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

45 Pages Posted: 14 Oct 2011

See all articles by Miriam Schwartz-Ziv

Miriam Schwartz-Ziv

Hebrew University of Jerusalem - Department of Finance and Banking

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

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Date Written: October 2011

Abstract

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" assume boards play a direct role in managing the firm, and "supervisory models" 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: 67% of the issues they 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 3.3% of the time. In addition, managerial models describe boards at times as well: 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.

Suggested Citation

Schwartz-Ziv, Miriam and Weisbach, Michael S., What Do Boards Really Do? Evidence from Minutes of Board Meetings (October 2011). NBER Working Paper No. w17509, Available at SSRN: https://ssrn.com/abstract=1944007

Miriam Schwartz-Ziv (Contact Author)

Hebrew University of Jerusalem - Department of Finance and Banking ( email )

Mount Scopus
Jerusalem, 91905
Israel

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

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1000 Brussels
Belgium

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