Analysis reveals lower firm performance in companies with non-CEO executives on outside boards, suggesting possible implications for governance.
We examine how non‐CEO executives (NCEs) serving on outside boards affect their focal firm performance. Firms with such NCEs exhibit lower return on asset (ROA) and profit margins than those without. These effects begin after board service starts, are not explained by busy boards or CEOs, and persist at least a year. The negative impact is monotonically increasing with the number of NCEs on external boards and the number of boards they join. Finally, we show that there may be some benefits to NCE board activity as the negative effects are mitigated somewhat when the NCEs sit on their own firm's board.
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Chowdhury et al. (2025) studied this question.
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