DEFECTIONS FROM THE INNER CIRCLE - SOCIAL-EXCHANGE, RECIPROCITY, AND THE DIFFUSION OF BOARD INDEPENDENCE IN US CORPORATIONS

This study seeks to reconcile traditional sociological views of the co rporate board as an instrument of elite cohesion with recent evidence of greater board activism and control over top management. We propose that CEO-directors may typically support fellow CEOs by impeding incre ased board control over management but that CEO-directors may also fos ter this change if they have experienced it in their own corporation. Drawing on social exchange theory, we develop and test the argument th at these CEO-directors may experience a reversal in the basis for gene ralized social exchange with other top managers from one of deference and support to one of independence and control. Using data from a larg e sample of major U.S. corporations over a recent ten-year period, we show (1) how CEO-directors ''defect'' from the network of mutually sup portive corporate leaders, (2) how defections have diffused across org anizations and over time, and (3) how this has contributed to increase d board control, as measured by changes in board structure, diversific ation strategy, and contingent compensation. We also provide evidence that a social exchange perspective can explain the diffusion of these changes better than more conventional perspectives on network diffusio n that emphasize imitation or learning.