18613: Mitigating CEO Deception: Uncovering the Critical Role of Attorney-Directors and Their Experience (session 25735)

Corporate governance research has long examined how board composition impacts firm outcomes, but less attention has been paid to how specific director expertise influences CEO behavior. This study investigates how attorney-directors affect CEO deception, and how attorney-directors' internal and external social capital moderates this relationship. Using a sample of S&P 1500 firms from 2008-2016, we find that the presence of attorney-directors on corporate boards generally reduces CEO deception. However, this effect is moderated by attorney-directors' social capital. Higher levels of external social capital (connections across different firms) strengthen attorney directors' ability to curb CEO deception, while higher internal social capital (tenure at the focal firm) weakens it. The combination of high external and low internal social capital is most effective in mitigating CEO deception. We supplement our main analysis with attorney-director interviews and board meeting transcript data to further explore the mechanisms behind these relationships. Our findings contribute to research on board capital, corporate governance, and CEO misconduct by revealing the nuanced effects of director expertise and social capital on monitoring outcomes.

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