Endogenously Chosen Boards of Directors and Their Monitoring of the CEO
This paper develops a model in which the effectiveness 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 influence over the board-selection process, depends on an updated estimate of the CEO's ability based on his prior performance. Many empirical findings about board structure and performance...
Published in 1995.