A network in today’s world can be seen as a social and professional. A social network today is as much important as a professional network and both of them contributes to the growth of a person. Similarly a director’s qualifications get contributed by his or her social as well as professional network.
It is very important to study networks because these are like building blocks or connecting bridges which not only help in the growth of a person as important and useful networks can be sought for help and recommendations but networks are also useful in sharing information, influence and even support for individual or combined growth.
For this reason, executives with a broad network tend to be highly valued as director nominees.1
Google is an example of a company with a well connected board. At the time of the company’s IPO in 2004, it shared director affiliations with many successful institutions including Apple, Cisco, eBay, Intel, and Yahoo! It was also connected to firms outside of the area, including Amazon and Wal-Mart.
Like every coin has two faces or everything has its pros as well as cons, networks are also not an exception. Inter-board connections have the potential to cause outcomes with negative effects that might impair economic value and reduce governance quality.
1. Spreading Bad Practices: Directors practicing one thing at a firm may bring it to other firms they are affiliated to. So the same practice that was having negative impact on one firm might get spread to others as well.
2. Spreading Bad Information: As we know that sharing of information can be very effectively done using networks, one might even use it to share bad information like information that is false in nature like false rumors.
3. Less efforts of a...
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... out that companies with a well-connected board have greater future operating performance and higher future stock price returns than companies whose boards are less connected.
These effects are most pronounced among companies that are newly formed, have high growth potential, or are in need of a turnaround. It can be concluded that “boardroom networks have an important and positive impact on the economic performance of a firm.”
Why This Matters
The negative effects of board interconnections include reduced independence, a culture of back scratching, and an “old boy network.” At the same time, it is important to understand that these connections can deliver tangible, positive value that benefits the organization and its stakeholders as board members’ professional backgrounds and network of connections contribute to governance quality and shareholder value creation.
Ralph Nader, Mark Green and Joel Seligman, in an excerpt from Taming the Giant Corporation (1976, found in Honest Work by Ciulla, Martin and Solomon), take the current role of the company board of directors and suggest changes that should be made to make the board to be efficient. They claim the current makeup of the board does not necessarily do justice to the company because “in nearly every large American business…there exists a management autocracy” (Nader, Green and Seligman, 1976, p.570). The main resolution they present is to make the board more democratic with the betterment of the company as its first priority. Currently the board no longer oversees operations, or elects top company executives and they are no longer involved in the business operations to the extent they should be. Nadar, Green and Seligman argue that that all of these things need to be changed. For a corporation so large to be successful there must be separation of powers just as there is in any current government system ( p.571). They claim this is the only and best way to success (Nader, Green and Seligman, 1976, p.570-571).
The corporation’s business is carried out by its management, under the direction of the Board of Directors. The Board, and each committee of the Board, has complete access to management. Also, the Board and committee member’s has access to independent advisors as each considers necessary or appropriate. Mallor, Barnes, Bowers, & Langvardt (2010) state that the Board of Directors also, issues shares, Adopts articles of merger or sha...
The Council of Institutional Investors (1998) documents that full-time directors should not serve on more than two other boards. The National Association of Corporate Directors (1996) suggests that full-time directors should not serve on more than three or four other boards. In contrast The Principles of Corporate Governance issued by The Business Roundtable (1997) believes that limits on the number of directorships are not required. Further a survey of directors of Fortune 500 companies by Korn/Ferry International (1998) shows that too many board appointments place an excessive burden on a director. Fifty-six percent of outside directors report that they declined an invitation to serve on an additional board, sharing the view that it is not feasible to serve too many boards. Because the directors in the survey believed that too many board appointments might distract them, thereby making them inefficient monitors. There is ample evidence that suggest the US market has efficient infrastructure and established institutions that has well-functioning capital, labor and product markets. The transaction cost theory proposed by Coase (1937) and Williamson (1985) suggests that the optimal structure of a firm depends on its institutional context . However, in emerging market
Social capital is about the worth of social networks, bonding similar people and bridging between diverse people, with norms of reciprocity. (Jenkins, 2002). The existence of a network or connections is necessary in order to maintain useful relationships that can provide material or symbolic profits. According to Bourdieu, every social class has a Habitus which is a set of unspoken rules, tastes and classifications.
The Board of Directors is consisted of 11 members: James M. Elliot, the Chairman of the Board, 3 inside members and 7 outside members. The economy is stable and profitable, but that also means a lot of competition in the market. This poses a great opportunity for the company to grow and gain more of the market share. The only foreseeable real threat that the company will face is new competitors in the market.
Grosser, T. J., Lopez-Kidwell, V., & Labianca, G. (2010). A social network analysis of positive and negative gossip in organizational life. Group & Organization Management, 35(2), 177-212. doi:10.1177/1059601109360391
Network: Is the value created by collaborating with others. We are connected now, and it becomes basic for companies to collaborate with each other, to gain processes with technology and information. For example, Boing Company is collaborating with General Electrics – that provide Boing with the plane motors- so Boing can innovate the product.
This paper will discuss the political frame. The political frame views companies as jungles and focuses on the powerful members in an organization who negotiate and influence others. The political frame also looks at the dynamics of alliances and opponents and how they interact.1
Each party plays his parts – Role of key players like owners, Board of directors and staffs
The use of the Internet has exploded in the past few decades, and the age of the user is swiftly declining as well (Greenfield, Patricia, and Zheng Yan). “The spread of Internet access has been described as nine times faster than that of radio, four times faster than the personal computer, and three times faster than television” (Shields, Margie, and Behrman 5). The Internet has woven itself into people’s daily lives and has really changed culture in numerous ways. It has helped make education more accessible, especially to those in developing countries. Specifically, it has brought life saving health practices and information to those who otherwise would have gone without it. Also, children who need extra help learning, like kids with special
For my independent study, I have created a network in my house. A network by definition are more than one computer that are linked together electronically via a protocol (common language) so the computers can communicate and share resources. This network improves the day-to-day life by adding value and usefulness to the computers. The processes and ideas that I have learned thru this experience can be applied directly into today’s rich electronic business environment.
To Begin to understand Social Network theory more deeply, it is important to understand some of the key concepts of the theory. One of the main concepts of this theory is identifying what a network means. A network can be defined as a set of relationships (Dunn, 1983). The simplest kind of network contains two objects, such as two people, and a relationship that links them together. For example, two people that know each other would ...
According to Carol Padgett (2012, 1), “companies are important part of our daily lives…in today’s economy, we are bound together through a myriad of relationships with companies”. The board of directors remain the highest echelon of management in any company. It is the “group of executive and non-executive directors which forms corporate strategy and is responsible for monitoring performance on the behalf of shareholders” (Padgett, 2012:1). Boards are clearly critical to the operation of companies and they are endowed with substantial power in the statute (Companies Act, 2014). The board is responsible for directing and steering the company. The board accomplishes this by business planning and risk management through proper corporate governance.
However, in recent years we've seen a variety of very successful business start-ups that are as a result of the reputation of the CEO. I am talking about “celebrity CEOs” here. When the success of such a business is basically attributed to the robust name of the CEOs, it is usually said to be in equilibrium with that of the company (Alva Group,
The internet as we all know is probably the most useful resource known to man in this day of age. Not only is the internet easy to access its easy to use. Nearly everyone owns a computer and nearly all of which have access to the internet. But isn't that a good thing? Millions of people having the ability to access and share all the information anybody could ever want.