Is Busy Really Busy? Board Governance Revisited
WHU - Otto Beisheim School of Management
Inga van den Bongard
University of Mannheim - Finance Area
University of Bonn
September 30, 2013
Forthcoming Journal of Business Finance & Accounting
We investigate the relationship between firm governance and the board’s position in the social network of directors. Using a sample of 133 German firms over the four-year period from 2003 to 2006, we find that firms with intensely connected supervisory boards (1) are associated with lower firm performance, and (2) pay their executives significantly more. We interpret these results as evidence of poor monitoring in firms with directors who are more embedded in the social network. In both cases, simple measures for busy directors that were used by other studies in the past fail to show any significant pattern. The findings suggest that the quality and structural position of additional board seats may play a bigger role than simply the number of board appointments.
Number of Pages in PDF File: 42
Keywords: Director Network, Busy Board, Agency Theory, Executive Compensation
JEL Classification: G30, G38
Date posted: March 14, 2010 ; Last revised: September 30, 2013
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