Skip to main content
SpringerLink
Log in

Identifying Key Determinants of Effective Boards of Directors

  • Chapter
Global Boards

Abstract

Boards of directors are of interest to academics, the investment community, the business world and society at large. According to Cadbury (1999) this attention is understandable given the fact that boards of directors serve as a bridge between the shareholders, who provide capital, and management in charge of running the company. At the heart of the corporate governance debate is the view that the board of directors is the guardian of shareholders’ interest (Dalton et al., 1998). Yet, boards are being criticized for failing to meet their governance responsibilities. Major institutional investors put pressure on (incompetent) directors and have long advocated changes in the board structure (Monks and Minow, 2001). Their call has been strengthened by many corporate governance reforms resulting from major corporate failures. The reforms put great emphasis on formal issues such as board independence, board leadership structure, board size and committees (Weil et al., 2002; Van den Berghe and De Ridder, 1999). These structural measures are assumed to be important means to enhance the power of the board, protect shareholders’ interest, and hence, increase shareholder wealth (Becht et al., 2002; Westphal, 1998).

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 84.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 109.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  • Agrawal, A. and Knoeber, C.R. (1996). Firm performance and mechanisms to control agency problems between managers and shareholders. Journal of Financial and Quantitative Analysis, 31(3) 377–97.

    Article  Google Scholar 

  • Baliga, B.R., Moyer, R.C. and Rao, R.S. (1996). CEO duality and firm performance: what’s the fuss? Strategic Management Journal, 17 41–3.

    Article  Google Scholar 

  • Baysinger, B.D. and Butler, H.N. (1985). Corporate governance and the board of directors: performance effects of changes in board composition. Journal of Law, Economics and Organization, 1(Fall) 101–24.

    Google Scholar 

  • Baysinger, B.D., Kosnik, R.D. and Turk, T.A. (1991). Effects of board and ownership structure on corporate R&D strategy. Academy of Management Journal, 34 205–14.

    Article  Google Scholar 

  • Becht, M., Bolton, P. and Röel, A. (2002). Corporate governance and control. Working paper 9371, National Bureau of Economic Research.

    Google Scholar 

  • Byrd, J.W. and Hickman, K.A. (1992). Do outside directors monitor managers? Evidence from tender offer bids. Journal of Financial Economics, 32 195–221.

    Article  Google Scholar 

  • Cadbury, A. (1999). What are the trends in corporate governance? How will they impact your company. Long Range Planning, 32(1) 12–19.

    Article  Google Scholar 

  • Carter, C.B. and Lorsch, J.W. (2004). Back to the Drawing Board. Designing Corporate Boards for a Complex World. Harvard Business School Press. Boston, MA.

    Google Scholar 

  • Chaganti R., Mahajan, V. and Sharma, S. (1985). Corporate board size. composition and corporate failures in retailing industry. Journal of Management Studies, 22 400–16.

    Article  Google Scholar 

  • Charan, R. (1998). Boards at Work. How Corporate Boards Create Competitive Advantage. JosseyBass, a Wiley Company, CA.

    Google Scholar 

  • Charan, R. (2005). Boards That Deliver. Advancing Corporate Governance — From Compliance to Competitive Advantage. Jossey-Bass, a Wiley Company, CA.

    Google Scholar 

  • Cochran, R.L., Wood, R.A. and Jones, R.B. (1985). The composition of boards of directors and the incidence of golden parachutes. Academy of Management Journal, 28(3) 664–71.

    Article  Google Scholar 

  • Coles, J.W., McWilliams, V.B. and Sen, N. (2001). An examination of the relationship of governance mechanisms to performance. Journal of Management, 27(1) 23–50.

    Article  Google Scholar 

  • Collins, K.M.T., Onwuegbuzie, A.J. and Jiao, Q.G. (2006). Prevalence of mixed methods sampling designs in social science research. Paper presented at the Annual Meeting of the American Educational Research Association, San Francisco, CA, 1–7 April 2006.

    Google Scholar 

  • Conyon, M.J. and Peck, S.I. (1998). Board size and corporate performance: evidence from European countries. European Journal of Finance, 4(3) 291–304.

    Article  Google Scholar 

  • Cornforth, C. (2001). What makes boards effective? An examination of the relationships between board inputs, structures, processes and effectiveness of non-profit organisations. Corporate Governance: An International Review, 9(3) 217–27.

    Article  Google Scholar 

  • Creswell, J.W., Plano Clark, V.L., Gutmann., M.L. and Hanson, W.E. (2003). Advanced mixed methods research designs. In C. Teddlie and A. Tashakkori (Eds), Handbook of Mixed Methods in Social and Behavioural Research. Sage Publications, Thousand Oaks, CA.

    Google Scholar 

  • Daily, C.M. and Dalton, D.R. (1994a). Bankruptcy and corporate governance: the impact of board composition and structure. Academy of Management Journal, 37(6) 1603–17.

    Article  Google Scholar 

  • Daily, C.M. and Dalton, D.R. (1994b). Corporate governance and the bankrupt firm: an empirical assessment. Strategic Management Journal, 15 643–54.

    Article  Google Scholar 

  • Daily, C.M., Dalton, D.R. and Cannella Jr, A.A. (2003). Corporate governance: decades of dialogue and data. Academy of Management Review, 28(3) 371–82.

    Google Scholar 

  • Daily, C.M., Johnson, J.L. and Dalton, D.R. (1999). On the measurement of board composition: poor consistency and a serious mismatch of theory and operationali-zation. Decision Sciences, 30(1) 83–106.

    Article  Google Scholar 

  • Dalton, D.R., Daily, C.M., Ellstrand, A.E. and Johnson, J.L. (1998). Meta-analytic reviews of board composition, leadership structure and financial performance. Strategic Management Journal, 19(3) 269–90.

    Article  Google Scholar 

  • Demb, A. and Neubauer, F.-F. (1992). The Corporate Board. Confronting the Paradoxes. Oxford University Press, Oxford.

    Google Scholar 

  • Deutsch, Y. (2005). The impact of board composition on firms’ critical decisions: a meta-analytic review. Journal of Management, 31(3) 424–44.

    Article  Google Scholar 

  • Donaldson, L. and Davis, J.H. (1991). Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Management, 16 49–64.

    Article  Google Scholar 

  • Drucker, P.F. (1974). Management: Tasks, Responsibilities, Practices. Harper and Row, New York.

    Google Scholar 

  • Eisenberg, T., Sundgren, S. and Wells, M.T. (1998). Larger board size and decreasing firm value in small firms. Journal of Financial Economics, 48 35–54.

    Article  Google Scholar 

  • Fama, E.F. and Jensen, M.C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2) 327–49.

    Article  Google Scholar 

  • Felton, R.F., Hudnut, A. and Witt, V. (1995). Building a stronger board. The McKinsey Quarterly, 2 163–75.

    Google Scholar 

  • Finkelstein, S. and D’Aveni, R.A. (1994). CEO duality as a double-edged sword: how boards of directors balance entrenchment avoidance and unity of command. Academy of Management Journal, 37 1079–108.

    Article  Google Scholar 

  • Forbes, D.P. and Milliken, F. (1999). Cognition and corporate governance: understanding board of directors as strategic decision-making groups. Academy of Management Review, 24(3) 489–505.

    Google Scholar 

  • Gabriellson, J. and Winlund, H. (2000). Boards of directors in small and medium-sized industrial firms: examining the effects of the board’s working style on board task performance. Entrepreneurship and Regional Development, 12 311–30.

    Article  Google Scholar 

  • Golden, B.R. and Zajac, E.J. (2001). When will boards influence strategy? Inclination x power strategic change. Strategic Management Journal, 22(12) 1087–111.

    Article  Google Scholar 

  • Goodstein, J., Gautam, K. and Boeker, W. (1994). The effects of board size and diversity on strategic change. Strategic Management Journal, 15(3) 241–50.

    Article  Google Scholar 

  • Grady, D. (1999). No more board games! The McKinsey Quarterly, 3 17–25.

    Google Scholar 

  • Hill, S. (1995). The social organization of boards of directors. British Journal of Sociology, 46(2) 245–78.

    Article  Google Scholar 

  • Hill, C.W.L. and Snell, S.A. (1988). External control. Corporate strategy and firm performance in research-intensive industries. Strategic Management Journal, 9 577–90.

    Article  Google Scholar 

  • Huse, M. and Schoning, M. (2004). Group dynamics and decision processes in boards of directors: observations from flies on the wall. Paper prepared for the 20th EGOS Colloquium, Ljubljana, Slovenia, 1–3 July.

    Google Scholar 

  • Huse, M. (2005). Accountability and creating accountability: a framework for exploring behavioural perspectives of corporate governance. British Journal of Management, 16(1), 65–79.

    Article  Google Scholar 

  • Jensen, M.C. (1993). The modern industrial revolution. Exit and failure of internal control systems. Journal of Finance, 48(3) 831–80.

    Article  Google Scholar 

  • Jensen, M.C. and Meckling, W.H. (1976). Theory of the firm: managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3(4) 305–60.

    Article  Google Scholar 

  • Johnson, J.L., Daily, C.M. and Ellstrand, A.E. (1996). Boards of directors: a review and research agenda. Journal of Management, 22(3) 409–38.

    Article  Google Scholar 

  • Johnson, R.A., Hoskisson, R.E. and Hitt, M.A. (1993). Board of director involvement in restructuring: the effects of board versus managerial controls and characteristics. Strategic Management Journal, 14(4) 33–50.

    Article  Google Scholar 

  • Johnson, R.B. and Turner, L.A. (2003). Data collection strategies in mixed methods research. In A. Tashakkori and C. Teddlie (Eds), Handbook of Mixed Methods in Social and Behavioral Research (pp. 297–319). Sage Publications, Thousand Oaks, CA.

    Google Scholar 

  • Judge, W.Q. and Zeithaml, C.P. (1992). Institutional and strategic choice perspectives on board involvement in the strategic decision process. Academy of Management Journal, 35(4) 766–94.

    Article  Google Scholar 

  • Kesner, I.F. (1987). Directors’ stock ownership and organizational performance: an investigation of Fortune 500 companies. Journal of Management, 13(3) 499–508.

    Article  Google Scholar 

  • Kesner, I.F. (1988). Directors’ characteristics and committee membership: an investigation of type, occupation, tenure and gender. Academy of Management Journal, 31 66–84.

    Article  Google Scholar 

  • Kesner, I.F., Victor, B. and Lamont, B. (1986). Board composition and the commission of illegal acts an investigation of Fortune 500 companies. Academy of Management Journal, 29(4) 789–99.

    Article  Google Scholar 

  • Kosnik, R.D. (1990). Effects of board demography and directors’ incentives on corporate greenmail decisions. Academy of Management Journal, 33 129–51.

    Article  Google Scholar 

  • Lawler, E.E., III., Finegold, D., Benson, G.S. and Conger, J.A (2002). Corporate boards: keys to effectiveness. Organizational Dynamics, 30(4) 310–24.

    Article  Google Scholar 

  • Leblanc, R. and Gillies, J. (2003). Improving board decision-making: an inside view. Paper presented at the 6th International Conference on Corporate Governance and Direction, Henley Management College, 6–8 Oct.

    Google Scholar 

  • Leblanc, R. and Gillies, J. (2005). Inside the Board Room. How Boards Really Work and the Coming Revolution in Corporate Governance. Jossey-Bass, a Wiley Company, CA.

    Google Scholar 

  • Lorsch, J.W. and MacIver, E. (1989). Pawns or Potentates. The Reality of America’s Corporate Boards. Harvard Business School Press, Boston, MA.

    Google Scholar 

  • Mace, M.L.G. (1971). Directors: Myth and Reality. Division of Research Graduate School of Business Administration Harvard University, Boston.

    Google Scholar 

  • Malette, P. and Fowler, K.L. (1992). Effects of board composition and stock ownership on the adoption of poison pills. Academy of Management Journal, 35(5) 1010–35.

    Article  Google Scholar 

  • Miles, M. and Huberman, A. (1984). Drawing valid meaning from qualitative data: toward a shared craft. Educational Researcher, 13 20–30.

    Article  Google Scholar 

  • Monks, R.A.G. and Minow, N. (2001). Corporate Governance. 2nd edition, Blackwell, Oxford.

    Google Scholar 

  • Muth, M.M. and Donaldson, L. (1998). Stewardship theory and board structure: a contingency approach. Corporate Governance — An International Review, 6(1) 5–27.

    Article  Google Scholar 

  • Onwuegbuzie, A.J. and Teddlie, C. (2003). A framework for analyzing data in mixed methods research. In C. Teddlie and A. Tashakkori (Eds), Handbook of Mixed Methods in Social and Behavioural Research. Sage Publications, Thousand Oaks, CA.

    Google Scholar 

  • Pearce II, J.A. and Zahra, S.A. (1992). Board composition from a strategic contingency perspective. Journal of Management Studies, 29(4) 411–38.

    Article  Google Scholar 

  • Pettigrew, A. (1992). On studying managerial elites. Strategic Management Journal, 13(8) 163–82.

    Article  Google Scholar 

  • Pettigrew, A. and McNulty, T. (1995). Power and influence in and around the boardroom. Human Relations, 48(8) 845–73.

    Article  Google Scholar 

  • Pfeffer, J. and Salancik, G.R. (1978). The External Control of Organisations: A Resource Dependence Perspective. Harper and Row, New York.

    Google Scholar 

  • Provan, K.G. (1980). Board power and organizational effectiveness among human service agencies. Academy of Management Journal, 23 221–36.

    Article  Google Scholar 

  • Rechner, P.K. and Dalton, D.R. (1991). CEO duality and organizational performance: a longitudinal analysis. Strategic Management Journal, 12(2) 155–60.

    Article  Google Scholar 

  • Roberts, J.T. (2002). Building the complementary board. The work of the Plc Chairman. Long Range Planning, 35 493–520.

    Article  Google Scholar 

  • Roberts, J.T., McNulty, P. and Stiles, P. (2005). Beyond agency conceptions of the work of the non-executive directors: creating accountability in the boardroom. British Journal of Management, 16(Special Issue) S5–6.

    Article  Google Scholar 

  • Rosenstein, S. and Wyatt, J.G. (1997). Inside directors, board effectiveness and shareholder wealth. Journal of Financial Economics, 44(2) 229–250

    Article  Google Scholar 

  • Shleifer, A. and Vishny, R. (1997). A survey of corporate governance. Journal of Finance, 52(2) 737–83.

    Article  Google Scholar 

  • Sonnenfeld, J.A. (2002). What makes great boards great. Harvard Business Review, 8 106–13.

    Google Scholar 

  • Teddlie, C. and Tashakkori, A. (2003). Handbook of Mixed Methods in Social and Behavioural Research. Sage Publications, Thousand Oaks, CA.

    Google Scholar 

  • TIAA-CREF (Teachers Insurance and Annuity Association-College Retirement Equities Fund). (2006). Policy Statement of Corporate Governance. New York. http://www.tiaa-cref.org/pubs/html/governance policy/index.html

  • Vance, S.C. (1978). Corporate governance: assessing corporate performance by boardroom attributes. Journal of Business Research, 6 203–30.

    Article  Google Scholar 

  • Van den Berghe, L. and Baelden, T. (2005). The complex relation between director independence and board effectiveness. Corporate Governance: International Journal of Business in Society, 5(5) 58–84.

    Article  Google Scholar 

  • Van den Berghe, L. and De Ridder, L. (1999). International Standardisation of Good Corporate Governance. Kluwer, Dordrecht.

    Book  Google Scholar 

  • Van der Walt, N. and Ingley, C. (2003). Board dynamics and the influence of professional background, gender and ethnic diversity of directors. Corporate Governance: An International Review, 11 218–34.

    Article  Google Scholar 

  • Wagner, J.A.., Stimpert, J.L. and Fubara, E.I. (1998). Board composition and organizational performance: two studies of insider/outsider effects. Journal of Management Studies, 35(5) 655–77.

    Article  Google Scholar 

  • Weil, Gotshal and Manges, L.L.P. (2002). Comparative study of corporate governance codes relevant to the European Union and its member states. Final Report & Annexes I-III on behalf of the European Commission Internal Market Directorate General, in consultation with EASD (European Association of Securities Dealers) and ECGN (European Corporate Governance Network).

    Google Scholar 

  • Weisbach, M.S. (1988). Outside directors and CEO turnover. Journal of Financial Economics, 20 431–60.

    Article  Google Scholar 

  • Westphal, J.D. (1998). Board games: how CEOs adapt to increases in structural board independence from management. Administrative Science Quarterly, 43(3) 511–37.

    Article  Google Scholar 

  • Yerack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40(2) 185–211.

    Article  Google Scholar 

  • Zahra, S.A. and Pearce II, J.A. (1989). Boards of directors and corporate financial performance: a review and integrative model. Journal of Management, 15(2) 291–334.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. GUBERNA, Belgium

    Abigail Levrau (Doctor Assistant, member of the Management Committee)

  2. Partner, Vlerick Leuven Gent Management School, GUBERNA, Belgium

    Lutgart Van den Berghe (Executive Director ,Extra-Ordinary Professor)

  3. Ghent University, Belgium

    Lutgart Van den Berghe (Executive Director ,Extra-Ordinary Professor)

Authors
  1. Abigail Levrau
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Lutgart Van den Berghe
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. School of Management, Cranfield University, UK

    Andrew Kakabadse (Professor of International Management Development) (Professor of International Management Development)

  2. Business School, Northampton University, UK

    Nada Kakabadse (Professor in Management and Business Research) (Professor in Management and Business Research)

Copyright information

© 2009 Abigail Levrau and Lutgart Van den Berghe

About this chapter

Cite this chapter

Levrau, A., Van den Berghe, L. (2009). Identifying Key Determinants of Effective Boards of Directors. In: Kakabadse, A., Kakabadse, N. (eds) Global Boards. Palgrave Macmillan, London. https://doi.org/10.1057/9780230250512_2

Download citation

Publish with us

Policies and ethics

Search

Navigation