Additional Research on Corporate Board Interlocks: Identifying influential Directors through analysis of boards interlocks during the period 2010-2012 by IIM-Bangalore, 2014

(Executive Summary)

It has been found that directors who occupy board positions of both listed and unlisted companies influence the performance of the firms in two ways (Hillman and Dalziel, 2003). They can do so by effectively monitoring the activities of the company as representatives of shareholders. In addition, they bring in scarce intangible resources such as legitimacy, advice, connections to other organizations. From a corporate governance literature, monitoring function of the board is of greater importance than bringing in resources. The theoretical lens that is utilized to understand this monitoring function is agency theory. This aspect focuses on the issues that arise when ownership and control are separated in organizations (Berle and Means, 1938). So specifically, the board needs to monitor the agents managers to protect the interests of the principals owners (Mizruchi, 1996). Some of the monitoring activities that the board needs to perform are identifying the CEO, monitoring the CEO and the top management, chart out the compensation for the top management including the CEO.

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