And Then There Were None: Political Settlements of Insider Board Membership

This study advances a view of the firm as a political coalition by theorizing and testing hypotheses on how political settlements among board factions regarding board independence shapes insider participation on the board. We suggest that insider board participation is determined not only by the conflict among elites, but also by their ability to establish tacit agreement. The idea of settlement is important because it provides a window to understanding the processes of restrained partisanship and stability at the top of U.S. corporations. We contribute to the theoretical body of work on coalitions, boards and settlements by considering the role of three distinct coalitions -- CEOs, insiders and outsiders - and the effects of critical events, formal roles and informal power across on the creation and maintenance of board structural arrangements. We study an unexplored structural form and build on the nascent body of empirical work on settlements by offering a quantitative analysis boards characterized by a single inside director -- the CEO. We find that CEO succession, formal authority derived from insider board roles and informal power of both outsiders and insiders impact the settlements and the adoption of a CEO-only insider structure.