Money & Business
Flattery Will Get You Everywhere
What matters more on a corporate board: competence or conformity? After polling 760 outside directors at 300 U.S. companies, James Westphal of the University of Michigan's Ross School of Business and Ithai Stern of Northwestern's Kellogg School of Management find that directors can improve their odds of gaining other board appointments by providing good advice to CEOs. But flattering fellow board members works much better. In Flattery Will Get You Everywhere (Especially If You Are a Male Caucasian): How Ingratiation, Boardroom Behavior, and Demographic Minority Status Affect Additional Board Appointments at U.S. Companies, appearing in the Academy of Management Journal, the authors find that white men, in particular, can increase their chances of earning another board seat by avoiding nitty-gritty corporate governance—monitoring senior managers, say—while women and minorities limit their prospects when they act the same way.
Old-Boy Networks Aren't Boffo
It's not what you know but who you know. Or is it? Researchers from the University of Toronto and the University of Maryland's Robert H. Smith School of Business aren't so sure. In Social Structure and Exchange: Self-Confirming Dynamics in Hollywood, appearing in the Administrative Science Quarterly, the authors studied how relationships between Hollywood film distributors and production teams affect box-office returns. As expected, they found plenty of mutual back-scratching. Movies whose principals had worked together had much bigger budgets, including more for advertising, than teams with no prior relations. On the face of it, this system seems lucrative: Teams that had worked together enjoyed 53 percent higher box office sales than those that had not. After taking the higher spending into account, though, the authors found those productions actually netted 26 percent less, almost $5 million, than movies made by first-timers. "If you don't look outside your network," says coauthor David Waguespack, an assistant professor at Maryland, "you may be limiting your options."
CEOs: Who Pays the Piper?
It's no secret: Some CEOs get paid a boatload. Whether they're worth it is a matter of hot debate. Researchers from Rutgers University, Penn State University, and the Stanford Graduate School of Business examined how CEOs' skyrocketing salaries affect their underlings. In Overpaid CEOs and Underpaid Managers: Fairness and Executive Compensation, published in Organization Science, the authors studied close to 20,000 employees at 122 large U.S. companies from 1981 through 1985. Their finding: The greater the inequity between CEO and worker pay, the higher the turnover among managers.
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This story appears in the June 25, 2007 print edition of U.S. News & World Report.