The Value Creating Board

Corporate Governance and Organizational Behaviour

Morten Huse, Morten Huse

• Editorial: Routledge
• Año: 2008
• ISBN:
  9781134074167
• Edición: 1
• Categoría: Commerce
• Categoría: Commerce Général

This book presents boards of directors from a strategic and entrepreneurial management perspective. Boards of directors are receiving increased interest in the business world as well as among academic audiences however few contributions integrate corporate governance and organizational behavior. In this book a research stream about value-creating boards is introduced. Boards of directors have during the recent decades mostly been studied within a framework of corporate governance where the interests of external investors are emphasized. This book aims to go further and explore actual board behavior. The framework and the contributions in the book include concepts such as:

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• board leadership and structure,

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• boardroom decision-making,

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• board task performance

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• corporate entrepreneurship and innovation

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• boards in small and medium-sized firms

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• board diversity and women directors

The book also presents the results of a research agenda about value-creating boards which was conducted throughout various European countries.

Part I
Introduction

The value creating board and behavioural perspectives

1 The value creating board and behavioural perspectives
MORTEN HUSE

2 Context, behaviour and evolution: Challenges in research on boards and governance
JONAS GABRIELSSON AND MORTEN HUSE

3 Accountability and creating accountability: A framework for exploring behavioural perspectives of corporate governance
MORTEN HUSE

1 The value creating board and behavioural perspectives

Morten Huse

Abstract

During recent decades boards have mostly been studied within a framework of corporate governance where the interests of external investors are emphasized. We will here break some new ground, offering a major survey on boards of directors throughout various European countries, and opening up the hitherto unexamined area of study of board behaviour and the workings of the value creating board.

A framework is presented including concepts such as: the knowledge and diversity of board members; trust and interactions inside and outside the boardroom; board leadership and structure; boardroom decision-making; and corporate entrepreneurship and innovation. The value creation of boards is not only related to value protection for certain shareholders or value distribution to various stakeholders, but also to value creation throughout the whole value chain—as in relation to innovation and corporate entrepreneurship, for example.

Key words: Boards of directors, Behavioural perspectives, Board task performance, Value creation, Corporate innovation

Introduction

How to achieve good corporate governance is a problem that has not yet been resolved, and many established prescriptions have failed to ensure proper care. Boards of directors are also receiving increased interest in the business world as well as among academic audiences. However, the academic contributions are far removed from business practice, and boards of directors have, during the recent decades, mostly been studied within a framework of corporate governance where the interests of external investors are emphasized. In this tradition boards have generally been considered as a black box, and actual board behaviour has hardly been studied (Daily, Dalton and Cannella, 2003; Gabrielsson and Huse, 2004). Creating board accountability, in the sense of bridging the gap between theory and actual board performance, requires a better understanding of what makes a board function, i.e. looking into the ‘black box’ of the board (Huse, 2005).

Mainstream board research, and much of the research on agents in corporate governance in general, is based on incomplete and inadequate models. The human dimension is rarely included, and the key question of why boards fail to behave accountably is not properly investigated (Finkelstein and Mooney, 2002). There is thus a need for discussions on the complexity of the decision-making processes of boards of directors (Daily et al., 2003; Forbes and Milliken, 1999).

Lessons learnt from various management disciplines

In this book I aim to present a framework and a research agenda to explore value creating boards. This framework includes thinking about the key relationships which enable the creation of board accountability. As contributors, we try to explore what is needed to make sure that a board does its job, and I present a comprehensive overview of various ways of thinking about board performance.

This book draws on lessons learnt in strategic and entrepreneurial management. The value creation of boards in this perspective goes beyond the question of monitoring and gatekeeping. Value creation of boards is not only related to value protection for certain shareholders or value distribution to various stakeholders, but also to value creation throughout the whole value chain—as in relation to innovation and corporate entrepreneurship, for example.

It is an intention of the book to contribute to opening the ‘black box’ and explore actual board behaviour. The sub-title of the book directs attention to organizational behaviour. Lessons from psychology and behavioural economics for corporate governance and boards of directors have still to be investigated.

The framework and the contributions in the book include concepts such as

• the knowledge and diversity of board members
• trust and interactions inside and outside the boardroom
• board leadership and structure
• boardroom decision-making
• board task performance
• corporate entrepreneurship and innovation.

Contributions

The book makes various contributions. First and foremost, it addresses one of the most current and topical debates in corporate governance—the ways in which board behaviours can actually contribute to making boards more effective and contribute to value creation. This is done in the context of the ‘value creating board’ and as such we are seeking to shed light on the inner workings of the board, i.e. open the now famous ‘black box’. Therefore, it may be a key resource for any academic and researcher working in this area. Second, the book is not located in a narrow subject domain, rather it seeks to make contributions to related subject areas including organizational behaviour and entrepreneurship and innovation. As such, it is important secondary reading for students in a range of different courses in business, management, business law and economics. Third, the book contains a balance between ‘classic’ texts written by eminent writers in the field and newly emerging conceptual and empirical papers by established and new academics. Fourth, the book brings in perspectives from different countries and not only from an Anglo-American research and corporate governance tradition.

Framework and outline

The basic framework for the book is presented in Huse (2005): ‘Accountability and creating accountability: a framework for exploring behavioural perspectives on boards and governance’, British Journal of Management, 16 (special issue): 65–79. An in-depth presentation of the framework is found in Huse (2007). The various articles and research projects represented in this book are the building blocks in Huse (2007).

The classics—developing a field

The book has three main elements. After an introductory section presenting research on boards that has been published in major journals from 1990 to 2002 (Gabrielsson and Huse, 2004) and the framework (Huse, 2005), there is a section (Part II) presenting seminal classical articles that together constitute the basis for this research on boards of directors. Most of these articles are review articles, and they present gaps in existing literature. They show that research attention should be directed to understanding the gaps between board task expectations and actual board task performance (Mace, 1972); explore board composition in relation to various board roles or tasks (Fama and Jensen, 1983; Zahra and Pearce, 1989); explore the relationships between board composition and corporate performance in intermediate steps, including mediators like structures, processes and task performance (Zahra and Pearce, 1989); the board as a decision-making team and processes inside the boardroom (Forbes and Milliken, 1999); and see the board as an open system with interactions between board members, the top management team and various other actors (Pettigrew, 1992).

Exploring methods and concepts

Most of the articles in Part III are empirical studies employing qualitative methods in concept development. They represent contributions from various research projects that I have coordinated from 1990 until 2005. This section contributes both to exploring various research methods in studying boards of directors and introducing various concepts that have been observed in these studies. The qualitative studies presented include a reconstructive case study (Huse and Eide, 1996), participant observation studies using ‘fly on the wall’ techniques (Huse, Minichilli and Schøning, 2005) and ‘one of the lads’ (Huse, 1998) methods, and the collection of ‘board life stories’ from women directors (Huse and Solberg, 2006). Survey studies using different perspectives and respondents are also presented (Huse, 1993; Huse and Rindova, 2001). The studies illustrate variations in board tasks (Huse, 1993 and 1998; Huse and Rindova, 2001), and they present the board decision-making culture and the dynamics inside the boardroom (Huse et al., 2005) and the interactions outside the boardroom (Huse, 1998; Huse and Eide, 1996; Huse and Solberg, 2006).

Testing relationships in the value creating board surveys

Various empirical studies from the ‘Value creating board’ surveys are presented in the third and final main section: Part IV. The ‘Value creating board’ surveys were coordinated from the Norwegian School of Management BI, and the main survey instrument consisted of about 250 questions that were linked to the framework presented in Huse (2005). Scholars from various countries contributed to these surveys by being co-authors in articles using data from Norway (Gnan and Zattoni, 2008; Nordqvist and Minichilli, 2008; Nielsen, 2008; Wenstøp, 2008; Zona, Minichilli, Zattoni, 2008), or by collecting and using data from their home countries, i.e. Belgium (Bammens and Voordeckers, 2008), Italy (Minichilli, Zattoni and Zona, 2008), the Netherlands (van Ees, van der Laan and Postma, 2008; van der Heuvel and van Gils, 2008) and Sweden (Gabrielsson and Politis, 2008). The articles have different research questions and focus. Some studies are about small firms (Bammens and Voordeckers; Gabrielsson and Politis; Gnan and Zattoni; van der Heuvel and van Gils), some use data from medium-sized firms (Nielsen; Wenstøp; Zona et al.), while other studies have a main focus on listed firms (Minichilli et al.; van Ees et al.). Research questions centre around board tasks (Bammens and Voordeckers; Minichilli et al.; van der Heuvel and van Gils), board working structures (Nordqvist and Minichilli; Nielsen), trust, power and processes (van Ees et al.; Wenstøp), women directors and diversity (Nielsen) and the boards’ contribution to corporate innovation (Gabrielsson and Politis; Zona et al).

Building blocks and accumulation of knowledge

Through this book I hope to break some new ground in exploring boards of directors and corporate governance. Results from a major survey on boards of directors throughout various European countries are presented, and they open the hitherto unexamined area of study of board behaviour and the workings of the value creating board. This book consists of various building blocks. These blocks may contribute to build a research stream about value creating boards where the focus is on behavioural perspectives.

The framework and contributions in the book include concepts such as: the knowledge and diversity of board members; trust and interactions inside and outside the boardroom; board leadership and structure; boardroom decision-making, and corporate entrepreneurship and innovation. The value creation of boards is not only related to value protection for certain shareholders or value distribution to various stakeholders, but also to value creation throughout the whole value chain.

Two articles are presented in this introductory section. The first article (Gabrielsson and Huse, 2004) reviews all empirical articles published about boards of directors in six main scientific journals. A total of 127 empirical articles were found in Academy of Management Journal, Administrative Science Quarterly, Journal of Management, Strategic Management Journal, Journal of Management Studies and Journal of Management and Governance. The articles were sorted based on m...