# Disentangling Director Attributes: Human Capital versus Social Capital of Directors
## 2 Literature Review and Human and Social Capital Determinants
### Human Capital  
We next construct our human capital index by scoring directors between 0 and 2 on nine attributes. The scores are summed to form our human capital index (_HCI_), which has a maximum possible value of 18. The nine attributes we employ have been drawn from the director attribute literature. The first attribute is education, where we use a director's highest qualification, as a proxy for their level of education ([PERSON], 2001). We assign a director 2 if their highest level of education is a postgraduate degree, 1 for an undergraduate degree, and 0 for no degree. The next attribute is director experience based on the number of years a director has served on publicly listed boards ([PERSON] and [PERSON], 2013). A director scores 2 if they have four or more years' experience, 1 for one to three years' experience, and 0 for one year or no experience, similar to the approach of [PERSON] and [PERSON] (2013). A director in their first year on a board is assumed to have little board experience, and thus may not contribute strongly to a board, while a director with more than three years has served a full term as a director (three-year terms are normal in most countries), experiencing a full range of board activities. We also consider a director's expertise. Directors of large firms, as they are more complex, more publicly visible, and prestigious, are more likely to have dealt with a wide range of corporate issues ([PERSON] et al., 2013; [PERSON] et al., 2003), creating a set of transferrable skills ([PERSON] et al., 2013; [PERSON] et al., 2003). This attribute is measured by classifying directors based on the size of the firms a director currently serves, specifically the director of an NZX10 (top 10 listed firms) is assigned a 2, 1 for an NZX50 (top 50 listed firms), and 0 otherwise. CEOs are seen as bringing valuable skills and experiences to boards ([PERSON] et al., 2015; [PERSON] and [PERSON], 2012), although current CEOs are often constrained by their current time commitments. We consider a director's CEO experience, assigning a director with CEO experience at a public firm a 2, 1 for CEO experience at a private firm, and 0 for no CEO experience. CEOs of publicly listed firms have additional relevant experience compared to one of a private firm, because of dealing with additional responsibilities such as those relating to listing rules, and continuous disclosure rules. Individuals who have been CEOs for less than one year, and have no other prior CEO experience, are assigned a 0 as they have yet to build up a significant of managerial skill. International experience is an important attribute of the board to adequately deal with today's globalized business environment. We classify directors based on whether they have had international exposure; predominantly through sales, or having worked abroad ([PERSON] and [PERSON], 2005; [PERSON], 2014; [PERSON] et al., 2013; [PERSON] and [PERSON], 2014). We assign directors a score of 2 if they have international experience and 0 otherwise. We also consider a director's exposure to M&A deals based on the cumulative number of deals a director has been involved with. We assign a director a score of 2 if they have been involved with three or more deals, 1 for directors involved with one or two deals, and 0 for directors with no deal experience. Directors with either financial or legal acumen are attractive potential directors given that boards require members with these skills ([PERSON] et al., 2018; Equilar, 2016; [PERSON], 2017). We consider a director to have financial acumen if their main or secondary career is in the accounting or banking fields, or if they are a financial expert (see Appendix A for variable definitions). Directors who are or have been lawypers are deemed to have legal acumen. We assign a director a score of 2 if they have both financial and legal acumen, 1 for either financial or legal acumen, and 0 if they have no financial or legal acumen.