Independent Director Networks and Executive Perquisite Consumption——“Collusion” or “Coordination” in Governance?

ABSTRACT

Prior research documents that the network of independent directors brings abundant resources and information advantages. Does it raise the possibility of executives engaging in rent-seeking? This paper investigates the specific impact of the independent director network on executive perquisite consumption in China. The results show that the more substantial the network of independent directors is, the greater the degree of executive perquisite consumption. Different ownership types result in different mechanisms; director network centrality primarily increases the entertainment component of executive perquisite consumption in SOEs, implying “cooperation in governance” and exhibiting inverted U-shaped nonlinear features; director network centrality increases the supplementary component of monetary compensation for executive perquisite consumption in nSOEs, illustrating “coordination in governance.” Moreover, the “Eight Rules” and intense external supervision effectively restrain “collusion” of SOEs.

KEYWORDS:

• Independent director
• network centrality
• executive perquisite consumption
• collusion
• coordination

Disclosure statement

No potential conflict of interest was reported by the author(s).

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/1540496X.2022.2072202.

Notes

1. For the details of the model, see the supplementary document.

2. For real examples of “Collusion” in SOEs and “coordination” in nSOEs, see the supplementary document.

3. For specific approach, see the supplementary document.

4. For details of the model, see the supplementary document.

5. For details of further test logic, see the supplementary document.

6. We further test the Nonlinear influence of independent director networks and executive perquisite consumption, the supplementary document.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71372206,71672152]; Special Project of Education and Teaching Reform in Central Universities: Case Study of Corporate Governance Behavior in the Background of Big Data [2021YJG033]; Tianfu Cultural Research and Cultural Creation Project in 2021 [TYB202112]; Program for New Century Excellent Talents in University [NCET-13-0963].