Research Summary
Research Summary
The Talent at the Table: Business Expertise and Share Ownership in Fortune 500 Boardrooms
Description
This paper examines the relationship between corporate value and "vestige" directors, defined as directors who own sizeable shareholdings but lack salient business experience relative to their peers on Fortune 500 boards. These people come to serve on boards not by virtue of any unobserved or unconventional talent, but rather because of the magnitude of their ownership stakes, which reflect their historical connections to the companies where they serve as directors. The presence of vestige directors on boards is associated with lower firm value, particularly as the size of their ownership stakes increases, and these findings are robust to tests of several alternative hypotheses.