Advisory Directors

We propose a measure of the advising capacity of corporate boards that focuses on the distribution of committee assignments. We then study the characteristics and impact of directors dedicated to providing strategic counsel to top management. We find that advisory directors possess professional expertise and experience most valuable to the CEO in strategic decision making: entrepreneurial background, CEO-level experience, advanced degrees, and longer board tenures. We also find that these directors are associated with better strategic outcomes. Acquisition returns are higher at companies with advisory directors while time to deal completion is shorter. Similarly, advisory directors are associated with increased and better-quality corporate innovation and higher firm value. The value effect is stronger when advising needs are high and when the CEO is less powerful and thus more amenable to board influence on strategy. We do not find that advisory directors diminish the effectiveness of board monitoring