Identifying key determinants of effective boards of directors
AbstractMainstream research on boards of directors has been focusing on a direct relationship between board characteristics and firm performance, but up till now the results are inconclusive. Although these studies revealed interesting and useful insights, little is known about the factors that shape board effectiveness. This paper aims to reduce this gap by exploring the variety of indicators that contribute to the effectiveness of boards. The paper derives from an interview-based investigation among 104 directors of Belgian listed companies. The findings are further elaborated with quantitative data from two written questionnaires, involving directors of non-listed companies and experts in the field of corporate governance. The results point to three major issues. First, there appears to be a gap between a limited number of structural board measures consistently found in literature and the systematic occurrence of a set of behavioural criteria of board effectiveness in the perceptions of (Belgian) directors. Second, the findings suggest that the value of independence may be overemphasized at the cost of the broader issue of diversity. Third, it appears that mainstream board research ignores to a large extent two additional conditions (the information flow and the leadership style of the chairman) under which a board of directors can make an effective contribution to the strategic direction and control of a company. Our findings suggest that the ambiguity found in current research evidence can to some extent be attributed to the ignorance of a wide range of interconnected structural (such as diversity and competence) and behavioural factors (such as trust, attitude, norms and conduct) which actually shape the effectiveness of boards in performing their roles.
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Bibliographic InfoPaper provided by Vlerick Leuven Gent Management School in its series Vlerick Leuven Gent Management School Working Paper Series with number 2007-11.
Length: 58 pages
Date of creation: 15 Mar 2007
Date of revision:
Other versions of this item:
- A. Levrau & L.A.A. Van Den Berghe, 2007. "Identifying Key Determinants Of Effective Boards Of Directors," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/447, Ghent University, Faculty of Economics and Business Administration.
- NEP-ALL-2007-03-24 (All new papers)
- NEP-BEC-2007-03-24 (Business Economics)
- NEP-CSE-2007-03-24 (Economics of Strategic Management)
- NEP-MKT-2007-03-24 (Marketing)
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