The road to directorship: How corporate executives secure positions on other firm's boards
The role of outside directors in the corporate governance process has received well publicized attention from academic research, the business/financial press, and politicians. However, which individuals serve as outsiders from the executive ranks and which types of firms they join is less well understood. Since outside directors are critical to effective corporate governance we seek to better understand those who serve. Using theories of legitimacy, signaling, and prestige we investigate the circumstances surrounding outside director appointments and seek to clarify why we observe certain individuals joining boards as outside directors. We examine the phenomenon of outside directorships through an executive's home firm career, prestigious affiliations, and the firms which employ them as outsiders. In general, we find significant differences between those executives who join their first board vs. those who go on to become outside directors on more than one firm. In addition, home firm performance is not a reliable indicator of who serves as an outsider.