Network connections, CEO compensation and involuntary turnover: The impact of a friend of a friend

Steven Balsam; So Yean Kwack; Jae Young Lee

doi:10.1016/j.jcorpfin.2017.05.001

Network connections, CEO compensation and involuntary turnover: The impact of a friend of a friend

Steven Balsam, So Yean Kwack, Jae Young Lee

Department of Business Administration

Research output: Contribution to journal › Article

3 Citations (Scopus)

Abstract

We show that hard to observe, indirect connections between a CEO and “independent” board members are associated with higher CEO compensation. While we find this result for the “friend of a friend” connection, we do not find it for direct connections, i.e. friends sitting on the board. We postulate that this differential result is caused by directors with readily observable connections to the CEO being wary of provoking outrage. In contrast we find both types of connections associated with reduced involuntary CEO turnover, suggesting that outrage is not as big a concern, e.g., compensation is the foci of stakeholders.

Original language	English
Pages (from-to)	220-244
Number of pages	25
Journal	Journal of Corporate Finance
Volume	45
DOIs	https://doi.org/10.1016/j.jcorpfin.2017.05.001
Publication status	Published - 2017 Aug

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All Science Journal Classification (ASJC) codes

Business and International Management
Finance
Economics and Econometrics
Strategy and Management

Cite this

Balsam, S., Kwack, S. Y., & Lee, J. Y. (2017). Network connections, CEO compensation and involuntary turnover: The impact of a friend of a friend. Journal of Corporate Finance, 45, 220-244. https://doi.org/10.1016/j.jcorpfin.2017.05.001

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10.1016/j.jcorpfin.2017.05.001