such a director was included or not. Once the classification is made, the following alternative measures of board composition
are determined for each of the three years under consideration: (a) total number of outside directors to board size
(OUTSIDERS TO SIZE); (b) percentage of outside directors to inside directors (OUTSIDERS TO INSIDERS); and (c)
percentage of inside directors to board size (INSIDERS TO SIZE).
For every outside director and the CEO, the number of years in the position is determined from the biographical
description provided in the Form 20-F. Thus, the following two tenure measures are calculated: 1) total years of CEO in that
position (CEO TENURE), and 2) the aggregate average tenure of outside directors (OUTSIDERS TENURE).
In addition, for every outside director and the CEO, the share of equity owned was established to calculate: 1)
percentage of CEO ownership (CEO OWNERSHIP), and 2) percentage of outside directors’ ownership (OUTSIDERS
OWNERSHIP).
Finally, the number of interlocking directorates (INTERLOCKING) on a board was determined by reading the
bibliography or personal description
3
of each member. An individual serving on the board of another company that is part of
the grupo will be considered as having an interlocking directorate.
Control variables are included in the models to account for differences in company size, industry, age, dual-class
shares, and country. To control for size, a continuous variable (COMPANY SIZE) is created using the natural log of total
employees. Industry dummies were created based on the Standard Industrial Classification (SIC) code of each. The age of
the company (LN_AGE) is a continuous variable calculated from the date of establishment of each firm. A dummy variable
(SHARE DUALITY) controls whether or not the company issues dual-class shares.
Descriptive Statistics
Table 1 summarizes the descriptive statistics for the 269 observations that comprise the whole sample as well as
separated by country (for all years combined). On average, LA companies have nine members on their board of directors, of
whom eight are insiders. Note that 40.5 percent of the observations had no outside directors serving on the board, indicating
companies dominated and controlled by families. Mexican companies tend to have larger boards, 11 members on average, in
comparison with their counterparts in Brazil and Chile, with an average of eight members.
// TABLE 1 ABOUT HERE //
The CEOs in the sample have served in their position for eight years in comparison with less than three years (2.68
years) for outside directors. The tenure of both CEOs (12.9 years) and outsider board members (3.9 years) from Mexico is
longer than those from either Brazil (5.8 and 1.6 years) or Chile (5.0 and 2.3 years) for CEOs and outsiders, respectively.
The CEO is also the Chairman of the board in 19 percent of the observations. This contradicts the profile in the
Convention