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Showing posts from October, 2015

The relationship between the CEO and the chairman of the board of directors

Elsewhere on this blog I have already argued that improving corporate governance is not as simple as increasing the number of independent, non-executive directors on the board. In some instances, increasing board independence may cause more harm than good as some firms may require friendlier boards, with an emphasis on providing advice rather than monitoring.

In a new study I have published in the Journal of Corporate Finance (the pre-publication version can be obtained from here) and which is co-authored with Peter Limbach and Meik Scholz from the Karlsruhe Institute of Technology, we find that the age difference between the CEO and the chairman of the board of directors also matters. We argue that greater age dissimilarity between the CEO and the chair is likely to increase cognitive conflict between the two, which likely results in more scrutinising by the chair of the decisions proposed  by the CEO. Such cognitive conflict is likely to be greatest when there is a generational gap,…