Structural Holes, CEOs, and Informational Monopolies: The Missing Link in Corporate Governance (Symposium: Social Science and Corporate Misbehavior)
The theory set forth here does explain the phenomenon observed by Bhagat and Black. In Part I of this article, I will explain the significance of my theory to corporate law reform efforts. Parts II and III will explicate the underlying theory. Part IV will demonstrate how my hypotheses explain the direct *1320 relationship between increased board independence and CEO power, and Part V will discuss the extent to which managers a level or two below the CEO might also be in a structural position to manipulate both the board and the CEO.
Following this discussion, Part VI will address a second independent variable that might have an important magnifying effect on CEO power: the bureaucratic organization of the corporation itself. While corporate reformers have been advocating independent boards, important changes in corporate structure have taken place. Large public corporations, once rigidly hierarchical, have, at least in some industries (and sometimes within industries), substantially shifted to more horizontal management systems. This horizontal management structure magnifies the strength of the CEO, whether the board is an inside board or an independent one. Because this conclusion is still tentative, however, I reserve this discussion for the end of the article. Part VII will conclude with some possible directions for further research and reform.