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The Structure of Board Committees

Posted: 19 Aug 2015 Last revised: 19 Oct 2016

Kevin D. Chen

University of Pennsylvania - Accounting Department

Andy Wu

Harvard Business School (Strategy Unit); University of Pennsylvania, The Wharton School

Date Written: September 1, 2016

Abstract

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

Chen, Kevin D. and Wu, Andy, The Structure of Board Committees (September 1, 2016). Available at SSRN: https://ssrn.com/abstract=2646016 or http://dx.doi.org/10.2139/ssrn.2646016

Kevin Chen

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104
United States

Andy Wu (Contact Author)

Harvard Business School (Strategy Unit) ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=871877

University of Pennsylvania, The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104
United States

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