Last to come and last to go? The complex role of gender and ethnicity in the reputational penalties for directors linked to corporate fraud

Ivana Naumovska*, Georg Wernicke, Edward J. Zajac

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Scopus citations

Abstract

Scholars have found consistent evidence that directors who served on boards of firms accused of misconduct face reputational penalties in the director labor market. While commonly interpreted in terms of an "ex post settling-up"process that penalizes directors for failing in their role as monitors of management, the fundamentally social basis of the director labor market suggests that the ex post settling-up process may also incorporate a resource-provisioning role for directors as conferrers of legitimacy. We analyze how growing socioeconomic pressures that aim to redress the longstanding underrepresentation of female and ethnic minority directors may lessen, for these sought-after directors, the penalties typically imposed by the labor market in the aftermath of corporate misconduct. Using a rich proprietary data set on financial misconduct and directors' demographic characteristics, we find strong support for our hypotheses regarding a possible "reputational immunity"effect. We also provide supplementary analyses demonstrating the specific mechanisms underlying our predictions, and establishing the robustness of the results to a variety of alternative explanations. We discuss the implications of our theoretical perspective and empirical findings for future research on corporate governance, corporate misconduct, and the duality of minority status as it relates to discriminatory outcomes in modern labor markets.

Original languageEnglish (US)
Pages (from-to)881-902
Number of pages22
JournalAcademy of Management Journal
Volume63
Issue number3
DOIs
StatePublished - Jul 2020

ASJC Scopus subject areas

  • Business and International Management
  • Business, Management and Accounting(all)
  • Strategy and Management
  • Management of Technology and Innovation

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