Three Essays on Boards, Blockholders and the Media

摘要

Essay 1 examines the impact of an independent blockholder on the board of directors. The problem driving the analysis is a CEO who plans to divert project resources for personal benefit. If successful, he will provide private benefits to insiders who support the diversion. I find that, in the absence of a blockholder, the success of the diversion effort strictly depends on the size of the private benefit to insiders. By contrast, the presence of the blockholder can increase or decrease the willingness of insiders to vote against the CEO, to the point of precluding a rational CEO from even attempting diversion.;Essay 2 investigates the impact of a family blockholder on the board of directors. Theoretically, I find that by controlling the nominating process and rewards to independent insiders, the family can control the vote whether or not they have a voting majority on the board. Empirically, I find qualified support for the theoretical analysis. I find no empirical support for the assertion that family control detracts from firm value.;Essay 3 presents a novel exploration of the theoretical relationships between the media and the corporate board. The analysis in this essay shows how the threat of media exposure can affect the decision-making of a CEO considering diverting project resources for personal consumption, and that of the inside board members who must approve his proposed project implementation. The analysis reveals that the certainty of public exposure will discourage most CEOs from attempting diversion. For the CEO who is unfazed by the threat of public exposure, it is highly probable that he will be abandoned by formerly supportive corporate insiders' even if the private benefits of supporting the 'tainted' CEO are substantial.