The magical effect of putting a famous face on a company's board

Gerald Ford was a particularly enthusiastic collector of boardroom seats after he left the White House. While on the board of American Express he stunned his fellow directors by asking Harvey Golub, the chief executive at the time, to explain the difference between “equity” and “revenue”, according to Vicky Ward’s new book on Lehman Brothers, “The Devil’s Casino”. According to “Reaching for the Stars: The Appointment of Celebrities to Corporate Boards”, a new study by four American-based economists, simply announcing that a celebrity is joining a board gives the company’s share price a boost. Disney’s share price jumped by 4.2% on the day Mr Poitier was appointed. But, for the more than 700 celebrity director appointments (out of over 70,000 board appointments in all) that the study examines during 1985-2006, the firms’ shares continued to outperform significantly over the subsequent one, two and three years.