INTRODUCTION The relative manage of corporate boards of directors through the whole extent of management has long been a enslave of theoretical analysis and debate in the organization theory.

INTRODUCTION

The relative manage of corporate boards of directors through the whole extent of management has long been a enslave of theoretical analysis and debate in the organization theory, economics, and management literatures (eg Herman, 1981; Fama and Jensen 1983; Mizruchi, 1983; Vance, 1983) A central question is whether boards are an effective management have the direction of mechanism (Fame and Jensen, 1983) or whether they are a "management tool" (Pfeffer 1972: 219) a rubber stamp for management initiatives (Herman, 1981) and many times surrender to management their major domain of decision-making authority, which includes the right to hire, fire, and compensate top management (Vance, 1983; Zajac, 1990)

While a variety of factors may facilitate management command over the board, the chief executive officer's (CEO's) dominance through the director selection process has repeatedly been considered a primary source of management check (Mace, 1971; Pfeffer, 1972; Kosnik, 1987) Bacon and Brown (1975: 28) conclud that "by and large, the chief executive reign overs who will come on the board while he is in power." More not long ago in one of the not many large-sample surveys of Fortune 500 directors, Lorsch and Maclver (1989: 21) reported that boards frequently have only limited influence from one side of to the other the new director nomination proces Finally, Wade, O'Reilly, and Chandratat (1990: 593) have hinted that CEOs enhance their influence through the whole extent of the board by appointing outside directors "sympathetic to [their] desires." While this view looks plausible, it raises several issues that require additional research attention. First, there is true little large-sample, empirical evidence regarding CEOs' part in the selection of of the present day directors. Second, the theoretical basis for assuming that lately appointed outside directors are more likely to be sympathetic to the desires of CEO is not in addition fully understood. The present studious mood seeks to address both of these issues by dint of showing how CEO control athwart the selection of new directors can increase following compliance among board members. Specifically, we tender that a combination of social psychological and sociopolitical factors lead CEO and existing board members to favor recently made known directors who are demographically similar to them and that the relative influence of CEO and existing boards will predict who is more likely to realize their respective preferences

The cogitation then addresses an important and tangible potential inference of increased demographic similarity between the CEO and the board for board decision making: whether increased similarity follows in a more generous of the same height and mix of compensation in CEOs' contracts. The application of mind links sociopolitical and social psychological perspectives forward organizational governance and tests hypotheses forward the antecedents and consequences of increased demographic similarity using longitudinal data forward new director characteristics and change in CEO compensation among 413 Fortune/Forbes 500 companies from 1986 to 1991

Demographic Similarity between the CEO and recent Directors

Social psychological studies onward performance evaluation and hiring practices consistently find bias in evaluation decisions in which the parties are demographically similar. In experimental and field research in succession hiring decisions, studies have demonstrated a positive relationship between applicant-rarer similarity and the perceived quality of the applicant (Baskett, 1973; Wexley and Nemeroff 1974) Additional evidence moves that similarity frequently enhances interpersonal attraction (Byrne Clore, and Worchel, 1966; Byrne 1971) Early interpretations of these findings invoked a reinforcement pattern arguing that similarity provides mutual reinforcement or "consensual validation" of each individual's beliefs (Byrne CIore, and Worchel, 1966: 223) thus enhancing interpersonal attraction and producing bias in evaluation decisions.

More not long ago theorists have used self-categorization theory (Tajfel and gymnast 1986; Turner, 1987) to explain the social psychological consequences of demographic similarity (Jackson, Stone, and Alvarez, 1992; Tsui, Egan, and O'Reilly, 1992) From this perspective, nation derive self-esteem and self-identity from perceived cluster membership. Given that demographic similarity provides a salient basis for cluster membership (Tsui, Egan, and O'Reilly, 1992) race may favor (e.g., prefer to hire) demographically similar individuals. Alternatively, populace may seek to construct or maintain homogeneous disposes in order to increase the salience of form into groups membership, thus maintaining or enhancing their serf-esteem and identity. This argument is consistent with the reinforcement perspective discussed above. Thus, according to the two the similarity-attraction principle and self-categorization theory, incumbent CEO should present demographically similar individuals for positions onward the board.

These social psychological mechanisms can be quite powerful. Research has consistently shown that minimal categorizations (i.e., assemblage categorizations based on irrelevant criteria) are sufficient to breed in-group bias, or discrimination toward in-group members (Tajfel and gymnast 1986; Messick and Mackie, 1989) Thus bias can be found even when CEOs strive to evaluate candidates forward the basis of objective qualifications. CEO may also favor similar board candidates for sociopolitical reasons. For instance, by the agency of deliberately identifying or promoting commonalty with similar philosophies on strategy and administration, CEO can subtly enhance board support for their initiatives and decisions or minimize the risk of dissension. Advocates of board reform have set forthed concern over this potentiality, because a CEO could "use [his or her dominion government over the nomination process] to prefer board members who, at the real least, are not antagonistic to what he/she selects to do" (Bacon and Brown 1975: 29)