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What Do Boards Really Do? Evidence from Minutes of Board Meetings

Miriam Schwartz-Ziv

Michigan State University

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

March 4, 2012

Journal of Financial Economics (JFE), Forthcoming

We analyze a unique database from a sample of real-world boardrooms – minutes of board meetings and board-committee meetings of eleven business companies for which the Israeli government holds a substantial equity interest. We use these data to evaluate the underlying assumptions and predictions of models of boards of directors. These models generally fall into two categories: “managerial models” that assume boards play a direct role in managing the firm, and “supervisory models” that assume that boards monitor top management but do not make business decisions themselves. Consistent with the supervisory models, our minutes-based data suggest that boards spend most of their time monitoring management: approximately two-thirds of the issues boards discussed were of a supervisory nature, they were presented with only a single option in 99% of the issues discussed, and they disagreed with the CEO only 2.5% of the time. Nevertheless, at times boards do play a managerial role: Boards requested to receive further information or an update for 8% of the issues discussed, and they took an initiative with respect to 8.1% of them. In 63% of the meetings, boards took at least one of these actions or did not vote in line with the CEO. Taken together our results suggest that boards can be characterized as active monitors.

Number of Pages in PDF File: 45

Keywords: boards of directors, minutes, supervisory models, managerial models

JEL Classification: G30, L20

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Date posted: October 10, 2011 ; Last revised: November 5, 2013

Suggested Citation

Schwartz-Ziv, Miriam and Weisbach, Michael S., What Do Boards Really Do? Evidence from Minutes of Board Meetings (March 4, 2012). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1940433 or http://dx.doi.org/10.2139/ssrn.1940433

Contact Information

Miriam Schwartz-Ziv
Michigan State University ( email )
315 Eppley Center
East Lansing, MI MICHIGAN 48824-1122
United States
8573127793 (Phone)
8573127793 (Fax)
HOME PAGE: http://miriamschwartzziv.wix.com/mysite
Michael S. Weisbach (Contact Author)
Ohio State University (OSU) - Department of Finance ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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