No full-text available
To read the full-text of this research,
you can request a copy directly from the author.
The Governance Role of the Board in Corporate Strategy: An Initial Progress Report
Abstract
This paper presents a preliminary progress report into the governance role that boards play (and should play) in the strategic planning process. It reports on whether the nature and degree of their involvement (or lack thereof) in certain strategic planning activities is positively associated with selected performance outcomes. The findings indicate that, surprisingly, a board's involvement in reviewing and discussing its organisation's financial statements may not be adding the kind of value that organisations look to receive from their board of directors.
... The level of a board of directors' involvement in strategic decisions can be viewed either as an institutional response or as a strategic adaptation to external pressures for greater board involvement. Higher involvement has been shown to be positively related to financial performance , while it may not be adding the value that organizations expect to gain from the boards' involvement (Bart, 2004). ...
... The extent to which either construct is favored depends on contextual factors such as board power, environmental uncertainty and information asymmetry. Bart (2004) found out that while boards receive and discuss all sorts of 'strategic information', there is no question that, currently, financial measures are deominant. This latter issue received the highest ratings in the information and discussion scores. ...
... Given the lack of a measure of the centralization of decisions, we chose to define seven levels of centralization of authority, which are: (2000), Salmon (2001) and Bart (2004) as a basis. The scale adopted was a grade from 1 to 5 according to the board's level of involvement in each of the strategic decisions made. ...
This study analyzes the involvement of boards of directors in strategic management. Through a survey of 36 Brazilian companies affiliated with the Brazilian Institute of Corporate Governance, we intend to analyze the factors that determine the degree of involvement of boards of directors in strategic decisions. Three dimensions were focused: which strategic decisions are under the boards' responsibility; which criteria are used to determine the optimum involvement of the board; and to what degree boards centralize strategic decisions. Results showed that boards are increasing their involvement in different types of strategic decisions, not limiting themselves to monitoring and controlling the company. Also, boards will tend to reach a balance when it comes to centralization of authority, sharing decisions with top managers and acting like counselors in the strategic management process.
... The level of a board of directors' involvement in strategic decisions can be viewed either as an institutional response or as a strategic adaptation to external pressures for greater board involvement. Higher involvement has been shown to be positively related to financial performance , while it may not be adding the value that organizations expect to gain from the boards' involvement (Bart, 2004). ...
... The extent to which either construct is favored depends on contextual factors such as board power, environmental uncertainty and information asymmetry. Bart (2004) found out that while boards receive and discuss all sorts of 'strategic information', there is no question that, currently, financial measures are deominant. This latter issue received the highest ratings in the information and discussion scores. ...
... Given the lack of a measure of the centralization of decisions, we chose to define seven levels of centralization of authority, which are: (2000), Salmon (2001) and Bart (2004) as a basis. The scale adopted was a grade from 1 to 5 according to the board's level of involvement in each of the strategic decisions made. ...
Este estudo analisa o envolvimento dos conselhos de administração na gestão estratégica. A partir de um levantamento com 36 empresas brasileiras afiliadas com o Instituto Brasileiro de Governança Corporativa, foram analisados os fatores que determinam o grau de envolvimento dos conselheiros nas decisões estratégicas. Foram abordadas três dimensões: quais decisões estão sob a responsabilidade do conselho; quais critérios determinam o grau ótimo de envolvimento do conselho; e em que medida os conselhos centralizam as decisões estratégicas. Os resultados mostraram que os conselhos estão aumentando seu envolvimento em diferentes tipos de decisões estratégicas, não se limitando a monitorar e controlar a empresa. Além disso, eles buscam um equilíbrio ao centralizar a autoridade, dividindo decisões importantes com a alta administração e agindo no processo de aconselhamento.
... Indeed, in the UK, events at a GlaxoSmithKline (GSK) annual meeting were described as a defining moment for shareholders when an advisory vote was made against the proposed pay package of CEO Dr. Jean-Pierre Garnier. 2 The vote, despite being non-binding, was heard by the board and resulted in significant changes being made to the compensation regime. ...
... At its most basic, governance is defined as the structures, processes and behaviors used to control the organization, manage the relationships among key organizational stakeholders and, in so doing, improve organizational performance (Bart, 2004). Compensation is the primary tool used to align interests of management with that of the shareholders. ...
This paper presents the results of a survey of Compensation Discussion and Analysis (CD&A) documents from 32 publicly listed U.S. companies. Our aim was to probe the extent to which companies are providing investors, through the CD&A, with an easy to understand and complete assessment of the compensation provided to their highest paid executives. Using a detailed content analysis, the results show that while companies are complying somewhat with regulatory requirements, they are failing to meet the intent of the CD&A, which is, to provide completeness, transparency and understanding regarding a firm's executive compensation. A number of recommendations for change is also proposed.
... Second, with regard to the mission statement development process, the studies indicate that managers whom develop a mission statement with the aim of inspiring organizational members, promoting shared values, and providing a common direction, are most likely to increase their organization's performance (Bart, 1997, Bart, 1998. Furthermore, the amount of internal stakeholders involvement, and especially the degree of involvement of the members of the Board of Directors, was found to be positively and significantly related with performance (Bart, 2004a;Bart and Tabone, 1998). ...
Purpose
After two decades of research, the effect of a mission statement on an organization's performance is still unclear. In order to address these shortcomings, a research project via the setting‐up of this paper seeks to identify all empirical studies addressing the mission statement‐financial performance relation, analyze how the mission statement‐financial performance relation is operationalized, and aggregate the findings of the identified studies by means of a meta‐analysis.
Design/methodology/approach
A systematic literature review procedure was developed to identify all relevant articles and meta‐analytic procedures were used to calculate the effect size of the selected studies.
Findings
The study results indicate a small positive relation between mission statements and measures of financial organizational performance. However, additional analyses indicated that interstudy differences in measures significantly influenced the estimates (population effect sizes of the created subsamples ranged from 0.0808 to 0.4100).
Research limitations/implications
These contradictive findings stress the importance and impact of operationalization decisions in mission statement‐performance research, and provide paths for future practice‐oriented research.
Originality/value
This study is the first to assess the performance impact of one of the most popular management instruments, namely mission statements, by means of meta‐analytical techniques and, to evaluate the moderation effect of operationalization decisions on the cited relationship. Furthermore, by aggregating research on the mission statement‐performance relationship, a knowledge base was devised which provides normative advice on the characteristics of a “good” mission statement.
... In diesem Sinne fordert der Deutsche Corporate Governance Kodex: "Der Vorstand stimmt die strategische Ausrichtung des Unternehmens mit dem Aufsichtsrat ab und erörtert mit ihm in regelmäßigen Abständen den Stand der Strategieumsetzung" (Cromme 2002: 4). 5 Die Forderung nach einer konstruktiven Einbindung des Aufsichtsrats in die Strategieumsetzung findet sich vor allem in der angelsächsischen Corporate Governance Literatur (u.a. Bart 2004;Hillmann/Danziel 2003;Rindova 1999;Stiles 2001;Westphal/Fredrickson 2001;Zahra 1990). Allerdings bleibt bisweilen unklar, wie der Aufsichtsrat diesen Erfordernissen gerecht werden soll. ...
Wie in zahlreichen internationalen Corporate Governance Regelwerken und Richtlinien gefordert, müssen sich Aufsichtsorgane zukünftig verstärkt der Aufgabe zuwenden, die Implementierung erklärter strategischer Konzepte zu begleiten und diesbezügliche Aktivitäten der Geschäftsführung zu kontrollieren. Hierzu wird aufbauend auf Erkenntnissen der Strategieprozessforschung ein Instrumentarium vorgestellt, mit dessen Hilfe die Konsistenz zwischen erklärten und tatsächlich realisierten Unternehmensstrategien gemessen werden kann. Die praktische Relevanz der Konsistenzanalyse für Aufsichtsräte wird anhand eines Beispiels veranschaulicht. As urged by a number of international corporate governance codes and guidelines, supervisory boards need to monitor strategy implementation and to monitor the activities of executive management. Based on insights from strategy process research a method is presented measuring the consistency between announced and realized corporate strategies. An example is provided to demonstrate the usefulness of the consistency analysis for business practice.
Urban-Ecological Organisations (UEOs) exist to foster and develop knowledge and implementation of urban ecology by strengthening contacts, providing information, minimising environmental risks, and enriching the dialogue between researchers and practitioners. They also represent the interests of the government and address ecological issues posed by increasing urbanisation in the interest of the public. This becomes pertinent because the rising rates of urbanisation have created new challenges in the 21st Century. Therefore, there is a need for concerted efforts to squarely meet the challenges and maximise the opportunities afforded by urbanisation. It is critical that such efforts adopt a holistic view for achieving sustainable urban development, particularly within the context of climate change. Relying on secondary data, this review investigated the challenges and prospects of environmental governance and the role of UEOs as an instrument for managing Nigeria’s environment in a sustainable manner. The expected outcome will unravel governance challenges at the federal, state, and local levels in tackling environmental challenges issues in the country. The review shows that Nigeria’s environmental governance frameworks are ineffective in dealing with the magnitude of the country’s environmental challenges. Hence, the institutional and legislative frameworks for environmental governance must be comprehensive and effective. Also, it is crucial that the three tiers of government should show strong political will, while the UEOs in both public and private sectors should collaborate to drive the transformation towards sustainable urban development.
In developing countries, governance systems are still recent, or practically non-existent (Shleifer & Vishny, 1997). For this reason, the way their boards behave is not yet clear to the firms in these countries. For foreign investors, the lack of governance structures may represent a risk because it jeopardizes the good corporate governance of the enterprises operating in such regions. This study analyzes the involvement of the board of directors in the strategy of enterprises located in developing countries. The study is guided by the question: In developing countries, what is the difference between the board of directors' current level and its ideal level of involvement in company strategy? Based on the theory of the role of the boards of directors, we present the results of a survey with 32 firms from 19 developing countries. The businesses were chosen among those widely known by international investors, including multilateral financing agencies and commercial banks. Respondents were the chairman of the board of directors or, in some cases, a senior manager referred by him. The results presented show that the European boards have the highest degree of involvement in firm strategy. In Asia, the main specific characteristic influencing the board's performance is the high level of government involvement in corporate management. In Latin America, the predominance of family groups with high ownership concentration also emerges, aligned with the fact that this is the region with the second highest degree of board involvement in firm strategy.
To what extent are there differences in the strategic practices of Boards of 'for profit' and 'not for profit' organisations? While there are obvious differences in the way these two types of organisations operate, the question as to whether those differences extend into the boardroom – and, especially, how directors engage with their managements on strategy – is currently unknown. Accordingly, this paper reports on the nature and extent of the board's strategic role in both for profit and not for profit organisations and then makes a direct comparison of them. Interestingly, the lack of significant differences between these two types of organisation constitutes the major finding of this current investigation and suggests that, in the area of governance, the supposed – or claimed – differences between for profit and not for profit organisations may be more imagined than real. In fact, there may be some very practical reasons for their similarity.
Recent research by the author has established that boards have an important and significant role to play when it comes to their organisations' strategy and strategic planning process. But is there room for improvement? According to the directors that have participated in an ongoing research project, the answer is most definitely 'yes'. The current paper identifies and discusses the top 13 areas of improvement, which directors feel need to be addressed if their responsibility for strategy is to be exercised properly. The author's findings point especially to the types of practices that modern boards need to follow if they are serious about getting the maximum benefit from their engagement with management in an organisation's strategic planning process.
This article presents the findings from an exploratory empirical research investigation that assessed the content of selected Board Charters for 118 publicly traded companies listed on the TSX/S&P Composite Index. The Board Charter is considered to be the starting point in a Board's quest for creating a state of good governance within its organisation. However, the specific content of what a Board Charter actually contains has largely remained a mystery. The current study, therefore, was designed to identify what a typical Board Charter looks like as well as determine the frequency with which various Board Charter elements are contained in them. Interestingly, this is the first study of its kind to shed light on the nature and content of this often confidential document which has only recently come into greater use.
This research study focuses on the problems involved in nominating board members based solely on rules and regulations, which neglect the affective dynamics of board behaviour and board process. For example, choosing board candidates who are independent (not part of a company's management), a rule imposed by the Toronto Stock Exchange (TSX) guidelines, may ensure that an organisation remains listed on this lucrative exchange. However, it does not ensure that the candidates have the necessary knowledge or are well versed in the company's business activities to effectively serve on a particular board. Having independent board members does not ensure that they ask tough questions of themselves or of management or that they have an extensive network from which to draw for advice on strategic issues. These are equally important areas of board governance that cannot be ignored when choosing candidates for the board, and these questions should not be suppressed in favour of concentrating solely on formal concerns such as independence. Information about board characteristics can provide management theorists with a broader range of ‘informal’ variables that can contribute to the decision-making process. Board characteristics assist the board in operating as a team, improving the efficiency of the board. Selecting board members with the most suitable and effective characteristics for a particular board ensures that directors are spending their limited time on the company's most important challenges. This research was carried out in several stages in order to gather both qualitative and quantitative data. In this research there was a significant relationship for values and decision-making and no relationship for TSXFormal and decision-making, which is consistent with the literature, suggesting there must be a change in executives’ values to ensure changes in behaviour. A corporate governance model was developed. This model helps in ensuring that boards populated with board members who have knowledge and values (skills matrices) are more aware of the detrimental effect that groupthink can have on the decision-making process. Several executives mentioned the ability of board members ‘to apply due diligence’ to strategic decision-making. This means that directors apply their experience and expertise to better understand issues and bring these to bear upon the decision-making process. Additionally, knowledge, values and groupthink (skill matrices) may be used both when nominating new board members and as an annual evaluative tool. Businesses are continually diversifying and board members need to continuously embellish their skill set and knowledge in order to adapt. However, the finding and the development of this corporate governance model are significant as they mark the start of how board characteristics can be operationalised. What is needed is more balanced research that looks at both the formal and the informal system. In doing so, more articulate measures of board decision-making process will evolve. The business environment is ever changing and dynamic; research in these areas will convey the interrelationship between the formal and informal system. Nevertheless, this research is unique as it has investigated the formal and informal system using both primary qualitative and quantitative data analysis and therefore provides much needed information about the characteristics requisite for nominating board members.International Journal of Disclosure and Governance (2009) 6, 106–126. doi:10.1057/jdg.2008.27; published online 8 January 2009
EXECUTIVE SUMMARYThis research study discusses corporate governance issues from a behavioural viewpoint. It makes a distinction between strict adherence to formal rules and regulations: CEO/Chair separation, independence of board members and board size and informal characteristics of board members: knowledge, values and groupthink.There are three main conclusions: This research clearly proves that formal rules and regulations are inadequate; they have little effect upon decision making by board members. Informal characteristics must be considered in unison with the formal system when nominating board members in order to restore shareholder confidence and to rebuild trust in board governance.Similar values and groupthink can contribute positively to board members’ decision making. There is, however, a high possibility for groupthink and values to become redundant, masking board members’ knowledge.Skills matrices that include questions related to values, knowledge and groupthink and three behavioural characteristics should be considered by boards to ensure the nomination of well-rounded members.Changes to board process, and board decision making, are seminal in preventing future Enron and WorldCom fiascos. It is only by changing the behaviours of the board of directors, through adopting skills matrices, that sweeping changes can occur. In the past, boards have asked: who are our board members? The most important question a board can ask today, however, is: how can the skills and knowledge of our board members be used in service of the strategic direction of the corporation? This can be achieved by recruiting new board members who fill the needs of an organisation, in contrast to nominating ‘friends’ and continuing the tradition of the old boys club. It should be noted that out of the 100 of the largest economies in the world, 57 of these are corporations and 49 are countries. Corporations are powerful entities in our society, operating in a manner similar to representative governments. Like heads of government, at the top echelon of each corporation is the board of directors; their decisions have enormous ramifications for everyone. Although most citizens have a limited or a passive interest in corporate governance, we each depend on these corporations for jobs, salaries and as investors. Governance of these gargantuan corporations, which wield considerable economic power in the world, concerns each and every citizen. This study draws novel conclusions about the state of governance today, and presents practical solutions for corporations to consider when selecting board members. The detailed discussion about what happens in the boardroom demystifies board process and provides the bases for three critical objectives when selecting new board members or evaluating current board members performance: ascertain and embellish the knowledge base of directors;motivate directors to share and gather information to ensure personal values are congruent with organisational values; andensure clear and fluent transmission channels exist to reduce the potential of having groupthink on board.International Journal of Disclosure and Governance (2008) 5, 68–92. doi:10.1057/palgrave.jdg.2050074; published online 3 January 2008
Purpose
This paper aims to use the argument that formal regulations alone may not be the defining factor in improving corporate governance and the decision making process of the BOD.
Design/methodology/approach
Based on 20 semi‐structured interviews with board chairs, members of corporate boards, CEOs, and upper/executive management at 12 Canadian companies, a bird's eye view is taken from the top. A content analysis of the interviews was performed. a clear picture about the interaction and behaviour of directors emerged. Subsequently, three objectives that are required for effective decision‐making were developed: knowledge; motivation; and transmission channels/internal control. The analysis offers three critical objectives, which all boards should endeavour to accomplish.
Findings
These interviews demystify board process and provide the bases for three critical objectives for effective corporate governance: ascertain and embellish the knowledge base of directors; motivate directors to share and gather information; and ensure clear and fluent transmission channels exist.
Practical implications
The usual board measures such as CEO duality, insider and outsider ratio, number of board members and directors' share ownership may not be the only critical determinants of board effectiveness.
Originality/value
Conventional notions of decision making have neglected key human faculties and individual characteristics that combine to determine organizational outcomes. This paper fulfils a need for research in the area of board processes and board decision making and provides a roadmap to improve corporate governance within organizations.
Purpose
The purpose of this paper is to explore how an employee volunteer program (EVP) as one aspect of responsible corporate citizenship (typically expressed in a mission statement) can influence the relationships among a firm, its employees and its community.
Design/methodology/approach
A pedagogical approach used in the educational sector known as “community service‐learning” or “service‐learning” was used as the basis for analyzing the experiences of 12 first‐time volunteering employees who described in a personal interview the motivations and outcomes associated with their participation in their EVP.
Findings
It was found that all three elements of service‐learning – that is, reciprocity, reflection, and development of responsible citizenship skills – were useful in understanding how an EVP can leverage human capital to benefit the firm, its employees and the community and make a firm's mission of responsible citizenship a reality.
Research limitations/implications
Despite the small sample size of 12 respondents, there were significant data in the comments from these respondents about the possible impact of an EVP experience in terms of various elements involved in service‐learning.
Practical implications
There are several corporate implications from the research which are related to various elements of service‐learning. For example, companies are encouraged to include in the creation and rollout of their EVP a reflection process which could also be connected to employee recognition programs, training programs and employee career development.
Originality/value
The paper presents a novel approach to assessing the motivations and possible outcomes associated with an EVP. It should be of interest to both academics and practitioners.
The significance of product innovation charters (PICs) cannot be overemphasized, as they provide understanding and a tool for setting organizational goals, charting strategic direction, and allocating resources for new product portfolios. In a unique way, a PIC represents a sort of mission statement mutation for new products. With the backdrop of strategy formulation and product innovation literatures, this article investigates the impact of both content specificity within PICs and satisfaction with the PIC formulation process on new product performance in North American corporations. A survey was undertaken among executives knowledgeable about their organization's new product development process. The respondents included chief executive officers, vice presidents, directors, and managers. The findings demonstrate that significant differences exist both in PIC content specificity and process satisfaction between highly innovative and low innovative firms. The study also shows that PIC specificity in terms of the factors mission content and strategic directives positively influences new product performance. Further, the study demonstrates that satisfaction with the process of formulating PICs plays a positive and powerful mediating role in the PIC specificity–performance relationship. The results suggest that product innovation charters, like their mission statement cousins, may be of more value than most managers realize. The study shows that achieving a state of organizational satisfaction with a PIC's formulation process is critical for obtaining better new product performance. Directions for future research also are suggested.
Sport Governance provides a comprehensive guide to the practical application of governance principles to amateur and professional sport organisations operating at the community, state/provincial, national, and international levels. It presents a balanced view between accepted practice and what contemporary research evidence tells us about a range of governance principles and practices. Organised in three parts, the text provides the reader with an explanation of the concept of governance, key terms and definitions as well as the economic, political and social factors that impact on how the governance function is enacted within sport organisations; an understanding of the "mechanics" of governance - the elements of structure, process and performance that ensure the governance function is carried out within sport organisations; and a discussion of a number of contextual issues in sport governance, including dual leadership, ethics, governance change and future governance challenges. Sport Governance is essential reading for practitioners working and volunteering in the sport industry and upper level undergraduate and postgraduate students enrolled in sport and leisure management programs.
The study at hand analyses the research strategies applied in empirical articles addressing the concept of mission statements. We systematically scanned eight computerized databases in order to delimit the field of empirical mission statement research. This scanning process resulted in 63 articles. Consequently the detected articles were analyzed by means of a code sheet. The code sheet comprised five general sets of research strategy characteristics: (1) primary data location and means of data collection, (2) level of analysis, (3) sample characteristics, (4) type of analysis / analytic techniques and (5) time frame. The results of the content analysis enabled us to assess the validity and robustness of research conducted within the field of mission statement research. Suggestions are made to increase the level of validity of future research. We claim that the results of the study at hand will contribute to the maturation of the field. They will provide insights into the possible future development of mission statement research methodology and facilitate the transition of the field from predominantly descriptive to empirically grounded.
A relationship between board/management "involvement" and "awareness" with organizational mission and their link to "employee commitment" and "organizational performance" was modeled by drawing on previous research. The model was tested with data from 339 large Canadian and US organizations. It was determined that "mission awareness" on the part of both the board and senior management is an important consideration in the determination of employees' commitment to the mission. However, the impact of board and management involvement with the mission is not identical. The results emphasize the strong and important role that the board performs when it is actively engaged in the development of the organization's mission.