CEO Influence and Board Committee Structure

초록

This study examines the relationship between CEO influence and the board's voluntary use of committees that are not required by regulations. To borrow a framework from the organizational decision-making literature, boards of directors are multi-agent multi-task systems. Without an explicit hierarchy to impose a committee structure on directors, boards are decentralized systems, which potentially leads to fewer board committees due to directors’ aversion to heightened accountability (i.e., free-riding). We posit that the CEO's influence in the board can be a centralizing force in this decision-making process, thus encouraging the board to have more committees because the CEO benefits from the enhancement of its effectiveness through non-required committees that likely play advisory roles. Consistent with this prediction, we find CEO/chair duality, a proxy for CEO influence, to be positively associated with the use of non-required committees. This finding is more pronounced among the firms with lower levels of excess CEO compensation, which supports CEO influence working as a stewardship mechanism. Overall, our findings contribute to the literature by suggesting a potential channel that reflects advantages of insider control, which is a perspective that regulators often neglect.

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