Option backdating and board interlocks Horny techef
Our empirical analysis gives support to our main arguments: the longevity of cartels tends to be increased by the level of variety of age-based experience and power disparity between partners but reduced by their level of separation in uncertainty avoidance.Implications for the literature on organizational misconduct are discussed.We begin by providing evidence that well-connected directors have greater protection from career concerns.We next examine the channels by which director connectedness may improve monitoring and find that audit committee connectedness has a positive effect on the quality of financial reporting.Further, better connected compensation committees are less likely to overpay the CEO.
Moreover, CEOs who began their careers in prosperous times were more likely to backdate stock option grants later in their careers.
Next, we propose that CEOs who begin their careers in prosperous times will be more likely to engage in self-serving corporate misconduct later in their careers.
We tested these hypotheses by assembling a large data set of American CEOs and following their stock option reporting patterns between 19.
These associations are robust to alternative explanations-endogenous matching of firms and directors, general technical expertise of the board, and pro-active stacking in board composition.
The results are consistent with the view that director skills and information spillovers through director networks add value.