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- 2023-01-10 (2)
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Abstract
We develop an integrated set of propositions describing the relationships among CEO characteristics, the perceived trustworthiness of the CEO, and the board of directors’ decisions concerning the governance structure of the firm. In particular, we propose that CEO education, tenure, experience, board memberships and founder status affect the board’s perception of the CEO’s ability, benevolence, and integrity (the three key trustworthiness dimensions), and that these trustworthiness perceptions then affect the board’s choice of governance mechanisms with regard to CEO compensation mix, CEO/board chair duality, board size, and outsider representation on the board. Our theoretical development suggests that agency theory’s difficulties in explaining corporate governance may be the result of researchers’ failure to incorporate CEO trustworthiness into their models.
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