Corporate Elite Networks and Governance Changes in the 1980s

Abstract

Changes in corporate governance practices can be analyzed by linking the adaptations of individual firms to the structures of the networks in which firms' decision makers are embedded. Network structures determine the speed of adaptation and ultimate patterns of prevalence of governance practices by exposing a firm to particular role models and standards of appropriateness. The authors compare the spreads of two governance innovations adopted in response to the 1980s takeover wave: poison pills (which spread rapidly through a board‐to‐board diffusion process) and golden parachutes (which spread slowly through geographic proximity). The study closes with a discussion of networks as links between individual adaptation and collective structures.