Board Refreshment: Like a Breath of Fresh Air

• In Event: Gender and Diversity

Abstract

We develop a novel board refreshment index (BRI) predicated upon seven different director characteristics. For any given director characteristic, we document a refreshment whenever the change in board composition increases the participation of minorities relative to the dominant majority. Whereas the need for monitoring and the presence of longer tenured directors induces boards to seek further refreshment, more diverse boards are less likely to refresh. We also find that an elevation in board refreshment increases CEO turnover-performance sensitivity, pay-for-performance sensitivity, and pay-for-risk sensitivity. Findings suggest that board refreshment promotes more effective board monitoring as well as efficient managerial contracting.

Authors

• Bilal Al Dah, Kean University

• Mustafa Abdullah Dah, Lebanese American University

• Melissa Al Frye, University of Central Florida