Take a Stand or Keep Your Seat: Independent Director Turnover following Social Activist Challenges


Mary McDonnell
Mary McDonnell
  • Speaker
Wharton School of Business, University of Pennsylvania

Event Information

Type
Research Seminar
Programme
Strategy & Entrepreneurship
Date
Tue. 5 Sep. 2017
Contact
Mirko Benischke
Time
13:00 – 14:30
Location
T3-17


Abstract

Outside directors play a major role in modern corporate governance by providing firms with valuable human and social capital as well as serving as the primary monitors of managers. Given their influence, researchers have been increasingly interested in understanding what motivates these individuals to exit their positions. We add to this line of inquiry by exploring director departure after social activist challenges. Drawing on impression management and identity theory, we argue that the effect of negative claims on an individual director will depend intimately on the whether the claims substantively conflict with the director’s personal values and identity. The results of our study support our claims by showing that board turnover is significantly higher in the years after a boycott in comparison to matched-samples of non-boycotted firms. At the director level, our results reveal that an ideological match between a board member and the activist challengers predicts subsequent director exit. This positive interaction effect is significantly stronger among directors who are likely to be most sensitive to the social performance of the firms with which they are affiliated, due to their functional background or identity characteristics. We discuss the implications of our results for research on corporate governance, corporate social responsibility, and social movements.

Mirko Benischke
  • Coordinator