Composition and CEO Duality in Boards of Directors: An International Perspective
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IdaleneF. Kesner**
Universityof North Carolina at Chapel Hill
Abstract.This paperprovidesan empiricalassessmentcomparing board board composition(proportionof outside/nonmanagement members)and CEO duality(role of CEO and chairpersonheld simultaneously)between samples (n=150) of Japanese, United Kingdom,andUnitedStatesindustrialfirms.Resultsindicatemarked differencesin these corporategovernancedimensions.Implications regarding board independence, and differences in corporate governanceinternationally arediscussed.
The "corporation"as a legal entity and form of organizationcommonly exists in the majorityof sovereignnations. Given the characteristicsof the typical corporation,its popularityis not surprising.In fact it has been referredto as a seductiveformof organizationwhichamongotherthings providesa device for raisingcapitalfrom a large numberof investors who do not want any day-to-daymanagementparticipation.It provides limited liabilityfor the investors,which permitsthe participationof a largenumberof smallinvestors.Moreover,itpermitsinvestorsto diversify theirportfoliossuch that each investorcan minimizehis riskexposure. Finally, a corporationhas a perpetuallife so that the demise of an investornormallyhas no impact upon the firm (Blair and Kaserman 1983, p. 334). This form of organization,however, presents an interestingdilemma. This problem-first broughtto generalattentionby BerleandMeans'(1932) influential earlywork (see also, Glasbergand Schwartz1983; Hindley 1970; Jensen 1983; Larner1970; Lewellen 1969; Palmer 1972; Pedersonand Tabb 1976; Useem 1980; Zeitlin 1974)-concerns the separationof ownershipfrom control.The managementsof moderncorporationsdo not generallyhold substantialequity
*
DanR.Daltonisa Professor attheGraduate Schoolof BusinessatIndianaUniversity. IdaleneF. Kesneris an AssistantProfessorof BusinessPolicyand Environment at the Universityof NorthCarolinaat ChapelHill.She receivedherPh.D.fromthe SchoolofBusiness Graduate atIndianaUniversity. Professor Kesnerhaspublished articles in suchjournalsas theAcademyof Management ReviewandtheJournalof Business Strategy,and hercurrentresearchinterestsincludecorporateboardsof directorsand executivesuccession. **
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STUDIES,FALL1987 JOURNALOFINTERNATIONAL BUSINESS
ownthecorporation; management positionsinthecompany.Simply,shareholders thisis a distinctadvantage.As noted,investors runsit. Formanyshareholders, neednot concernthemselveswiththe routineoperationsof the companiesin is thecharterof thecompany'sCEO whichtheyholdstock.Thisresponsibility There andits boardof directors.Others,however,areevidentlynotpersuaded. oftendo not behave is recurringcriticismthatmanycorporatemanagements objectives(e.g.,Kesner in a mannerevenremotelyconsistentwithstockholder andDalton1985;Kramer1986;Ingersoll1986). of course,thatsome managements may act morein their It is unfortunate, Most observerswouldagree own
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