Do individual directors matter?

Paper 1: Pilot study of Swiss firms Abstract Using a fixed effects approach, we investigate whether the presence of specific individuals on Swiss firms’ boards affects firm performance and the policy choices they make. We find evidence for a substantial impact of these directors’ presence on their firms. Moreover, the director effects are correlated across policies and performance measures but uncorrelated to the directors’ background. We find these results interesting but conclude that they should to be substantiated on a dataset that is larger and better understood by researchers. Also, further tests are required to rule out methodological concerns. Paper 2: Evidence from the S&P 1,500 Abstract We ask whether directors on corporate boards contribute to firm performance as individuals. From the universe of the S&P 1,500 firms since 1996 we track 2,062 directors who serve on multiple boards over extended periods of time. Our initial findings suggest that the presence of these directors is associated with substantial performance shifts (director fixed effects). Closer examination shows that these effects are statistical artifacts and we conclude that directors are largely fungible. Moreover, we contribute to the discussion of the fixed effects method. In particular, we highlight that the selection of the randomization method is pivotal when generating placebo benchmarks. Paper 3: Robustness, statistical power, and important directors Abstract This article provides a better understanding of Senn’s (2014) findings: The outcome that individual directors are unrelated to firm performance proves robust against different estimation models and testing strategies. By looking at CEOs, the statistical power of the placebo benchmarking test is evaluated. We find that only the stronger tests are able to detect CEO fixed effects. However, these tests are not suitable to analyze directors. The suitable tests would detect director effects if the inter quartile range of the true effects amounted to 3 percentage points ROA. As Senn (2014) finds no such effects for outside directors in general, we focus on groups of particularly important directors (e.g., COBs, non-busy directors, successful directors). Overall, our evidence suggests that the members of these groups are not individually associated with firm performance either. Thus, we confirm that individual directors are largely fungible. If the individual has an effect on performance, it is of small magnitude.

Ready for a crisis? How supervisory boards affect the formalized crisis procedures of small and medium-sized family firms in Germany

Overcoming a crisis situation in which the socioemotional wealth (SEW) of a family is at risk can be threatened by a lack of formal crisis procedures, which can increase the probability of organizational decline. Thus, not being prepared for a crisis situation may be a critical factor in the long-term survival of family firms. From a corporate governance perspective, supervisory boards may achieve higher levels of crisis readiness. Applying the resourced-based view and SEW theory, we analyze the relationship between family ownership and formalized crisis procedures in 150 small and medium-sized German firms. Our results show that formalized crisis procedures decrease as family ownership increases. Including supervisory boards in our analysis, we find a significant moderating effect of supervisory boards on the relationship between family ownership and formalized crisis procedures. Specifically, our results suggest that family firms with supervisory boards show similar levels of formalized crisis procedures as non-family firms with supervisory boards. In contrast, family firms without supervisory boards exhibit lower levels of formalized crisis procedures compared with non-family firms without supervisory boards. We also discuss managerial implications, limitations, and future research.