This articleexamines how a director’s social capital might affect his behavior, the board’sperformance, and corporate governance, as well as the potential normativeimplications of the director’s social network. We argue that the quality ofboard performance could be improved where the social network closure within theboard is high and there are many non-redundant contacts beyond the board.Network closure can improve trust and collaboration within a board, whileexternal contacts may benefit a company with more diverse sources ofinformation. Moreover, different network positioning leads to the inequality ofsocial capital for directors. With more social capital, a director is morelikely to be powerful and influential on the other directors on the board. Regardingthe fulfillment of their monitory function, we suggest that independentdirectors would be unlikely to compromise their monitory liability when theyhave more social capital on the board than the managerial directors. Wedemonstrate our theory with an analysis of corporate boards of companies listedin Hong Kong. Although it is not easy to incorporate social network analysisinto legislation or corporate governance code, our theory may further theunderstanding of the function and effectiveness of different board structuresand provide some insights into the future selection of directors by a companywithin an existing legal framework.
social network, corporate governance, family firm, independent director, centrality
Internet Law | Social Media
The Brooklyn Journal of Corporate, Financial and Commercial Law
Brooklyn Law School
NIU, Zihan and CHEN, Christopher C. H..
Social capital of directors and corporate governance: A social network analysis. (2017). The Brooklyn Journal of Corporate, Financial and Commercial Law. 11, (2), 343-376. Research Collection School Of Law.
Available at: http://ink.library.smu.edu.sg/sol_research/2218
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