Managing reputation in the boardroom

The reputational perspective on boards of directors lends a number of insights to the corporate governance literature which clarifies and explains outcomes which are counter to those using an agency based perspective. The theoretical perspective developed in this work suggests that recent heightened scrutiny on boards has increased the likelihood that outside directors will act to in ways to protect their reputations. Reputation management actions by outside directors reveal that they may not be risk neutral but, in actuality, risk-averse executives seeking to protect their own reputations from potential damage arising as a result of their directorship duties. As a means of protecting their reputation, outside directors may therefore have a vested interest in creating celebrity CEOs.