Director ownership, corporate performance, and management turnover

One of the goals of the corporate governance movement has been to replace the current procedurally based duty of care with an equity-based model. For such an approach to be viable, a linkage between better director management monitoring and heightened board equity ownership must be demonstrated. This Article finds such a linkage empirically. The authors report that based on an examination of a substantial number of public companies, the greater the dollar value of the outside director equity ownership: (i) the better the company's overall performance, and (ii) the more likely in a poorly performing company that there will be a disciplinary-type CEO turnover.