Politicians in the Boardroom : Is It a Convenient Burden?

The paper analyzes the governance of the corporation when politicians hold board positions. Specifically, we study whether former politicians have different probabilities of holding relevant positions on boards of directors and delegated committees compared to other directors. Our results provide strong evidence against a lower probability and weak evidence of higher involvement. Our results suggest that when deciding on the positions held by their directors, firms estimate the quality of former politicians as corporate directors, in terms of monitoring and advising, to be similar to that of other directors. This quality is also corroborated, especially when politicians serve as independent directors, by studying whether their presence affects board performance in terms of CEO turnover control, executive director compensation, audit qualifications, and earnings management. Only when politicians serve as proprietary directors, representing large shareholders, we find some evidence of board performance deterioration, weak evidence when they serve as executive directors