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Strategic Governance: how to assess board effectiveness in guiding strategy execution

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  • Sascha L. Schmidt

    (European Business School (EBS) in Oestrich Winkel, Germany.)

  • Matthias Brauer

    (University of St Gallen, Switzerland.)

Abstract

Subsequent to a host of corporate corruption scandals, boards of directors are facing amplified pressure from investors, creditors and shareholders in a bid to ensure effective corporate governance of their investments. In previous research and public debate, the effectiveness of corporate governance structures has come under close scrutiny. However, boards' effectiveness in fulfilling their strategic role by guiding strategy execution mostly has been left unaddressed. Due to the high degree of secrecy and sensitivity of strategy issues, boards' effectiveness in guiding strategy execution is much more difficult to assess externally compared to structural governance issues. Against the backdrop of these difficulties and based upon insights from strategy process research, we suggest taking "strategy consistency" between a firm's resource allocation and its announced strategy as a proxy for boards' effectiveness in guiding strategy execution. In doing so, the paper contributes to extant research by going beyond structural governance issues and paying direct attention to strategic governance issues. Specifically, the paper develops a new approach and set of standard measures to assess boards' effectiveness in strategy execution. Copyright (c) 2006 The Authors; Journal compilation (c) 2006 Blackwell Publishing Ltd.

Suggested Citation

  • Sascha L. Schmidt & Matthias Brauer, 2006. "Strategic Governance: how to assess board effectiveness in guiding strategy execution," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(1), pages 13-22, January.
  • Handle: RePEc:bla:corgov:v:14:y:2006:i:1:p:13-22
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    References listed on IDEAS

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    1. Dherment-Ferere, I. & Renneboog, L.D.R., 2000. "Share Price Reactions to CEO Resignations and Large Shareholder Monitoring in Listed French Companies," Discussion Paper 2000-70, Tilburg University, Center for Economic Research.
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    Cited by:

    1. Pugliese, A. & Bezemer, P.J. & Zattoni, A. & Huse, M. & van den Bosch, F.A.J. & Volberda, H.W., 2009. "Boards of Directors’ Contribution to Strategy: A Literature Review and Research Agenda," ERIM Report Series Research in Management ERS-2009-013-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    2. Garen Markarian & Antonio Parbonetti, 2007. "Firm Complexity and Board of Director Composition," Corporate Governance: An International Review, Wiley Blackwell, pages 1224-1243.
    3. Whalley, Jason & Garrett, Janette & Vialle, Pierre, 2015. "An exploratory study of the board composition of European incumbent telecommunication operators," 26th European Regional ITS Conference, Madrid 2015 127197, International Telecommunications Society (ITS).
    4. Armin Wiedenegger & Alexander Kern & Maria Rupprechter, 2012. "The Choice of Legal Form and its Effects on Good Governance: A Case Study of an Austrian Professional Soccer Club," Ekonomika a Management, University of Economics, Prague, vol. 2012(3), pages 23-43.
    5. Brauer, Matthias & Heitmann, Mark, 2013. "Antecedents and temporal dynamics of strategic divergence in multinational corporations: Evidence from Europe," Journal of World Business, Elsevier, vol. 48(1), pages 110-121.
    6. Jelena Nikolić & Verica Babić, 2016. "The Implications Of Ownership Concentration Forshareholder Protection And Strategic Decision-Making," Economic Annals, Faculty of Economics, University of Belgrade, vol. 61(211), pages 69-98, October -.

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