Small firm CEOs and outside directorships: tenure, demonstration and synergy effects

Abstract

We investigate the determinants of the number of outside directorships held by CEOs of small, unquoted companies. CEOs of growth orientated firm’s hold more outside directorships, as do CEOs of more complex firms. This reflects the need to acquire external resources and develop internal human capital. The evidence also supports CEO life‐cycle theories in that longer tenured CEOs hold more outside directorships. It is also likely that once a CEO has crossed the threshold of taking her first outside directorship (and many never do) then this sends a signal to other boards that the individual is now in the market for other directorships and of the requisite quality. Synergy effects were also evident in particular industries. On balance there was little evidence of perquisite consumption and some evidence that boards do have a disciplining role.