Michael L. McDonald

Me or We: The Effects of CEO Organizational Identification on Agency Costs

The corporate governance literature on potential remedies for the agency problem has focused largely on external control mechanisms, especially board independence. We instead consider how an intern...

Helping Other CEOs Avoid Bad Press: Social Exchange and Impression Management Support among CEOs in Communications with Journalists

In this study, we examine the determinants and consequences of impression management (IM) support in communications between CEOs and journalists, whereby CEOs of other firms provide positive statements about a focal CEO’s leadership and strategy and/or external attributions for low performance at the focal CEO’s firm. Drawing from social exchange theory, our theoretical perspective suggests how IM support may result from norms of reciprocity among corporate leaders. We consider the potential for direct and generalized reciprocity in the provision of IM support, including generalized reciprocity in which CEOs who received IM support previously pay the support forward to another third-party CEO, and a second form of generalized reciprocity in which CEOs reciprocate IM support to fellow CEOs whom they believe have given similar support to other CEOs in the past. We also draw from the social psychological literature on persuasion to suggest why IM support for another CEO may have a more positive influence on the tenor of journalists’ coverage about the firm’s leadership than impression management by the CEO about his or her own leadership and strategy. We test our hypotheses with data from large and mid-sized public U.S. companies from 1999 to 2007, including original survey data from a large sample of CEOs and journalists. The results supported our hypotheses, and additional findings suggested that the apparent effects of impression management by leaders and staff about their own firms following a negative earnings surprise may be partially attributable to the effects of IM support.

Those Closest Wield the Sharpest Knife: How Ingratiation Leads to Resentment and Social Undermining of the CEO

Using survey data from CEOs and other top managers at large and mid-sized public companies in the U.S., as well as from journalists, we explore how ingratiation, a fundamental means of building and maintaining one’s social capital, may trigger behavior that damages the social capital of the person being ingratiated. Although ingratiation, such as flattery or opinion conformity, may elicit positive affect from its target, we suggest it can also elicit a specific form of negative affect toward the target, which in turn can trigger interpersonal harm-doing. Focusing on ingratiation by top managers toward the CEO, we find that ingratiating managers are likely to develop feelings of resentment toward the CEO and that ingratiation may be especially likely to elicit resentment among top managers when the CEO is a racial minority or a woman. We also find that negative affect from ingratiation can induce interpersonal behavior that has the potential to damage the social capital of the influence target, as feelings of resentment that result from ingratiatory behavior can trigger social undermining of the CEO in the manager’s communications with journalists.

Corporate Governance and Knowledge Management: How Board Independence May Increase CEO Paranoia, and Lead to Increased Top Management Team Homophily

What are the implications of changes in corporate governance for a firm’s ability to create and transfer knowledge? This study suggests that board changes ostensibly aimed at bolstering the monitoring role of governance may inadvertently, as a result of CEO social cognitions, undermine a firm’s knowledge management capabilities through increases in top management team (TMT) homophily. Our theory builds on the premise that the TMT is the information processing center of the firm in its relationship with the environment. We theorize how changes in board composition that increase the board’s social independence from CEOs may affect TMT member selection through symptoms of CEO non-clinical paranoia about their relations with the board. Our theory is tested with data from an original survey of CEOs and outside directors from 263 large- and medium-sized U.S. global corporations, together with archival data on board composition and management characteristics. We submit that CEOs manifesting non-clinical paranoia are more likely to appoint executives like themselves to the top team; and these new executives also have fewer ties to the board. Results suggest that social psychological cognitions among corporate leaders may lead to TMT homophily - that is, less diversity in top management teams, including diversity of social network ties. Such homophily has, in turn, been shown to stifle new knowledge creation, knowledge transfer, and ultimately, strategic change.