Coping with Corporate Cholesterol: Board Interlocks and Their Impact on Corporate Governance - The Indian Experience

Several theories point to the influence of board interlocks on the diffusion of important resources, mainly information. Empirical confirmation of the information functionality of the interlocking directorates network was obtained in the case of network research under the Anglo-Saxon model of corporate governance as well as the continental model in developed countries. Since the early 1990s another model of corporate governance in CEE countries has been developed. The specific determinants of the development of this model do not allow us to unequivocally state similar causes and consequences of interlocking directorates in relation to the most frequently studied western corporate governance models. The aim of this study is to determine the importance managers attach to these relationships within a corporate network as a source of strategic information that is important to the company’s strategic decision-making process, in the context of the Polish governance model. The research employs the case-study method and presents the results of five case studies of companies listed on the Warsaw Stock Exchange. The research, on the one hand, suggests that the network embeddedness of Polish listed companies is of minor significance; on the other hand, it pointed to the existence of two main types of corporate networks: one inwardly directed and focused on supervisory board members’ controlling function performed with a view to protecting the shareholders’ equity ownership, and the other orientated towards external relationships, often distant from the original industry, in order to obtain information that supports new initiatives. What seems to most determine the behaviour of company managers is the corporate culture resulting from the presence of a foreign owner from a Western European country. In general, the findings confirm the importance of the network of interlocking directorates more as an instrument of control than diffusion of strategic information.

Download Full-text

Corporate Governance Issues in Executive Compensation: The Indian Experience (200882012)

SSRN Electronic Journal ◽

10.2139/ssrn.2337861 ◽

2013 ◽

Cited By ~ 1

Author(s):

Bala N. Balasubramanian ◽

Samir Kumar Barua ◽

D. Karthik

Keyword(s):

Corporate Governance ◽

Executive Compensation ◽

Indian Experience

Download Full-text

Competing institutional pressures in corporate governance reform: the role of board interlocks and industry peers

Corporate Governance ◽

10.1108/cg-04-2016-0096 ◽

2017 ◽

Vol 17 (3) ◽

pp. 538-559 ◽

Cited By ~ 1

Author(s):

Mario Krenn

Keyword(s):

Corporate Governance ◽

Institutional Change ◽

Resistance To Change ◽

Content Type ◽

Structural Context ◽

Corporate Governance Code ◽

Board Interlocks ◽

Social Structural ◽

Industry Peers

Purpose This study aims to examine the effects of competing influences emanating from firms’ social structural context (i.e. sent and received board of director interlocks and industry peers) on the adoption of an institutionally contested corporate governance code provision. Design/methodology/approach The corporate governance code provision of interest in this research recommends that German firms listed on German stock exchanges should disclose the individual remuneration arrangements for their board members. This paper uses 945 firm year observations from 2002 to 2006, the time period during which the adoption of this provision was voluntary for firms, to examine the role of firms’ social structural context in the legitimization process of this provision. Findings The results show that sent board interlocks to firms that defy pressures to adopt this practice have an equally pronounced but opposing effect on its institutionalization process. Received interlocks are inconsequential in this process. The results also provide evidence for the existence of competing influences emanating from firms’ industry peers. In contrast to the effects associated with sent board interlocks, at the industry level, peer acquiescence has a more pronounced effect than peer defiance. Furthermore, the practice’s legitimacy among firms’ peers moderates the effects of sent board interlocks. Originality/value The results of this paper suggest that a balanced approach to studying institutional change in corporate governance needs to acknowledge the co-existence of conflicting signals regarding the spread of new institutional models. The findings suggest that firms’ social structural context plays a central role in processes of contested institutional change. Board interlocks and industry peers carry the potential to facilitate institutional change and facilitate institutional continuity and resistance to change. However, not all board interlocks are of equal importance, and industry peers constitute a source of legitimacy to which directors forming the interlocks attend.

Download Full-text