Is more always better? The cost of board committees
Type
conference paper
Date Issued
2024
Author(s)
Abstract
The number of board committees has been steadily increasing over the past decade with boards adding new board committees such as technology, sustainability, finance, or strategy committees. Prior research has mostly focused on specialized committees in isolation, but we know little about the potential trade-offs of establishing an increasing number of board committees and its aggregate effects on organizational outcomes. Building upon the organizational structure literature and attention-based view, this study argues that an increasing number of board committees reduces a firm’s strategic uniqueness and ultimately, economic value creation. These effects are mainly driven by board committees’ attention focus on monitoring and limited diversity, which both discourage the deviation from peers to go unique ways with the firm’s strategy. We further explore two contextualized conditions, lower diversity in board committees and the presence of specialized strategy committee, which moderate the relationships. Analysis of a sample of S&P 1500 firms for the period of 2005 – 2021 largely supports our theoretical arguments.
HSG Classification
contribution to scientific community
Event Title
SMS 44th Annual Conference
Event Location
Istanbul, Turkey