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Are Directors Rewarded for Excellence? Evidence from Reputation Shocks and Career Outcomes

We examine how developing an individual reputation for excellence affects a director’s career outcomes in the labor market for boardroom talent. Using unique data on prestigious director awards, we find that individuals who experience very positive reputational shocks are typically rewarded with new board seats at firms that rank high in terms of size or public prestige. In addition, consistent with theories of career concerns and labor-market signaling, we find that these reputational effects are greater for younger directors and for non-overboarded directors. Estimation via instrumental variables supports a causal interpretation of the findings. Overall, our results provide new, clear-cut evidence of reputational rewards in the market for boardroom talent.