Board Fiduciary Duty, Communication, and Compensation
研究了加强董事会受托责任规则在代理冲突和战略沟通并存时的意外后果，发现严格规则可能削弱董事会努力激励、降低公司总价值和整体福利，尤其在CEO代理冲突严重时。
This paper examines the consequences of tightening board fiduciary duty rules in a setting that combines agency frictions and strategic communication. A firm needs to tailor an investment decision (e.g., mergers and acquisitions) to the state of the world. The CEO is privately informed about the state but is an empire builder. The board can learn about the firm’s state through exerting a costly information gathering effort or through communication. In equilibrium, the board values communication more than the shareholders do. By granting the CEO a larger equity stake, the board fosters communication, and this reduces its need for costly information acquisition. Anticipating this, rational shareholders can adjust the board’s equity stake to boost its effort incentive. Surprisingly, the benefit to shareholders from stricter fiduciary duty rules is nonmonotonic in CEO agency conflicts and can diminish as the severity of agency conflict increases. Moreover, welfare analysis shows that strengthening fiduciary duty rules can weaken board effort incentives and reduce total equity value and overall welfare. Paradoxically, these efficiency losses occur when CEO agency conflicts are severe—the very situations in which stringent fiduciary duty rules are typically introduced to address such concerns. These findings suggest unintended consequences of strengthening board fiduciary duty rules and highlight the importance of taking boards as strategic, self-interested entities. This paper was accepted by Prof. Ranjani Krishnan, accounting.