Closer Look Series: Director Networks: Good for the Director, Good for Shareholders

Closer Look Series: Topics, Issues and Controversies in Corporate Governance, No. CGRP-08, Stanford Graduate School of Business, By
David F. Larcker, James Irvin Miller Professor of Accounting, Director of Stanford Graduate School of Business Corporate Governance Research Program And Brian Tayan, MBA ’03;  Date: 8-5-2010

• Director Networks: Good for the Director, Good for Shareholders (PDF)

A director’s social and professional network contributes to his or her qualifications as a board member. In recent years, much attention has been paid to the negative aspects of inter-board connections, such as the spread of bad practices and a reduction in independence.

At the same time, not enough attention has been paid to the positive effects, including the access they provide to important market data and the referrals they bring for new business relationships.

We consider these effects in more detail and ask why it is so difficult for commercial governance ratings firms to incorporate this information into their analyses of governance quality.

Related Research:

Boardroom Centrality and Stock Returns(PDF )

Working paper dated: July 24, 2010

Authors: David F. Larcker , Stanford University – Graduate School of Businesss; Eric C. So, Stanford Graduate School of Business,

Charles C. Y. Wang, Stanford University

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