What are the determinants of board committees?

This paper examines how firms assign directors with different backgrounds to board committees after the Sarbanes-Oxley Act of 2003. Firms can structure their committees either to maximize the directors' contribution or to avoid strong monitoring. We find that directors with longer tenures and multiple board seats tend to sit on more committees, and this relation is stronger in informationally opaque firms. Our results suggest that firms rely more on directors with within-firm experience and good reputation to make important decisions such as executive turnover and compensation. Closer scrutiny reveals that busy directors are less likely to be assigned to additional committees when they obtain new board seats. This counters the interpretation that firms make busy directors even busier to avoid monitoring. Overall, our findings support the hypothesis that firms structure their committees to minimize the impact of information asymmetry between the managers and the independent directors.