Impact of foreign directors on board meeting frequency |
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| Institution: | 1. University of Colorado Colorado Springs, Colorado Springs, CO, 80918;2. Illinois State University, 420 State Farm Hall of Business, Normal, IL, 61790, USA;3. Illinois State University, 328 State Farm Hall of Business, Normal, IL 61790, USA;1. Odette School of Business, University of Windsor, Windsor, ON N9B 3P4, Canada;2. Ted Rogers School of Management, Ryerson University, Toronto, ON M5B 2K3, Canada;1. College of Business and Economics, University of Wisconsin Whitewater, Hyland Hall, Room 4518, 800 West Main Street, Whitewater, WI 53190, USA;2. Sawyer Business School, Suffolk University, 8 Ashburton Place, Boston, MA 02108, USA;3. NOVA School of Business and Economics, Universidade Nova de Lisboa, Campus de Campolide, 1099-032 Lisboa, Portugal;1. Mays Business School, Texas A & M University, College Station, TX 77843, USA;2. Faculty of Business and Commerce, Kansai University, 3-3-35 Yamate-cho, Suita-shi, Osaka 564-8680, Japan |
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| Abstract: | We find that UK firms are increasingly having fewer board meetings mainly because of the significant increase in the proportion of foreign non-executive directors on the board. The combination of low meeting frequency and the presence of foreign non-executive directors is correlated with lower total shareholder returns and increases the agency conflicts through excess compensation of the CEO and chairman, which are not related to firm value creation. Our results suggest that a trade-off between increased board diversity coupled with reduced monitoring through fewer meetings, weakens the internal governance mechanism, reduces the advisory role benefits of foreign non-executive directors who are likely to possess international expertise, and significantly exacerbate agency conflicts. |
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