Boards need more insiders, study suggests

Leaving a CEO "home alone" on company boards — meaning they are the only insider among independent directors — may actually be detrimental to an organization, according to a study from researchers at Auburn (Ala.) University, Arizona State University in Tempe, Wright State University in Fairborn, Ohio, and the University of Central Florida in Orlando.

Following a perceived increase in corporate scandals, many organizations have dialed back on insider board members to help protect shareholders. The study, featured by Forbes, sought to examine if the push for independent directors truly protected company interests.

Researchers examined 1,638 S&P 1500 companies from 2003 to 2014 and found when the CEO is the only company insider it may actually hurt an organization in the following ways:

  • Lone-insider CEOs are paid an average excess of 82 percent compared to CEOs of similarly sized companies within the same industry
  • Lone-insider CEOs are paid disproportionately more than other top managers
  • Lone-insider boards have higher rates of financial misconduct

Read more here.

 

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