ABSTRACT
We examine the influence of multiple board directorships and boards’ committee memberships on three board supervisory outcomes: executive remuneration, external auditor opinion, and earnings management. The study uses a panel of 122 non-financial companies listed on the Spanish Stock Exchange over the period 2004–2011. Our results show that firms with busy directors offer low executive remuneration and present a low probability of a qualified audit opinion. Furthermore, the results indicate that firms with overlap directors exhibit a higher probability of receiving a qualified audit opinion. Additionally, we find evidence that the overcommitment effects of busy and overlap directors are more evident for large firms. Overall, our findings suggest that busy (overlap) directors are beneficial (detrimental) to the monitoring capability of the board in the Spanish context.
RESUMEN
Analizamos el efecto de ocupar múltiples puestos en consejos de administración y en comités de dichos consejos sobre el resultado de tres actividades supervisoras del consejo: la remuneración de los ejecutivos, la opinión del auditor externo y la manipulación de los resultados empresariales. El estudio utiliza una muestra de 122 empresas no financieras cotizadas en el mercado español durante el periodo 2004–2011. Nuestros resultados muestran que las empresas que cuentan con consejeros altamente ocupados ofrecen baja remuneración a sus directivos y presentan una baja probabilidad de recibir una opinión calificada por parte del auditor externo. Encontramos además evidencia de que los efectos de la sobre ocupación de los consejeros con múltiples puestos en consejo y comités se hacen más evidentes en empresas grandes. En conjunto nuestros resultados sugieren que los consejeros con múltiples puestos en consejos (comités) resultan beneficiosos (perjudiciales) para la capacidad supervisora de los consejos en el contexto español.
Acknowledgements
We wish to acknowledge financial support from the Spanish Ministry of Economy and Competitiveness (projects ECO2012-31772, SV-PA-13-ECOEMP-19 and MINECO-16-ECO2015-66184-R).
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1. See Cashman et al. (Citation2012) for evidence on the presence of busy directors on the US firms.
2. For instance, limitations established by the codes of good governance and governmental recommendations in the UK, Belgium, France, Denmark, the Netherlands, China, Pakistan, and India among others.
3. According to the 2013 Spencer Stuart US Board Index, 76% of S&P 500 companies limit other corporate directorships for their board members, while this percentage was only 27% in 2006.
4. Conyon, Fernandes, Ferreira, Matos, and Murphy (Citation2011) report for 2003 a 48% and 19% proportion of stock and option-based executive remuneration for the US and Spain, respectively.
5. The typical Spanish listed firm has a single ‘nomination and remuneration committee’ instead of two separate committees. Less than 1% of the observations in our sample presented two separated remuneration and nomination committees. Therefore, being a member of the audit and the remuneration committees means in fact an overlap between the committees controlling the three main tasks delegated to the board committees, namely audit remuneration and nomination.