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Corporate governance 101: flattery will get you everywhere

Filed in archive corporate governance by leon on January 14, 2008

flattery.jpeg

How is it that despite all the focus on corporate governance and diversity, corporate boards all look and sound the same? Why do some directors get more board seats than others, and as a result have more influence over corporations and broader society?

A study from the University of Michigan's James Westphal and Northwestern Universitylinks's Ithai Stern confirms something we have long suspected: the more directors you suck up to and the more butt you kiss, the further you get.

The study Flattery Will Get You Every-where (Especially If You Are a Male Caucasian): How Ingratiation, Boardroom Behavior, and Demographic Minority Status Affect Additional Board Appointments at U.S. Companies found that directors increased their chances of board appointments if they went about providing advice and information to CEOs and if they ingratiated themselves toward peer directors. Well, at least for male Caucasians.

The survey of 760 board members of Fortune 500 companies found that directors who praised the efforts of management and ingratiated themselves with other directors were often rewarded for their behavior with multiple board appointments. But you had to know who to suck up to. Giving personal favors and helping other directors with their career paths. Disagreeing with other directors was a no-no. Complementing a director for his contributions to the board two more times during the past 12 months, or disagreeing with the director's point of view on a strategic issue one less time during that period, or doing one more personal favors for the director during the past year increases the likelihood of receiving a board appointment at a company where that director serves on the nominating committee or as CEO by 72 percent.

However, these strategies did not work if you were female, or not Caucasian or both. Also, the study found that the ones who gave honest feedback to management, provided tight oversight, and lobbied for close evaluation of executive proposals did not reap the same benefits. In fact, behaviors that promoted shareholder interests were punished.

What this study shows is that so many boards are like a Greek chorus, a group of sound but elderly businessmen who, with few exceptions, present the voice of moral conservatism, traditionalism and a reluctance to challenge the status quo. Managers assess directors by the quality of their questions but directors say they only know what to ask based on the quality of information management gives them. When directors can't monitor managers, the flow of information can be skewed and this produces a board that's flying blind.

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Permalink: Corporate governance 101: flattery will get you everywhere
Tags: Flattery  Will  Get  You  Everywhere  Especially  If  You  Are  a  Male  Caucasian:  How  Ingratiation  Boardroom   

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