New perspectives on board research: changing the research agenda

Abstract

Scholars and practitioners have recently devoted considerable attention to boards of directors, but far more research is needed. We still know little about how boards actually work and how their behavior may be improved to contribute to value creation. During more than two decades agency theory has been the dominant theory in studies about boards of directors. When relaxing some of the assumptions in agency theory several new pathways for new research arise. To present new perspectives on board research we follow in this essay some of the pathways arising from relaxing agency theory assumptions about complete contracts. Alternative theoretical approaches, research questions and methods are suggested

Improving corporate performance by enhancing team dynamics at the board level

“…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). When considering the perspectives employed in these inquiries, it is useful to review the different streams of literature on this topic -economic, behavioral, individual-based and team-based frameworksfrom which to observe and consider board characteristics and outcomes.…”

“…Another stream of research -the newest in the portfolio of approaches -is the use of behavioral theories to explain board actions and outcomes (Hambrick et al, 2008;Van Ees et al, 2009;Huse et al, 2011). These theories include some new and some old behavioral theories including identity theory (Ashforth and Mael, 1989), theory of planned behavior and reasoned action (Madden et al, 1992;Ajzen, 2002), and social networking theory (Granovetter, 1973), as well as various theories of the firm that have recently been applied to board behavior (Cyert and March, 1963;Grant, 1996;Rumelt, 1997;Slater, 1997) in framing and interpreting director actions and their impact on firm outcomes.…”

“…However, there have been calls from scholars to consider the board as a collective unit or the 'board as team' as the unit of analysis to try to better understand the impact of the board on corporate outcomes. This is reflected in the surge of recent work on teamwork in contexts as an empirical inquiry of the sparsely-researched link between board dynamics and governance (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.…”

“…Board performance has been at the center of modern corporate governance research for more than two decades, with the majority of inquiry relying exclusively on economic theories generating inconsistent and disappointing results (Bainbridge, 2010;Huse et al, 2011). Equally unsatisfactory is that most research has centered on the individual director as the unit of analysis instead of the board as a team, despite calls -since the early 2000s -for a focus on collective board processes and behaviors to understand and predict board performance quality (Leblanc and Gillies, 2003;Letendre, 2004;Huse, 2005;Pye and Pettigrew, 2005).…”

“…Poor board governance is one of the causes of shareholder activism (Smith, 1996;Gillan and Starks, 2007;Bebchuk and Weisbach, 2010). Much of the recent academic literature on boards has proffered the recommendation that directors should work as a team to be able to produce better board outcomes (Cohen and Bailey, 1997;Forbes and Milliken (F&M), 1999;Sonnenfeld, 2002;Finkelstein and Mooney, 2003;Leblanc and Gillies, 2003;Letendre, 2004;Pye and Pettigrew, 2005;Zona and Zattoni, 2007;Conger and Lawler, 2009;Payne et al, 2009;Van Ees et al, 2009;Huse et al, 2011;Lorsch, 2012), but these studies are based on theoretical assumptions.…”