Do board interlocks support monitoring effectiveness?

Abstract

Purpose This paper aims to investigate the relationship between board interlocks and monitoring effectiveness for listed German companies in a context of risk governance. While agency-theory and resource-dependence-theory suggest a positive association between board interlocks and monitoring effectiveness, reasons such as limited temporal resources of busy board members may suggest a negative association. Design/methodology/approach By using panel data regression, the authors examined the association between board interlocks and monitoring effectiveness, which was approximated by excessive management compensation, pay-for-performance-sensitivity and CEO turnover-performance-sensitivity. The data set comprises 3,998 directorships for 132 listed German companies covering the period 2015-2017. Findings The authors find that board interlocks are associated with not only a more excessive management pay and less performance-sensitive turnover but also a higher pay-for-performance-sensitivity. Originality/value The study examines the impact of multiple directorships based on a German panel data set that includes both multiple appointments of members to national supervisory boards and all other appointments to national and international executive and supervisory bodies. The authors compile three measures to operationalize monitoring effectiveness.

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“…In this regard, studies on board chairs could be inspired by the extant literature on CEOs. Given that board chairs also frequently have other jobs, positions, and commitments (e.g., being members of other boards) (Handschumacher, Behrmann, Ceschinski, & Sassen, 2019), we see an opportunity to learn more about how they…”

Besteht ein Zusammenhang zwischen der Gender-Diversity und Überwachungseffektivität des Aufsichtsrats? Eine empirische Analyse deutscher börsennotierter Unternehmen

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Reflecting on Corporate Governance in South Africa: Lessons Learned and the Way Forward

“…Diverse directors often receive multiple invitations to serve on several boards concurrently. Some researchers hence caution companies to consider the positive and negative implications of potential director "overboardedness" (Ferris, Jayaraman, and Liao 2020;Handschumacher et al 2019;Mans-Kemp, Viviers, and Collins 2018). A director becomes overboarded if he/she serves on too many boards simultaneously (Ferris et al 2020).…”

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