Governance and Social Responsibility : Assistant Professor Steven Boivie Examines CEO and Firm Performance
By Liz Warren-Pederson
Two new papers co-authored by Assistant Professor of Management Steven Boivie uncover novel facets of CEO and firm performance.
The first of the papers, out now in the Academy of Management Journal, finds a new remedy to the CEO agency problem. Instead of trying to design incentives and controls to keep corporate leaders acting in the best interest of the company, Boivie and his co-authors demonstrate that boards should try to hire leaders who strongly identify with the company itself.
“We were interested in how an internal psychological factor — how much a CEO’s self-concept is tied to a firm — might influence the extent to which that firm incurs agency cost,” Boivie said.
The result? “CEOs who have a self-image that overlaps with the firm will make better decisions for that firm,” Boivie said. “For example, when the firm’s performance is poor, they will take less compensation. They will refrain from using the corporate jet for personal use.”
The researchers estimate that 40 percent of CEOs see their identities tied closely to their firm and its image, and that common shareholder sticking points such as overcompensation and excessive perks are not issues in these firms. Further, these CEOs are self-regulating, and reduce the need for board supervision.
“CEOs who identify with the firm intentionally work for its best interests because helping the firm is tantamount to helping him or herself,” Boivie said.