Board Committees in Corporate Governance: A Cross‐Disciplinary Review and Agenda for the Future

Abstract

The importance of board committees – specialized subgroups that exist to perform many of the board's most critical functions, such as setting executive compensation, identifying potential board members, and overseeing financial reporting – has grown over time due to increased legal requirements and greater complexity of the environment in which firms operate. This has resulted in a large body of work examining board committees across the accounting, finance, and management disciplines. However, this research has developed rather independently within each discipline, preventing scholars and practitioners from developing a comprehensive understanding of board committees. To address this issue, we conduct a comprehensive review of the literature that: 1) summarizes and synthesizes antecedents and outcomes associated with board committees in publicly‐traded firms in English common law countries; and 2) offers a critical analysis of existing research, providing recommendations for advancements and new directions in board committee research.

Signaling a successor? A theoretical and empirical analysis of the executive compensation‐chief executive officer succession relationship

“…We argue that CEO–HPE pay disparity signals the likelihood that the board will choose an outside CEO successor; however, signal reliability may be affected by signaler characteristics (Connelly et al, 2011). A key characteristic of boards is their use of committees to address structural constraints and enhance information processing (Kolev, Wangrow, Barker, & Schepker, 2019). The board's compensation committee is responsible for ensuring executives are effectively (Conyon & Peck, 1998) and equitably compensated (Glass Lewis, 2012).…”

How to Lead the Board of Directors to a Sustainable Development of Business with the CSR Committees

“…According to authors who embrace the agency theory [3,4], the BoDs effectiveness depends on the ability by the board to control the agency problems guaranteeing better corporate performance, in the short as well as the long term. The difficulty by the BoDs to perform this fiduciary duty [59] has led some scholars to focus on the BoDs committees as potential sources for solving some deficiencies of the full corporate board [60]. Other authors refer to legitimacy theory [31] emphasizing the disclosure effects of the establishment of CSR committee for corporate legitimation to operate [49][50][51][52][53] or for the obtaining of sustainability reporting assurance [61,62].…”

“…Kolev et al [60] suggest studying unexplored areas about the BoDs committees, and revisit the topic with different approaches and theories. This paper suggests us to complete the existing approach embracing also the resource based theory [32][33][34] and the institutional theory [28][29][30][31], not considering the CSR committees as determinants of dependent variables (performance, disclosure, stakeholder engagement, etc.)…”

Board design and governance failures at peer firms

“…Put differently, while it may be beneficial in some cases to add directors with prior audit committee experience, it is not always beneficial. Kolev et al (2019, p. 1177) acknowledged how board turnover could “alter committee dynamics and functioning.” In our setting, if departing directors who lack audit experience are replaced with directors who are attuned to audit‐related issues, the previous mix of director perspectives could become skewed in favor of the audit committee. Given that individuals who are drawn to accounting careers may be more “prevention‐focused” compared to others, an emphasis on risk avoidance may be helpful in some contexts, but not necessarily beneficial in others.…”

“…In this study, we explore how the structure of board committees enables boards to take substantive—rather than merely symbolic—action to improve monitoring and meaningfully improve the future performance of the firm. Going beyond the traditional conception of the board as a unitary entity, a growing body of research argues that board committees represent the locus of decision‐making for the board (Brandes, Dharwadkar, & Suh, 2016; Kolev, Wangrow, Barker, & Schepker, 2019; Spira & Bender, 2004). However, despite the significant role of board committees, limited research addresses the potential implications of board committee structure.…”