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Published: May 13, 2011

 
 

Long-Lasting CEOs and Their Close-Knit Boards

Overall, the authors found that CEOs with longer tenures do have more social ties — including shared alma maters, past employment at the same firm, overlaps in military service, and memberships in the same clubs and charities — with the directors who sit on their boards than do newer CEOs. Longer-serving CEOs also have more directors who sit on multiple boards; who either were or are C-level executives; and who have business, law, finance, or accounting degrees. According to the authors, this is an indication that longer-term CEOs are comfortable with more educated and experienced directors, those who offer a wider breadth of knowledge and can enhance the quality of boardroom discussions with varied points of view.

The researchers conclude that long-term CEOs are not seeking to turn their boards into rubber stamps. Rather, they use their personal ties, and their directors’ wide perspectives and experience, to get valuable input that pays off in higher-quality innovation and better overall firm performance.

Bottom Line:
Long-tenured and successful CEOs tend to have boards filled with like-minded directors with whom they have social ties. But these directors also tend to have more experience and more diverse backgrounds than their counterparts in companies led by CEOs with less tenure. Although they may not have as much independence as their counterparts, these directors are often better advisors and are catalysts for improved innovation and investment performance.

 
 
 
 
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