Resources or Power? Implications of Social Networks on Compensation and Firm Performance

By Joanne Horton, Yuval Millo, George Serafeim. 2012

211 citations recorded by the source corpus.

Using a sample of 4,278 listed UK firms, we construct a social network of directorship-interlocks that comprises 31,495 directors. We use social capital theory and techniques developed in social network analysis to measure a director's connectedness and investigate whether this connectedness is associated with their compensation level and their firms overall performance. We find connectedness is positively associated with compensation and with the firm's future performance. The results do not support the view that executive and outside directors use their connections to extract economic rents. Rather the company compensates these individuals for the resources these better connections provide to the firm.

Subfields: Accounting, Sociology and Political Science, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/80fe0136e71fa2717146a15e549383b964d6b17e

Citations in the corpus

• Is Busy Really Busy? Board Governance Revisited (2013, unknown): “Horton et al. (2012), using methods of social network analysis to investigate whether directors’ social networks provide valuable resources to their firms, find”
• Boardroom Centrality and Firm Performance (2013, unknown): “Our paper complements the findings of Horton et al. (2012) but differs along a several important dimensions.”
• Director Networks and Takeovers (2013, unknown): “Renneboog and Zhang (2011) and Horton, Millo and Serafeim (2012) demonstrate that a CEO’s direct and indirect connections affect his power and his information-collection value, which is reflected in a higher remuneration.”