P.hd Interactions in Corporate Governance: Research Report

Internal Code: MAS5934

Research Report

Scenario: The research in the topic of interactions between the CEO and board members is aimed at examining relationships, if any, between their interactions and corporate performance. The problem to be addressed in this study is to determine whether there is a relationship between the interactions between the CEO and board members, corporate performance, and stock prices. Interactions involve trust and trust is defined as the psychological state regarding positive expectations (Rosseau et al., 1998). There have been many studies on the effects of corporate governance, but virtually none on whether interactions between the CEO and board members predict corporate performance and stock prices. Interactions involve trust that requires a high level of confidence in predicting outcomes which, in turn, affect the cooperation between the CEO, board members, and management (McKnight et al., 1998; Westphal, 1999). When the board members trust the CEO, the CEO is more inclined to ask for guidance from the board necessitating positive interactions (Westphal, 1999). CEOs and board members will need to change their relationships and interactions from passive or hostile to positive and cooperative (Das & Teng, 2001). Antagonistic or negative interactions between the CEO and board members may lead to conflict but there is no proof that the interactions predict corporate performance and there may be no correlation (Das & Teng, 2001).