Opening the ‘black box’: what does observational research reveal about processes and practices of governing?

Abstract

Despite several decades of research on governance, very little is known about processes and practices of governing and, crucially, the links between governing and organisational performance. This has led to calls to penetrate the 'black box' of the boardroom by conducting research which draws on data gathered through direct observation. Such calls, however, have so far produced a rather sparse and inchoate literature which would benefit from review in order to give shape to the field and provide direction for future research. Here, we critically examine the findings of this research, focusing on three emergent themes: (1) the extent to which empirical research supports the established theories in the field, particularly agency and stewardship theories; (2) what research says about 'good' and 'effective' governance and the relationship between them; and (3) the methodological and conceptual orientations which frame this research, and the claims made for 'processual' approaches. We conclude with an agenda for taking the field forward in order to extend knowledge and to contribute to theory around governing.

Sources of accountability inside the boardroom

“…It elides to theoretically explain the operationalisation of the complex nature of board relationships, resulting in the shrouding of underlying process mechanisms such as accountability (Dalton and Dalton, 2005; Nicholson et al , 2017). Therefore, and despite more than 45 years of dominance in corporate governance literature (Kim et al , 2006; Mero et al , 2014; Watson et al , 2020), agency theory provides limited insight into how boards work and how process mechanisms such as accountability can be invoked to enable board effectiveness.…”

“…They are able to provide oversight, confirm major strategies and determine executive management decisions, such as performance management or removal of key executives (Bezemer et al , 2014). Following high-profile corporate scandals that continue to occur as illustrated more recently by Berger et al (2016), Li et al (2018), Veetikazhi and Krishnan (2019) and Watson et al (2020), shareholders are increasingly calling for enhanced and more effective accountability at board level; yet accountability is still an under-researched area in corporate governance (Roberts et al , 2005; Zattoni and Cuomo, 2010).…”

Introduction to Special Issue on Innovations in Research Methods in Accounting and Governance

“…Boards of directors are difficult to research, given access challenges to the "black box of the boardroom" (Watson et al, 2021). Watson et al (2021) review the sparse research penetrating the boardroom using observational methods. They refer to this research as "processual" in that it focuses on procedures relating to governance.…”

Boards in action: processes and practices of ‘strategising’ in the Boardroom

“…A number of reasons have been advanced for this. First, little is known about how Boards do strategy (Hendry et al 2010) and, indeed, there is lack of clear consensus about the role of Boards in relation to this (Hendry and Kiel 2004;Judge and Talaulicar 2017); second, scholars have cast doubt on the ability of theory, particularly agency theory, which has dominated much scholarship around the function of Boards, to adequately account for the complex and multidimensional involvement of the Board in matters of strategy (Brauer and Schmidt 2008;Cornforth 2004;Stiles 2001;Tricker 2005); third, little research has actually penetrated the 'black box' of the Boardroom to examine the processes and practices by which Boards engage in strategy, particularly in commercial organisations (Watson et al 2020). This is compounded by a lack of clarity surrounding the term itself; 'strategy' embodies a number of normative assumptions which often go unchallenged, even in the academic literature (Townley 2014, p. 58).…”

“…However, this requires access to Boardrooms in order to study 'Boards in action' (Cadbury 2000). While a body of research is developing which is based on observation of Governing Boards, this still represents a very small proportion of the research carried out in this field (Watson et al 2020). Of this, even less has employed video-based data collection.…”