Where the Work Gets Done – The Effects of Committee Composition on Firm Performance

Abstract

There is an emerging consensus that the work of the board is done in committees (Kolev, Wangrow, Barker III, & Schepker, 2019). There are different types of committees on boards with differing charges. Yet there is sparse evidence as to how and how well these committees work. Investigating board committees from an attention-based view (Ocasio, 1997), we argue that committee heterogeneity is a powerful means to focus director attention on the specific task of a committee. By differentiating between tasks where directors need to be able to broadly scan the environment for opportunities and board tasks where directors need a very domain specific kind of knowledge we argue that firms whose committee composition is reflective of the requirements of the committee’s task, where the attention of the members is appropriately focused, will see positive firm performance. Based on an analysis of board committees, our results suggest that committee heterogeneity has varying effects on firm performance depending on whether a committee is required to focus attention on one domain specific task or whether a committee needs to distribute attention widely to meet the requirements of broad and complex tasks.