When Board Seats Pile Up, the CEO–Employee Pay Gap Widens
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A new HAPRI-affiliated study in the International Review of Economics & Finance finds that directors who sit on many boards at once are associated with a wider gap between what a firm pays its CEO and what it pays its typical employee. The effect is strongest for busy outside directors — the very people shareholders count on for independent oversight.
Context
Boards are the mechanism through which shareholders are supposed to hold executive pay in check. But a director's attention is finite, and in large listed firms the same experienced people are frequently recruited onto several boards at once. That practice — "busy" boards — is defended as a marker of quality and connections, and criticised as a recipe for thin, distracted monitoring.
Executive-to-worker pay ratios sit at the centre of that debate. The gap between the top of the pay scale and the shop floor has become a political and reputational issue as much as a governance one, and disclosure rules in the United States have made it visible. If board attention is what restrains pay at the top, then how that attention is spread across seats is a question with direct policy relevance.
Methods
The authors assemble a sample of 1500 large U.S. firms covering 2011 to 2023 and estimate multiple regression models linking director busyness — the number of directorships held — to the CEO–employee pay gap. They then separate busy outside directors from busy inside directors, and test whether internal and external organisational factors change how well outside directors are able to monitor.
Key findings
Holding multiple directorships is positively associated with a larger CEO–employee pay gap, consistent with busy boards facing monitoring constraints that weaken their oversight of executive compensation.
The pattern is sharper for busy outside directors than for busy inside directors — the independent monitors are the ones whose stretched attention shows up most in pay outcomes.
The constraint is not immovable: where local communities and a firm's corporate governance practices prioritise long-term goals, organisations can offset the monitoring difficulties that busy outside directors face.
Firms with busy outside directors also tend to show insufficient transparency about their environmental practices, suggesting the oversight shortfall extends beyond pay.
Keywords:
Busy Boards
Corporate Governance
Executive Compensation
CEO–Employee Pay Gap
Board Monitoring
Outside Directors
Link:
Citation:
Sul, H. K., Chung, C. Y., Vo, T. T., & Pham, H. (2026). Busy outside directors and CEO–employee pay gap. International Review of Economics & Finance, 110, 105629.
