changes that reflect greater board control over management may be subjected to a kind of informal social sanctioning, which we refer to as social distancing, on other boards; (2) how the tendency for directors to experience social distancing may be moderated by their status in the corporate elite; and (3) how directors who experience such social control could be deterred from participating subsequently in governance changes that threaten the interests of fellow top managers. We test our hypotheses with survey data on processes of social control from a sample of directors and CEOs at Forbes 500 companies and archival data on director participation in four corporate governance changes. The findings show that (1) directors who participate in governance changes that threaten managerial interests experience a higher level of social distancing on other boards, particularly when they have low to medium status in the corporate elite, and (2) directors are less likely to participate in such changes if they have recently experienced social distancing (directly or indirectly). Our theory and empirical tests ultimately address the question of how, or by what social process, boards of directors help maintain the solidarity of the corporate elite and serve the interests of corporate leaders.

Keywords: Governance, board of directors, social distancing

Suggested Citation

Westphal, James D. and Khanna, Poonam, Keeping Directors in Line: Social Distancing as a Control Mechanism in the Corporate Elite. Administrative Science Quarterly, Vol. 48, pp. 361-398, 2003, Copyright, Ross School of Business Paper No. B008, Available at SSRN: https://ssrn.com/abstract=647081

James D. Westphal (Contact Author)

University of Michigan - Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Poonam Khanna

University of Texas at San Antonio, Department of Management ( email )

United States

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