Leadership Skills in Corporate Director Biographies: Substance or Impression Management?

ABSTRACT Research Issue How objective are corporations' disclosures of their board members' skills? Specifically, how changeable are characterizations of directors as possessing leadership skill in reaction to external pressure? Research Insights We mail letters to a quasi‐randomly selected half of publicly listed US companies, inquiring whether they have sufficient leadership skill on their boards, and analyze subsequent changes in leadership mentions in proxy filings. Company‐ and director‐level regressions across the population of US corporations do not show a treatment effect. Theoretical/Academic Implications Our study uses an innovative experimental design that can be adapted to other research contexts. Our analysis yields valuable insights for the literature on director skill disclosure. We find that companies assign legitimacy value to director leadership skill yet vary widely in whether, where, when, and how they disclose this skill in proxy statements. We also find that, irrespective of our treatment, some companies add leadership mentions symbolically, to otherwise unchanged contents. The incidence of these symbolic additions does not significantly differ between the nudged and control groups. This suggests that future research attempting an intervention with a similar design might influence companies' disclosure of director leadership skill if the nudging stakeholder has sufficient authority and communicates through a direct, impactful channel that elicits meaningful disclosure adjustments. Practitioner/Policy Implications Practitioners involved in the proxy voting process, particularly at proxy advisory and asset management firms, may want to tread with caution when using word‐count analyses of proxy filings, specifically when counting leadership mentions. Policymakers may consider clarifying thresholds for disclosure of ambiguous attributes such as “leadership.”