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Board Characteristics and Involvement in Strategic Decision Making: Evidence from Swiss Companies

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  • Winfried Ruigrok
  • Simon I. Peck
  • Hansueli Keller

Abstract

abstract Boards of directors have a number of roles. The board's monitoring function has been the subject of much work. Less examined is the role that the board has in setting company strategy. This paper uses agency and network perspectives in developing and testing the relationship between board characteristics and involvement in strategic decision making. Using primary and secondary data, our results suggest that the level of board involvement in strategic decision making is related to a number of governance variables. We demonstrate that involvement is generally lower where boards are highly interlocked. We also show that certain types of board interlocks – namely horizontal (same industry) and those involving direct links with the banking sector – are particularly associated with this negative effect. There is weaker evidence that board strategic involvement is lower where the roles of company chief executive and chair are combined. We find no evidence that factors such as board size, or the percentage of outside directors per se are related to board involvement in strategic decision making. In doing so, this paper adds to the growing literature synthesizing the structural features and processes of boards.

Suggested Citation

  • Winfried Ruigrok & Simon I. Peck & Hansueli Keller, 2006. "Board Characteristics and Involvement in Strategic Decision Making: Evidence from Swiss Companies," Journal of Management Studies, Wiley Blackwell, vol. 43(5), pages 1201-1226, July.
    • Handle: RePEc:bla:jomstd:v:43:y:2006:i:5:p:1201-1226
    DOI: 10.1111/j.1467-6486.2006.00634.x
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    References listed on IDEAS

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    1. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    2. Kroszner, Randall S. & Strahan, Philip E., 1999. "Bankers on Boards: Monitoring Conflicts of Interest & Lender Liability," Working Papers 150, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    3. Stiles, Philip & Taylor, Bernard, 2001. "Boards at Work: How Directors View their Roles and Responsibilities," OUP Catalogue, Oxford University Press, number 9780198288763, Decembrie.
    4. Randall S. Kroszner & Philip E. Strahan, 1999. "Bankers on Boards: Monitoring, Conflicts of Interest, and Lender Liability," NBER Working Papers 7319, National Bureau of Economic Research, Inc.
    5. Randall S. Kroszner, 1999. "Bankers on Boards: Monitoring Conflicts of Interest & Lender Laiability," University of Chicago - George G. Stigler Center for Study of Economy and State 150, Chicago - Center for Study of Economy and State.
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