How symbolic action affects the media as a governance mechanism
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This dissertation examines the potential for the media to act as a corporate governance mechanism and suggests how corporate leaders, through the use of symbolic action, can influence the media’s ability to effectively enact this role. Specifically, I examine how media scrutiny may prompt firms to adopt governance structures that increase the structural independence of the board and thus, according to the prevailing agency logic of corporate governance, are thought to increase the board’s ability to monitor and control corporate leaders. However, the adoption of structurally independent boards may be largely symbolic wherein formal structural changes in board independence are made without increases in the social independence of the board. I argue that symbolic responses to scrutiny will meet the media’s expectations for proper governance and engender more positive subsequent evaluations in the media of the firm and its leaders. I conclude by showing why the effects of symbolic action on media coverage are important for a range of outcomes relevant to firms and CEOs including the likelihood of strategic change, CEO dismissal and compensation, and subsequent board appointments. By influencing the manner in which they and their firms are portrayed in the media, firm leaders may enhance their reputations in the press and garner personal benefits. Thus, while agency theory focuses on the media’s ability to curb agency costs, this study points out that because of the media’s susceptibility to symbolic action, the press may actually perpetuate agency costs in some cases. Longitudinal analysis of a sample of S&P 500 firms provides some support for these ideas.