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      The Structure of Board Committees
      02 Nov 2016Working Paper Summaries

      The Structure of Board Committees

      by Kevin D. Chen and Andy Wu
      Despite the central role of boards in corporate governance, there has been relatively little understanding of their internal organization, specifically the structure of board committees. Using a dataset of over 6,000 firms, the authors find that committee activity, especially the number of committees, has been stable over time. Most of the familiar non-required board committees are rarely used. The majority of directors sit on multiple committees. The benefits and costs of a committee depend on its type. Overall, committees need to be more integrated into our understanding of corporate governance.
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      Author 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.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: October 2016
      • HBS Working Paper Number: 17-032
      • Faculty Unit(s): Strategy
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      Andy Wu
      Andy Wu
      Assistant Professor of Business Administration
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