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What do Boards do? Evidence from Board Committee and Director Compensation Data

Renee B. Adams

University of New South Wales; Financial Research Network (FIRN); European Corporate Governance Institute (ECGI)

March 13, 2003

EFA 2005 Moscow Meetings Paper

This paper uses data on 1542 board committees and director compensation in a sample of 352 Fortune 500 companies in 1998 to analyze variation in board behavior. I use this data to quantify the amount of effort boards devote to their three different functions: monitoring, dealing with strategic issues and considering the interests of stakeholders. I show that boards appear to take their traditional oversight role seriously, since on average boards devote effort primarily to monitoring. However, there is a fair amount of variation across firms in the amount of effort boards devote to their different functions. In particular boards of larger firms and firms that face more uncertainty devote relatively less effort to monitoring, while boards of diversified firms devote relatively more effort to monitoring. Boards of larger, growing and older firms devote more effort to stakeholder interests on both an absolute and a relative basis. Finally, boards of growing firms devote relatively more effort to strategic issues.

Number of Pages in PDF File: 38

Keywords: Board of Directors; Committee, Compensation, Effort, Monitoring, Strategy, Stakeholder

JEL Classification: G30, G34, J31, J33, J44

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Date posted: September 2, 2005  

Suggested Citation

Adams, Renee B., What do Boards do? Evidence from Board Committee and Director Compensation Data (March 13, 2003). EFA 2005 Moscow Meetings Paper. Available at SSRN: http://ssrn.com/abstract=397401 or http://dx.doi.org/10.2139/ssrn.397401

Contact Information

Renée B. Adams (Contact Author)
University of New South Wales ( email )
Sydney, NSW 2052
+61(2)93854280 (Phone)

Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
HOME PAGE: http://www.firn.org.au

European Corporate Governance Institute (ECGI)
B-1050 Brussels
HOME PAGE: http://www.ecgi.org
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