Board task performance: An exploration of micro‐ and macro‐level determinants of board effectiveness

Abstract

This paper addresses recent calls to narrow the micro–macro gap in management research (Bamberger, 2008), by incorporating a macro-level context variable (country) in exploring micro-level determinants of board effectiveness. Following the integrated model proposed by Forbes and Milliken (1999), we identify three board processes as micro-level determinants of board effectiveness. Specifically, we focus on effort norms, cognitive conflicts and the use of knowledge and skills as determinants of board control and advisory task performance. Further, we consider how two different institutional settings influence board tasks, and how the context moderates the relationship between processes and tasks. Our hypotheses are tested on a survey-based dataset of 535 medium-sized and large industrial firms in Italy and Norway, which are considered to substantially differ along legal and cultural dimensions. The findings show that: (i) Board processes have a larger potential than demographic variables to explain board task performance; (ii) board task performance differs significantly between boards operating in different contexts; and (iii) national context moderates the relationships between board processes and board task performance. Copyright © 2010 John Wiley & Sons, Ltd.

The remuneration of independent directors in the UK and Italy: An empirical analysis based on agency theory

“…Comparing institutional settings characterized by such diversity in corporate governance practices should enhance the potential generalizability of the findings, by allowing account to be taken of the potential variation existing in governance practices in firms that operate in highly developed countries (e.g., Minichilli, Zattoni, Nielsen & Huse 2012). Italy is representative of the Latin civil law based 'insider-oriented' corporate governance system, while the UK is an example of the AngloAmerican market-based outsider-oriented common law system (Weimer & Pape, 1999).…”

Improving corporate performance by enhancing team dynamics at the board level

“…TIQ is the heart of our model, and the critical 'intervening process' that determines the success or failure of the board as a team, and therefore their ability to generate measurable profitability enhancement, demonstrated by the relationship TIQ has with TTP (0.77, P<0.01), TP (0.66, P<0.01) and directly Greenwald and Stiglitz (1994): the reduction of information asymmetry between those who 'make decisions (agents) and the theoretical beneficiaries of those decisions (principals)' is a way to optimize value creation (Greenwald and Stiglitz, 1994). Boards are primarily 'decisionmaking groups composed mostly of outsiders who bring substantial independence at the price of lower inside knowledge of the firm and its strategies' (Minichilli et al, 2012). According to the most recent survey of board directors conducted by Cloyd et al (2012), 97.8 per cent of boards are engaged in an evaluation process; however, the focus of the evaluation is on individual directors, and not the board as a team (Cloyd et al, 2012).…”

“…The inquiry into the impact that boards of directors have on their organizations began over 150 years ago (Smith, 1863) and continues to be studied today (Minichilli et al, 2012). Hundreds of articles have been written to try to capture the 'mystery' of the boardroom, directors and their impact on the successful management of the firm (Zahra and Pearce, 1989;Gabrielsson and Huse, 2004;Finegold et al, 2007;Hambrick et al, 2008;Huse et al, 2011).…”

“…Confounding the lack of clarity on board-level antecedent relationships to firm-level outcomes is the recognition that most research conducted employs secondarysource data or 'easily available data and the use of standardized methods' (Gabrielsson and Huse, 2004), preempting efforts to gather primary data on the subject. Of the hundreds of articles written about board governance since 1990, only 8 per cent address director performance from a behavioral perspective (Huse et al, 2011), and of these only a few have produced original survey data for their quantitative analyses (Minichilli et al, 2012). For all these reasonsthe preponderance of theoretical frameworks, difficulty in accessing primary data and defining the most appropriate unit of analysis -scholars refer to the board as a 'black box' (Pettigrew and McNulty, 1995;Leblanc and Schwartz, 2007;Neill and Dulewicz, 2010) and scholarly works have not yet succeeded in lifting the shroud of boardroom mystery.…”

“…As no board member is likely to possess the full complement of information and knowledge necessary to achieve desired goals, then working as a team permits greater productivity than can be achieved by individual efforts' (Gabrielsson et al, 2007). To best observe the behaviors that represent this concept, we need to understand different aspects of board performance ranging from how directors perform as a team, to how well directors are able to respond to contextual and cultural differences (Earley and Mosakowski, 2004) that define each board environment (board culture), to the intervening processes or the dynamic of the relationships of the board directors (Minichilli et al, 2012) and how they impact resulting board-level outcomes of TP and TTP. TP is a measure of a team's 'collective perceived capability of working together to achieve tasks' (Collins and Parker, 2010).…”