Upshots of 'good' governance: When and how independent boards change the composition of top teams

In this paper, we propose that widely advocated and highly legitimized practices will trigger the adoption of other practices of a similar character within corporate elites. In particular, we advance that formal board independence, a widely advocated and highly legitimized practice of ‘good’ corporate governance will bring about greater visible diversity among the top management team (TMT). However, we suggest that these changes will not alter the underlying social makeup of the TMT, i.e., hiring across social group boundaries, unless it is to prevent CEO dominance. Our findings, based on a panel of large publicly-traded firms for the 1999-2005 period of time, provide support to our model. Contributions to research on corporate governance are discussed.

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