Analyzing Ineffective Corporate Governance: Director Busyness and Board Committee Memberships

50 Pages Posted: 20 May 2008

See all articles by Pornsit Jiraporn

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Manohar Singh

Willamette University - Atkinson Graduate School of Management

Chun I. Lee

Loyola Marymount University - Department of Finance and Computer Information Systems

Date Written: April 28, 2008

Abstract

The benefits and costs of directors holding multiple board seats continue to be debated in the literature. We contribute to the debate by examining whether holding multiple outside board seats compromises directors' ability to effectively perform their monitoring duties. Analyzing over 40,000 observations of individual director data across more than 1,400 firms, we report that, by and large, individuals holding more outside directorships serve on fewer board committees. The relation, however, appears to be non-linear and U-shaped indicating some support for both the busyness and the reputation hypotheses. In addition, we find that holding more outside board seats decreases the likelihood of a board member being on a greater number of work-heavy and specialized committees such as compensation and audit committees. The findings substantiate evidence (Akhigbe and Martin 2006) on value relevance of board committee structures. Additional analysis of committee memberships suggests that women and ethnic minorities are placed on more board committees. In addition, directors on smaller and independent boards serve on more committees. Finally, it appears that the Sarbanes-Oxley Act had material impact on the association between the number of multiple board seats and the committee memberships.

Keywords: Sarbanes Oxley, multiple directorships, board committees, corporate governance

JEL Classification: G32, G34, G38

Suggested Citation

Jiraporn, Pornsit and Singh, Manohar and Lee, Chun I., Analyzing Ineffective Corporate Governance: Director Busyness and Board Committee Memberships (April 28, 2008). Available at SSRN: https://ssrn.com/abstract=1133584 or http://dx.doi.org/10.2139/ssrn.1133584

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Manohar Singh (Contact Author)

Willamette University - Atkinson Graduate School of Management ( email )

900 State Street
Salem, OR 97301
United States

Chun I. Lee

Loyola Marymount University - Department of Finance and Computer Information Systems ( email )

Los Angeles, CA 90045
United States

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