The role of the board of directors : perceptions of managerial elites

We highlight how directors and senior managers perceive the roles of a board to involve overseeing risk and compliance, strategy, governance, developing the CEO and senior management and managing stakeholders. We find that managers and directors perceive board effectiveness as linked to different combinations of these roles and that there appear to be differences in perceptions between different types of firms. We conclude that clarity around the board’s role set is critical to furthering the corporate governance research agenda, and that the relationship between board roles and perceived board effectiveness differs between managers and directors.

The emerging role of the Board of Directors in enterprise business technology governance

In an increasingly business technology (BT) dependent world, the impact of the extraordinary changes brought about by the nexus of mobile and cloud technologies, social media and big data is increasingly being felt in the board room. As leaders of enterprises of every type and size, board directors can no longer afford to ignore, delegate or avoid BT-related decisions. Competitive, financial and reputational risk is increased if boards fail to recognize their role in governing technology as an asset and in removing barriers to improving enterprise business technology governance (EBTG). Directors’ awareness of the need for EBTG is increasing. However, industry research shows that board level willingness to rectify the gap between awareness and action is very low or non-existent. This literature review-based research identifies barriers to EBTG effectiveness. It provides a practical starting point for board analysis. We offer four outcomes that boards might focus on to ensure the organizations they govern are not left behind by those led by the upcoming new breed of technology-savvy leaders. Most extant research looks backward for examples, examining data pre-2010, the time when a tipping point in the personal and business use of multimedia and mobile-internet devices significantly deepened the impacts of the identified nexus technology forces, and began rapidly changing the way many businesses engage with their customers, employees and stakeholders. We situate our work amidst these nexus forces, discuss the board’s role in EBTG in this context, and modernize current definitions of enterprise technology governance. The primary limitation faced is the lack of scholarly research relating to EBTG in the rapidly changing digital economy. Although we have used recent (2011 - 2013) industry surveys, the volume of these surveys and congruence across them is significant in terms of levels of increased awareness and calls for increased board attention and competency in EBTG and strategic information use. Where possible we have used scholarly research to illustrate or discuss industry findings.

The role of the board of directors in ensuring a culture of integrity

Corporate scandals are as old as the corporate form itself. Consider, for example, the controversies surrounding the role of one of the first modern corporations, the British East India Company, in the Bengal famine of 1770 and in the Chinese opium trade. Yet it is the increasing scale and scope of unethical acts carried out by individuals in the name, and interests, of corporations that continue to be concerning. Recent revelations surrounding the extent of bribery and covert surveillance used by News Corporation journalists in its British operations continue to shock the world and undermine confidence in that organiszation and journalists in general. Yet despite the systemic nature of many of these unethical activities, corporate leaders generally plead ignorance when transgressions come to light. During the enquity into the News Corporation scandal, Rupert Murdoch, the CEO and chairman, rejected the assertion that he was ultimately 'responsible for this whole fiasco' (House of Commons, 2011, Q.230). Instead, like many corporate leaders before him, Murdoch placed blame on the employees within the newspaper. His responses poses an increasingly important question: Do corporate leaders bear responsibility for the conduct of individuals within a corporation and, if so, why?

Enterprise business technology governance: A validation of three technology-governance competencies for boards of directors

The competent leadership and governance of digital transformation needs to involve the board of directors. The reported lack of such capability in boards is becoming a pressing issue. Underpinning leadership in such transformation are the competencies to effectively govern Enterprise Technology (ETG). In this paper we take the position that ETG competencies are essential in boards because competent enterprise business technology governance has been shown to contribute to increased revenue, profit, and returns. We report the industry validation processes of a set of three board-of-director competencies needed for effective ETG related to strategy and planning; investment and risk; and, innovation and value creation. We conclude that gaps in board ETG competence remain.

Enterprise technology governance: New information and technology core competencies for boards of directors

Boards of directors have legal and ethical responsibilities to be competent. Yet, in a world where business models and whole sectors are being disrupted by rapid information and technology change, a majority of directors lack IT governance knowledge and skills. Individual IT competency and collective board Enterprise Technology Governance capability is a global problem. Without capability, boards are potentially flying blind, and risk is increased and opportunities to lead and govern digital transformation lost. To address this capability gap, this research provides the first multi-industry validated Enterprise Technology Governance competency set for use in board evaluation, recruitment and professional development.

Do board contacts matter? : an analysis of the relationship between boards of directors’ ties and the performance of Australia’s largest companies.

Boards of directors are thought to provide access to a wealth of knowledge and resources for the companies they serve, and are considered important to corporate governance. Under the Resource Based View (RBV) of the firm (Wernerfelt, 1984) boards are viewed as a strategic resource available to firms. As a consequence there has been a significant research effort aimed at establishing a link between board attributes and company performance. In this thesis I explore and extend the study of interlocking directorships (Mizruchi, 1996; Scott 1991a) by examining the links between directors’ opportunity networks and firm performance. Specifically, I use resource dependence theory (Pfeffer & Salancik, 1978) and social capital theory (Burt, 1980b; Coleman, 1988) as the basis for a new measure of a board’s opportunity network. I contend that both directors’ formal company ties and their social ties determine a director’s opportunity network through which they are able to access and mobilise resources for their firms. This approach is based on recent studies that suggest the measurement of interlocks at the director level, rather than at the firm level, may be a more reliable indicator of this phenomenon. This research uses publicly available data drawn from Australia’s top-105 listed companies and their directors in 1999. I employ Social Network Analysis (SNA) (Scott, 1991b) using the UCINET software to analyse the individual director’s formal and social networks. SNA is used to measure a the number of ties a director has to other directors in the top-105 company director network at both one and two degrees of separation, that is, direct ties and indirect (or ‘friend of a friend’) ties. These individual measures of director connectedness are aggregated to produce a board-level network metric for comparison with measures of a firm’s performance using multiple regression analysis. Performance is measured with accounting-based and market-based measures. Findings indicate that better-connected boards are associated with higher market-based company performance (measured by Tobin’s q). However, weaker and mostly unreliable associations were found for accounting-based performance measure ROA. Furthermore, formal (or corporate) network ties are a stronger predictor of market performance than total network ties (comprising social and corporate ties). Similarly, strong ties (connectedness at degree-1) are better predictors of performance than weak ties (connectedness at degree-2). My research makes four contributions to the literature on director interlocks. First, it extends a new way of measuring a board’s opportunity network based on the director rather than the company as the unit of interlock. Second, it establishes evidence of a relationship between market-based measures of firm performance and the connectedness of that firm’s board. Third, it establishes that director’s formal corporate ties matter more to market-based firm performance than their social ties. Fourth, it establishes that director’s strong direct ties are more important to market-based performance than weak ties. The thesis concludes with implications for research and practice, including a more speculative interpretation of these results. In particular, I raise the possibility of reverse causality – that is networked directors seek to join high-performing companies. Thus, the relationship may be a result of symbolic action by companies seeking to increase the legitimacy of their firms rather than a reflection of the social capital available to the companies. This is an important consideration worthy of future investigation.

An observational analysis of the impact of board dynamics and directors’ participation on perceived board effectiveness

This study addresses calls for closer examination of board dynamics by offering an inside view of director interactions. Video-observations of three board meetings at each of two Australian corporations matched with director interviews and secondary data reveal distinct patterns of director interactions, their sources of variation and impact on perceived board effectiveness. Our data reveal that director interactions are multi-dimensional and dynamic: while group interactions across agenda items are similar, with a few directors leading the discussion, the contributing directors change across items. Moreover, directors’ inclusiveness and evenness of participation are associated with higher perceptions of board effectiveness. Last, we find that director interactions change with the nature of the items, board climate and board meeting arrangements. The study contributes to the literature by moving beyond the individual-level analysis of directors’ skills or independence, and offering a detailed view of how the joint group and individual dimensions of board dynamics affect board functioning.

Boards of directors' contribution to strategy : a literature review and research agenda

Research Question/Issue: Over the last four decades, research on the relationship between boards of directors and strategy has proliferated. Yet to date there is little theoretical and empirical agreement regarding the question of how boards of directors contribute to strategy. This review assesses the extant literature by highlighting emerging trends and identifying several avenues for future research. Research Findings/Results: Using a content-analysis of 150 articles published in 23 management journals up to 2007, we describe and analyze how research on boards of directors and strategy has evolved over time. We illustrate how topics, theories, settings, and sources of data interact and influence insights about board–strategy relationships during three specific periods. Theoretical Implications: Our study illustrates that research on boards of directors and strategy evolved from normative and structural approaches to behavioral and cognitive approaches. Our results encourage future studies to examine the impact of institutional and context-specific factors on the (expected) contribution of boards to strategy, and to apply alternative methods to fully capture the impact of board processes and dynamics on strategy making. Practical Implications: The increasing interest in boards of directors’ contribution to strategy echoes a movement towards more strategic involvement of boards of directors. However, best governance practices and the emphasis on board independence and control may hinder the board contribution to the strategic decision making. Our study invites investors and policy-makers to consider the requirements for an effective strategic task when they nominate board members and develop new regulations.

Board network characteristics and company performance in Sweden : the case of Gnosjö companies and their board members in southern Sweden

When managers of entrepreneurial companies typically talk about strategies, they first consider what products to make and secondly where to locate the business. The entrepreneurial companies locate in rural areas because of a wish to maintain a certain lifestyle, or because they can combine a resource available there with certain knowledge or interest that they have (Getz and Nilsson, 2004). In addition, many managers of entrepreneurial companies are confident in locating in a rural area, because there often is economic and social structure supportive of local corporate governance. The most central part of corporate governance is the board of directors. In an entrepreneurial company in a rural area, such members of boards are most likely to be individuals in dominant positions influential in the local economy.

The changing role of the supervisory board chairman: the case of the Netherlands (1997-2007)

Over the last ten years, the corporate governance context in most Western countries has changed as a result of irregularities, increased regulation, heightened societal expectations and shareholder activism. This paper examines the impact of the changing context on the role of chairmen of supervisory boards in the Netherlands. Based on a combination of thirty semi-structured interviews with board members of leading Dutch corporations and secondary data on the position of supervisory board chairmen at the top-100 listed firms in the Netherlands, the study reveals that board chairmen have become increasingly involved in both their control and service roles. While the demographics (i.e., age, tenure, gender and nationality) of chairmen have hardly changed over the last decade, chairmen are spending considerably more time on boards and committees, have reduced the number of board interlocks and have become more active on the forefront of the corporate governance discussion. The paper highlights several implications for scholars and practitioners.

Director independence or decision bias? An investigation of alternative sources of agency costs in board decision making

Research into boards traditionally focuses on independent monitoring of management, with studies focused on the effect of board independence on firm performance. This thesis aims to broaden the research tradition by consolidating prior research and investigating how agents may circumvent independent monitoring. Meta-analysis of previous board independence-firm performance studies indicated no systematic relationship between board independence and firm performance. Next, a series of experiments demonstrated that the presentation of recommendations to directors may bias decision making irrespective of other information presented and the independence of the decision maker. Together, results suggest that independence may be less important than the agent's motivation to misdirect the monitoring process.

Governance of enterprise Information and Technology: A new core competency for boards of directors

With the level of digital disruption that is affecting businesses around the globe, you might expect high levels of Governance of Enterprise Information and Technology (GEIT) capability within boards. Boards and their senior executives know technology is important. More than 90% of boards and senior executives currently identify technology as essential to their current businesses, and to their organization’s future. But as few as 16% have sufficient GEIT capability. Global Centre for Digital Business Transformation’s recent research contains strong indicators of the need for change. Despite board awareness of both the likelihood and impact of digital disruption, things digital are still not viewed as a board-level matter in 45% of companies. And, it’s not just the board. The lack of board attention to technology can be mirrored at senior executive level as well. When asked about their organization’s attitude towards digital disruption, 43% of executives said their business either did not recognise it as a priority or was not responding appropriately. A further 32% were taking a “follower” approach, a potentially risky move as we will explain. Given all the evidence that boards know information and technology (I&T***) is vital, that they understand the inevitably, impact and speed of digital change and disruption, why are so many boards dragging their heels? Ignoring I&T disruption and refusing to build capability at board level is nothing short of negligence. Too many boards risk flying blind without GEIT capability [2]. To help build decision quality and I&T governance capability, this research: • Confirms a pressing need to build individual competency and cumulative, across-board capability in governing I&T • Identifies six factors that have rapidly increased the need, risk and urgency • Finds that boards may risk not meeting their duty of care responsibilities when it comes to I&T oversight • Highlights barriers to building capability details three GEIT competencies that boards and executives can use for evaluation, selection, recruitment and professional development.

Leading Digital Transformation: Building Technology and Information Governance Capability in Boards of Directors and the C-Suite

Information and technology and its use in organisation transformation presents unprecedented opportunities and risks. Increasingly, the Governance of Enterprise Information and Technology (GEIT) competency in the board room and executive is needed. Whether your organization is small or large, public, private or not for profit or whether your industry is not considered high-tech, IT is impacting your sector – no exceptions. But there is a skill shortage in boards: GEIT capability is concerningly low. This capability is urgently needed across the board, including those directors who come from finance, legal, marketing, operations and HR backgrounds. Digital disruption also affects all occupations. Putting in place a vision will help ensure emergency responses will meet technology-related duty of care responsibilities. When GEIT-related forward thinking and planning is carried out at the same time that you put your business strategy and plan in place, your organization has a significantly increased chance of not only surviving, but thriving into the future. Those organizations that don’t build GEIT capability risk joining the growing list of once-leading firms left behind in the digital ‘cloud of smoke’. Those organizations that do will be better placed to reap the benefits and hedge against the risks of a digital world. This chapter provides actionable, research-based considerations and processes for boards to use, to build awareness, knowledge and skills in governing technology-related organization strategy, risk and value creation.