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

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  • Sascha L. Schmidt
  • Matthias Brauer

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.

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
    DOI: 10.1111/j.1467-8683.2006.00480.x
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    Cited by:

    1. Ricardo Rodrigues & J. Augusto Felício & Pedro Verga Matos, 2020. "Corporate Governance and Dividend Policy in the Presence of Controlling Shareholders," JRFM, MDPI, vol. 13(8), pages 1-15, July.
    2. Rodrigues, Ricardo & Samagaio, António & Felício, Teresa, 2020. "Corporate governance and R&D investment by European listed companies," Journal of Business Research, Elsevier, vol. 115(C), pages 289-295.
    3. 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.
    4. Wencheng Yu & Yikang Zhang & Kun Du & Yanzhou Wu, 2023. "Does the Quality of Director Fusion Raise the Risk of Corporate Debt Default?," Sustainability, MDPI, vol. 15(2), pages 1-18, January.
    5. Rebecca Booth & Donald Nordberg, 2021. "Self or other: directors’ attitudes towards policy initiatives for external board evaluation," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 18(2), pages 120-135, June.
    6. Garen Markarian & Antonio Parbonetti, 2007. "Firm Complexity and Board of Director Composition," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1224-1243, November.
    7. Hafezali Iqbal Hussain & Azlan Ali & Hassanudin Mohd Thas Thaker & Mohsin Ali, 2019. "Firm Performance and Family Related Directors: Empirical Evidence from an Emerging Market," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 13(2), June.
    8. 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.
    9. Valeriano Sanchez-Famoso & Jorge-Humberto Mejia-Morelos & Luis Cisneros, 2020. "New Insights into Non-Listed Family SMEs in Spain: Board Social Capital, Board Effectiveness, and Sustainable Performance," Sustainability, MDPI, vol. 12(3), pages 1-18, January.
    10. Romilda Mazzotta & Giovanni Bronzetti & Graziella Sicoli & Paolo Tenuta, 2018. "La valutazione del CdA in contesti ad elevata concentrazione proprietaria: mero conformismo o reale strumento di valutazione?," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2018(2), pages 107-128.
    11. 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).
    12. Bablu Kumar Dhar & Alessandro Stasi & Jesper Ole Döpping & Md Abu Issa Gazi & Jakhongir Shaturaev & Sabrina Maria Sarkar, 2022. "Mediating Role of Strategic Flexibility Between Leadership Styles on Strategic Execution: A Study on Bangladeshi Private Enterprises," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 23(3), pages 409-420, September.
    13. Kirsti Malkamäki & Esa Hiltunen & Eeva Aromaa, 2021. "The Role of Trust in the Strategic Management Process: A Case Study of Finnish Grocery Retail Company Kesko Ltd," South Asian Journal of Business and Management Cases, , vol. 10(1), pages 21-34, April.
    14. 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, Prague University of Economics and Business, vol. 2012(3), pages 23-43.
    15. Jelena Nikolić & Verica Babić, 2016. "The Implications Of Ownership Concentration Forshareholder Protection And Strategic Decision-Making," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 61(211), pages 69-98, October -.
    16. Liena Kano & Eric W. K. Tsang & Henry Wai-chung Yeung, 2020. "Global value chains: A review of the multi-disciplinary literature," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(4), pages 577-622, June.

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