Board design and governance failures at peer firms

Research Summary Our study introduces board committees as a crucial determinant of actions. We examine how directors who structurally link different committees—referred to multi-committee (MCDs)—explain why some actions are merely symbolic while others more substantive. As baseline, we argue that boards in general respond financial restatements at peer firms by symbolically appointing new relatively inexperienced and unlikely have substantive impact. In contrast, with audit–nomination MCDs likely take the action prior experience necessary reduce risk their own future restatement. combine qualitative interviews causal identification strategy using an original dataset covering Russell 3000 from 2001 2014. Managerial Committees play central role carry out governance responsibilities. This shows assigning multiple can improve performance under certain conditions. Specifically, when external events focus attention on board's monitoring role, presence (MCDs) audit nomination is associated subsequent appointment experienced reduction likelihood lawsuits. Because these specific configurations implications for effectiveness, recommend leaders be deliberate they allocate committee assignments treat structure intentional organizational design choice meaningfully outcomes.