Boards of directors and the media generally ‘get it right’ in rewarding CEOs based on performance, study shows | News | Notre Dame News | University of Notre Dame

We are not persuaded by the connection between rhetoric and results here. Even if these findings are true today, the indicators are too easily manipulated to continue to be of value. As we learn more about this study, we will report further.

A main focus in corporate governance research is whether boards of directors and the media appropriately reward and sanction CEOs based on their performance.

Evidence shows CEOs vary significantly in their ability to generate positive firm results. While some revitalize underperforming companies, others assume the reins of successful companies only to lead them to failure.

Prior research provides a pessimistic view of boards of directors, portraying them as inefficient and unable to monitor CEOs. But many of these studies approach the problem in the wrong way, according to new research from the University of Notre Dame. The study takes a broader view of these relationships and asks the question: Do boards generally get it right? The answer, the researchers find, is yes.

“Do Boards and the Media Recognize Quality? An Assessment of CEO Contextual Quality Using Pay, Dismissal, Awards, and Linguistics” is forthcoming in the Academy of Management Journal from Timothy Hubbard, assistant professor of strategic management at Notre Dame’s Mendoza College of Business, along with Cole Short from Pepperdine University.Boards of directors are responsible for the monitoring, rewarding and sanctioning of CEOs, while the media also plays an important role in corporate governance by distilling and disseminating key information about firms and their leaders.“

We find that boards of directors and the media do accurately reward CEOs based on their performance,” Hubbard said. “Higher-performing CEOs earn more, are dismissed less and receive more CEO media awards.”

Boards of directors and the media generally ‘get it right’ in rewarding CEOs based on performance, study shows | News | Notre Dame News | University of Notre Dame

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