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70 Brook. L. Rev. 1259 (2004-2005)
The Social Nature of Boards

handle is hein.journals/brklr70 and id is 1269 raw text is: The Social Nature of Boards- Rakesh Khuranal Katharina Pick' I. INTRODUCTION Still reeling from a series of high-profile and extremely costly corporate scandals involving dysfunctional board behavior, lawmakers and scholars are scrambling to make sense of the gaps in understanding that clearly exist in governance research. Inevitably, these scandals provoked a surfeit of Monday-morning quarterback explanations. Some argued that these problems should have been anticipated as the inevitable consequence of the proliferation of high-powered pay-for-performance plans.' Others talked about investors' misplaced faith in a firm's stock price as an indicator of corporate governance quality.2 Ironically, the same fields of finance and law that are now offering these retrospective judgments previously advocated increased stock option grants and an unyielding faith in the efficiency of the stock market.' © 2005 Rakesh Khurana & Katharina Pick. All Rights Reserved. Rakesh Khurana is an Associate Professor at Harvard Business School. He is also the author of SEARCHING FOR A CORPORATE SAVIOR: THE IRRATIONAL QUEST FOR CHARISMATIC CEOS (2002). Katharina Pick is a Ph.D. Candidate in Organizational Behavior at Harvard University. She is conducting dissertation research on the effect of role identities on the behavior of directors. Both authors would like to thank Professor Jay W. Lorsch for comments on an earlier version of this paper. 1 See L.A. BEBCHUK & J.M. FRIED, PAY WITHOUT PERFORMANCE: THE UNFULFILLED PROMISE OF ExECUTiVE COMPENSATION 159-62 (2004). 2 See Michael C. Jensen et al., Remuneration: Where We've Been, How We Got to Here, What are the Problems, and How to Fix Them (2004) 15-21 (unpublished manuscript, on file with author), available at http://papers.ssrn.com/sol3/papers.cfin? abstractid=561305. ' See, e.g., Anup Agrawal & Charles R. Knoeber, Firm Performance and Mechanisms to Control Agency Problems Between Managers and Shareholders, 31 J. 1259

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