Directors' Decision-Making Involvement on Corporate Boards

Abstract:     
Using the full set of committee memberships for the directors of Fortune 100 firms (which I collect from annual proxy statements), I introduce a measure to capture the extent of a director’s involvement in making decisions that affect corporate policy, and I provide evidence of substantial variation in directors’ decision-making power both within and across boards. I also show that considering the entire range of decision-making involvement can alter the implications of tests examining the link between board composition and corporate performance. Specifically, I find that the extent of affiliated directors’ committee involvement is substantially and negatively associated with firm value and subsequent operating performance, and I argue that incorporating these differences in decision-making power has important implications for studies in corporate governance.

Number of Pages in PDF File: 52

Keywords: committee involvement, board committees, board of directors

JEL Classification: G3, G34, G38

working papers series