Audit committee directors could also lose positions on other boards because
of loss in reputation as an effective monitor. In addition to the preceding
arguments, loss in other board positions also requires that the market for
directors attribute the failure to poor oversight, use the information to infer
directors’ abilities, and penalize the director. However, the penalty may not
manifest itself if the director has a track record of performance from other
positions (e.g., CEO or director of another company). Alternatively, CEOs
may prefer lax monitoring and find poor monitors attractive as candidates
for their boards (Shivdasani and Yermack [1999]).
Audit committee directors could also lose positions on other boards becauseof loss in reputation as an effective monitor. In addition to the precedingarguments, loss in other board positions also requires that the market fordirectors attribute the failure to poor oversight, use the information to inferdirectors’ abilities, and penalize the director. However, the penalty may notmanifest itself if the director has a track record of performance from otherpositions (e.g., CEO or director of another company). Alternatively, CEOsmay prefer lax monitoring and find poor monitors attractive as candidatesfor their boards (Shivdasani and Yermack [1999]).
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