Events

Prof. Ivy Zhang
Professor of Accounting
School of Business
University of California, Riverside

Using employee-submitted reviews on Glassdoor.com, we examine whether employees’ assessments of CEOs inform the director labor market. We expect employees’ approval rates of the CEO, a rare individual rating provided by insiders, to convey unique information to the external labor market. Our findings indicate that CEOs with higher employee approval rates subsequently gain more independent directorships. The effect is not driven by Glassdoor ratings on other dimensions, such as business outlook or overall company ratings, and holds after controlling for firm performance and firm and CEO characteristics. This relation strengthens when outsiders face greater information asymmetry in evaluating CEOs, when firm performance is a noisier signal of CEO quality, or when employee ratings are more informative. We further show that firms appointing CEOs with higher employee ratings as independent directors experience a more positive stock price reaction to the appointments and a larger improvement in future financial performance, with the effect being concentrated among appointing firms where labor is a more critical input. Overall we provide new evidence on the role of social media postings by rank-andfile employees in informing the external director labor market.