Social Selection Mechanism in Corporate Governance Network

This paper investigates network structures that evolved as a result of the executive and non-executive directorship selection processes in a Danish corporate governance context. Primarily, the paper focuses on discussion of legitimacy of a board and top management selection processes that emerge on two fronts – supervisory board selection of cooperatives, and their choice of executive directors (top-management). The paper utilizes the exponential random graph models on Danish corporate governance data for the period of five years (2010-2014) to reveal network structures in order to estimate tendencies for the social selection processes. This method is applied to enable unfolding of a discussion on how different interests and scarce resources over preferable social
actors (team members) create network dynamics, and how legitimate those processes are. Findings show that corporate governance network in Denmark tends to evolve around the most active top-managers and supervisory board members, while homophily effect related to knowledge and experience of actors plays significant role only within the supervisory board level, while not in the network between supervisory board members and top-managers.