Posted: 19 Aug 2015 Last revised: 19 Oct 2016
Date Written: September 1, 2016
We document and analyze board committee structures utilizing a novel dataset containing full board committee membership for over 6,000 firms. Board committees provide benefits (specialization, efficiency, and accountability benefits) and costs (information segregation). Consistent with these benefits and costs, we find that committee activity increases with firm size, the proportion of outside directors, board tenure and size, and public information available to outside directors. Moreover, boards allocate directors in ways to alleviate information segregation through multi-committee directors. Specifically, multi-committee directors tend to serve on related committees and be outside directors with more expertise and experience. Also, busy directors are less likely to serve on multiple committees, possibly to avoid being overloaded.
Keywords: corporate governance, board of directors, board committees, specialization, accountability, information segregation, overloaded directors, multi-committee directors, Sarbanes-Oxley Act
JEL Classification: G3, M4
Suggested Citation: Suggested Citation
By Kevin Murphy
By Alex Edmans