Executive turnover in the stock option backdating wave: The impact of social context

While boards are known to react to corporate misconduct by removing the executives responsible, little is known about whether the board's response is shaped by the firm's social context. Using the 2006 stock option backdating scandal, in which firms manipulated stock option grant dates, we examine the impact of two dimensions of social context—the pervasiveness of the misconduct and the media attention to the misconduct. We find that firms implicated later in the backdating scandal are less likely to experience executive turnover than those implicated earlier. We also find that the amount of media attention to backdating at the time a firm is implicated in the scandal increases the likelihood that the firm experiences executive turnover.Copyright © 2012 John Wiley & Sons, Ltd.