Endogenously Chosen Boards of Directors and ¤ Their Monitoring of the CEO
نویسندگان
چکیده
This paper develops a model in which the e®ectiveness of the board's monitoring of the CEO depends on the board's structure or composition. The independence of new directors is determined through a bargaining process between the existing directors and the CEO. The CEO's bargaining position, and thus his in°uence over the board-selection process, depends on an updated estimate of the CEO's ability based on his prior performance. Many empirical ̄ndings about board structure and performance arise as equilibrium phenomena in this model. We also explore the implications of this model for proposed regulations of corporate governance structures.
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