This study examines the impact of multiple directorships, commonly known as “busy” boards, on wage differences between employees and top executives. Using a sample of 1500 large U.S. firms from 2011 to 2023, we estimate multiple regression models to analyze how director busyness affects the CEO–employee pay gap. We find multiple directorships are positively associated with a larger CEO–employee pay gap, suggesting busy boards face monitoring constraints that weaken oversight of executive compensation. This effect is more pronounced for busy outside directors than for busy inside directors. We further examine how different internal and external organizational factors affect the oversight capabilities of outside directors and show that organizations can mitigate the monitoring difficulties of busy outside directors in settings where local communities and corporate governance practices prioritize long-term goals. Finally, our results indicate that firms with busy outside directors often exhibit insufficient transparency regarding their environmental practices.
Sul et al. (Wed,) studied this question.