Busy boards: How does the simultaneous participation of directors in multiple companies affect the board’s activities?

Abstract

We analyze the simultaneous participation of directors in multiple companies and its effects on boards’ roles and activities. By sitting in multiple boards, directors may face time scarcity and they may be too busy to adequately perform their tasks. Using survey questionnaires about board’s activities, which were directly sent to firms and their directors, this paper founds that busy boards are considered to be less active, less independent and less relevant to firms. Additionally, these boards are less committed to their responsibilities, such as hiring/firing the CEO and evaluating executives’ performance. They also do not monitor the firm’s risk properly. Our results present an insider perception of the board’s roles and activities, which can be useful for market regulators and policy-makers.