Influence Capital in Boards: a study of ex-bureaucrats in India

One of the important roles which firm boards play is the resource provision role. In this study, we examine influence capital, a specific form of resource provision on boards. Two categories of government officials, i.e., Politicians and Bureaucrats tend to be the major providers of influence capital. While firm connections to politicians as board members has been examined in prior literature, connections to bureaucrats (and ex-bureaucrats) has not received the same level of attention. This is despite a sharp increase in the appointment of bureaucrats in company boards in the last few years. We analyze and provide evidence that industry regulation and foreign corporate ownership are major organizational determinants of selection of bureaucrats as board members. Further, it was also imperative to understand the differences in selection of various categories of bureaucrats as board members. We examined and find that generalist bureaucrats are more sought after by firms than specialist bureaucrats, usually as independent directors. Overall, this study provides an important initial thrust for studying bureaucrat board members as providers of influence capital.