Politicians in disguise and financial experts on the board: Evidence from Spanish cajas

Abstract

This study offers insight into the role of board politicization on the Spanish cajas’ performance from a dual perspective. First, we analyze the effect of a new kind of political directors who occupy board seats as representatives of stakeholders outside the public administrations while maintaining a political affiliation. We call these “hidden” political directors as politicians in disguise. Second, we analyze how political interests can prevent directors with financial expertise from applying their knowledge to improve cajas’ performance. Using a sample of hand-collected data from 45 Spanish cajas, we find that politicians in disguise destroy value in the caja and that politically motivated financial experts on the board do not benefit cajas’ performance. JEL CLASSIFICATION: G34, G21, G28

Political directors and corporate social responsibility: Are political ideology and regional identity relevant?

“…In terms of political ties, we use the proportion of those representing local and regional governments or those affiliated with a political party (POLITICIAN) (Andres et al 2021). Regarding political ideology, we use the proportion of politicians linked to liberal political parties (LIBERAL).…”

“…For several reasons, these entities are especially interesting for testing our hypotheses. First, successive legislation gave public administrations the role of the dominant group in the cajas' governance system (García-Cestona and Surroca 2008; Andres et al 2021). In this way, the presence of directors with political connections was quantitatively important and explains why prior literature on cajas' governance has focused on the consequences of politicization, given its role as a key stakeholder.…”

“…In this way, the presence of directors with political connections was quantitatively important and explains why prior literature on cajas' governance has focused on the consequences of politicization, given its role as a key stakeholder. Most previous studies have considered the effects of politicization on cajas' performance (Azofra and Santamaría 2004; García-Meca and Sánchez-Ballesta 2014; Andres et al 2021), while few have analyzed its impact on CSR (e.g., López Iturriaga et al 2007).…”

“…Cajas are a specific type of entity, with peculiarities that make these relationships especially interesting to study. These entities are private but have no owners, such that legislation distributes control rights among several stakeholders, with those of public administrations being dominant (Andres et al 2021). In this study, therefore, we do not analyze independent directors with political ties, but rather directors who are representatives of public administrations.…”

“…Third, our study adds another piece to the puzzle of the performance of political directors in the governance of Spanish cajas. Most previous studies have focused on the effect of board politicization on cajas' performance (Azofra and Santamaría 2004;García-Meca and Sánchez-Ballesta 2014;Andres et al 2021), while few studies on CSR have been conducted. Finally, based on its results, our study provides guidelines for the configuration of the board of directors, emphasizing the importance of factors that extend beyond directors' independence or expertise.…”