Do board chairs matter? The influence of board chairs on firm performance

• Published date: 01 June 2017
• DOI: http://doi.org/10.1002/smj.2587
• Author: Markus A. Fitza,Michael C. Withers
• Date: 01 June 2017

Strategic Management Journal

Strat. Mgmt. J.,38: 1343–1355 (2017)

Published online EarlyView 2 November2016 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/smj.2587

Received 12 February 2016;Final revisionreceived 13 September 2016

DO BOARD CHAIRS MATTER? THE INFLUENCE

OF BOARD CHAIRS ON FIRM PERFORMANCE

MICHAEL C. WITHERS1,*and MARKUS A. FITZA1,2

1Department of Management, Mays Business School, Texas A&M University,

College Station, Texas, U.S.A.

2Faculty of Business and Law, The University of Newcastle, Callaghan, New South

Wales, Australia

Research summary: We use a variance decomposition methodology to assess the degreeto which

board chairs may inuence their companies’ performance. To isolate the board chair effect, we

focus on rms in which the CEO and board chair positions are separated. Using a U.S. sample

of 6,290 rm-year observations representing 1,828 board chairs in 308 different industries, our

resultsindicate that the board chair effect is substantial at about nine percent. Drawing on resource

dependency theory, we also theorize and show how this board chair effect is contingent on the

task environment in which rms operate. Our results add to the literature examining the role

and inuence of board chairs and the context in which chairs may have a greater impact on

performance.

Managerial summary: Following institutional and regulatorychanges, more rms are separating

the CEO and board chair positions. With an increasing number of individuals separate from the

CEO serving as board chairs, a critical question becomes: What inuence do these separate

board chairs have on rm performance? Prior research suggests that separate board chairs can

provideimportant resources —including advice and counsel, legitimacy,information linkages, and

preferential access to external commitments and support—to their CEOs, other top managers,

and overall rms. In turn, who the board chair is and the individual’s ability (or lack thereof) to

provide these resourcesmay have a signicant impact on rm performance. Offering support for

this perspective, we nd that separate board chairs explain ninepercent of the variance in rm

performance. Copyright © 2016 John Wiley & Sons, Ltd.

INTRODUCTION

Research has long considered the performance

inuence of the upper echelons (Finkelstein,

Hambrick, and Cannella, 2009), and in particular,

the chief executive ofcer (CEO) (e.g., Ahn etal.,

Keywords: board chairs; strategic leadership; corporate

governance; rm performance; variance decomposition

*Correspondence to: Michael C. Withers, Department of

Management, Mays Business School, Texas A&M Univer-

sity, 4221 TAMU College Station, TX 77843-4221, U.S.A.

E-mail: mwithers@mays.tamu.edu

Corrections made on 2/22/2017, after rst online publication: Non

signicant p values had been calculated wrongly and have now

been corrected. This has no effect on the general ndings of the

paper. Additionally, an afliation was added for author Markus

Fitza.

Copyright © 2016 John Wiley & Sons, Ltd.

2009; Hambrick and Quigley, 2014; Lieberson

and O’Connor, 1972; Mackey, 2008; Quigley

and Hambrick, 2015; Thomas, 1988; Wasserman,

Nohria, and Anand, 2001). As Hambrick (2007:

334) explains, “to understand …why [rms]

perform the way they do, we must consider [ …]

their top executives.” From this perspective, exec-

utives shape and inuence strategy formulation

and implementation (Hambrick and Mason, 1984),

which ultimately affect rm performance (Finkel-

stein et al., 2009). Following such arguments,

studies have considered the CEO effect on rm

performance using variance decomposition (e.g.,

Crossland and Hambrick, 2011; Fitza, 2014; Ham-

brick and Quigley, 2014; Mackey, 2008; Quigley

and Hambrick, 2015). These studies generally