Toward a Social Capital Theory of Director Selection

Abstract

Manuscript Type: Conceptual Research Question/Issue: Our study evaluates the role of social capital in new director selection, board composition, and board effectiveness. Research Findings/Insights: We take steps toward a theory of director selection, explaining how social capital at the individual-level influences director selection and at the group level influences board effectiveness. At the individual level, social capital is defined as the interpersonal linkages that director candidates have to others, both inside and outside the firm. At the group level, board social capital is an asset that includes both relations of directors and potential resources arising from the relations. Theoretical/Academic Implications: We argue that: 1) social capital can be divided into internal and external dimensions according to its locus and function; 2) both internal and external social capital are associated with board composition through director selection, although the causal logic differs considerably; 3) the influences of social capital on director selection vary according to the context; and 4) both internal social capital and external social capital generate unique resources that are important to board effectiveness. Practitioner/Policy Implications: Our study informs practicing managers, because we describe how and why most research and public discussion has emphasized the role of directors as monitors of managers and this has significantly downplayed the role of directors in providing advice, counsel, and other resources to their organizations. We provide a strong logic for seeking directors with specific types of social capital (internal or external) under specific contexts.

On the Internationalization of Corporate Boards

“…This argument could be extended to the selection of directors by shareholders. The reliance on personal networks and the role of social capital in the directors' selection is indeed supported by existing literature (Kim & Cannella, 2008;Simon & Warner, 1992;Westphal & Stern, 2006). Following these arguments, we could therefore expect that domestic shareholders will select members from their own domestic networks, implying a lower likelihood for nomination of international directors.…”

The Structural Elaboration of Board Independence: Executive Power, Institutional Logics, and the Adoption of CEO-Only Board Structures in U.S. Corporate Governance

“…Extending this notion, we propose that inside directors whose appointments predate the CEO are more likely to be political contestants of the CEO than those who postdate the CEO. Prior work suggests that a CEO is more likely to have close ties with inside directors appointed during his or her tenure (Kim & Cannella, 2008). Additionally, a CEO is less likely to be committed to inside directors who were appointed by a predecessor, and they are less likely to obtain these directors' support, compared to directors who they helped to appoint (Johnson, Schnatterly, & Hill, 2013).…”

Hubungan Saling Pengaruh Lembaga Pengarah dan Prestasi Firma: Perspektif Rangkaian Sosial

“…Pfeffer (1972), menyatakan bahawa teori pergantungan sumber melihat fi rma sebagai satu sistem terbuka dan amat bergantung kepada persekitaran memperoleh sumber. Ia melihat ahli lembaga pengarah dengan hubungan saling pengaruh yang berperanan sebagai penghubung atau jambatan kepada sumber luaran organisasi (Hillman et al 2009;Kim & Cannella 2008). Malahan hubungan begini mampu mengurangkan kesan ketidakpastian persekitaran.…”