Corporate Governance and Corporate Illegality: A Study of Board Structure and Design

• In Event: Understanding and Addressing Corporate and White-Collar Crime

Abstract

Corporations' Boards of Directors do many things to steer, guide, pilot, and monitor companies in order to enhance companies' performance, including but not limited to companies' ethicality. Put more succinctly, according to the Cadbury Report (1992), “corporate governance is the system by which companies are directed and controlled.” Yet, despite their Boards, there are occurrences of corporate offending. In this paper, we investigate whether certain Board-characteristics are more likely than others to minimize this frequency. Specifically, we examine whether fewer incidents of corporate offending occur in companies whose Boards are comprised of more (rather than fewer): (1) women and minorities; (2) members with years of education, years of executive-level experience, and/or years on the Board; (3) members who are "independent" (i.e., not on interlocking Boards), and/or (4) members on committees engaged in financial oversight and social responsibility and if these Board characteristics also have interactive effects with each other on corporate offending? To examine these questions, our study utilizes within firm analysis of a panel of 3000 publicly traded companies coded for -- not only their Boards' characteristics, but also environmental incidents, fraud, bribery, anti-competitive behavior associated with investigations that occurred 1996-2013.

Authors

• Sally S. Simpson, University of Maryland

• Miranda A. Galvin, University of Maryland

• Maria Cristina Layana, University of Maryland at College Park

• Hueun Lee, University of Maryland

• Debra Shapiro, University of Maryland

• Christine Beckman, University of Maryland

• Gerald S. Martin, American University