Research summary: We examine the consequences of the formalization of the board leadership structure at IPO for board‐level turnover. We introduce the concept of director undervaluation. It indicates the degree to which a director’s qualifications based on normatively accepted criteria for board leadership are not duly reflected in his/her appointments to the board chair and committee chair positions. We find that the higher the average undervaluation of directors on the board (“board undervaluation”), the greater the turnover levels of undervalued directors. This effect is stronger when board interaction frequency is higher. We contribute to the behavioral perspective on corporate governance by introducing justice‐based legitimacy as a key normative institution, and by providing a novel predictor of aggregate turnover of directors (as well as the firm’s CEO). Managerial summary: Why do outside directors exit the board? We offer a novel answer to this question in the context of newly public firms. We suggest that when directors are passed over for the board chair and committee chair positions despite having higher qualifications than their peers, they have been “undervalued,” and a negative board climate is likely to develop. We find that the higher the average undervaluation of directors on the board, the higher the turnover levels of these undervalued directors. More frequent board meetings exacerbate these turnover levels. Further, these turnover effects are not restricted to undervalued directors—even the CEO is more likely to exit. This study demonstrates the critical importance of developing a legitimate and fair board leadership structure.
Research summary Venture boards are theoretically important and economically relevant. They are at the apex of a venture's organizational hierarchy and have significant influence on the most important decisions related to venture strategy and personnel. This article reviews the organizational and strategy research on venture boards, clarifying how venture boards differ from venture investors and from public firm boards. It lays out a systematic research agenda to stimulate more research on venture governance, including venture board composition and structure, venture board processes, and venture board transitions to public firm boards. This agenda attempts to illuminate the research opportunities related to the distinctive nature of venture boards and enable theoretical engagement with the broader corporate governance scholarship on public firms. Managerial summary A venture's board of directors is highly consequential for its most important strategic and personnel outcomes. Uber and Theranos are just two recent ventures whose boards have come under public spotlight. This article reviews organizational and strategy research on venture boards, mapping the evolution of the academic literature, summarizing key findings, and identifying the most important limitations. It explains how venture boards are different from venture investors and from public firm boards. Importantly, it lays out a systematic research agenda that draws upon the distinctive nature of venture boards and also creates a bridge to the broader literature on public firm boards. New insights on venture board composition, structure, process, and transition to public firm boards will be relevant to venture executives, investors, and directors. Copyright © 2017 Strategic Management Society.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.