The effects of social ties and internal busyness of independent committee members on the advising role of boards of directors

The two primary responsibilities of boards of directors are advising and monitoring management. Yet, corporate governance research has predominantly concentrated on agency theory and the monitoring role of the board. Additionally, most studies that examine the work performed by boards' committees do so by examining each committee in isolation, ignoring the interplay between different committees. This dissertation, comprised of two essays, examines the differential association of board characteristics with outcomes that relate to the monitoring as well as the advising role of the board. Additionally, I examine the responsibilities of multiple committees, and the consequences of serving on multiple committees on firm value.;The first essay examines, in a common sample, how social ties (constructed from social networks) between management and independent directors affect the responsibilities of both the compensation and the audit committees. Consistent with Agency Theory, I find that social ties between executives and independent directors that serve on the compensation committee are associated with higher CEO compensation. In contrast, I find that social ties between executives and independent directors that serve on the audit committee are associated with higher quality financial reports and higher quality internal controls. This association is consistent with the collaborative board model and the theory of friendly boards that predict that social factors, such as trust and friendship, may encourage rather than obstruct board involvement and effectiveness in administering public companies.;The second essay examines the association of the internal busyness of boards with firm value. In my sample period, boards of public companies are required to have three committees (audit, compensation and nomination), composed entirely of independent board members. Complex committee work in the current environment and fewer board members who can serve on these committees could increase the likelihood that independent directors will not be able to effectively perform their committee work as well as allocate sufficient time to their strategic responsibilities. I find that firms with internally busy boards, those in which the majority of independent directors serve on two or more committees, are associated with lower firm value as measured by Tobin's Q.