Delving into the Boardroom “Black Box”: A Research Model of “Board Learning Capability” (BLC)

Abstract

This paper aims to shed light into boardroom processes by bringing together the literature on organization behaviour and that of boardroom process in order to form a model of boardroom learning capability. Board process is viewed as primarily a learning process whereby individual members with their knowledge, skills and external networks engage in a collective learning process that culminates in a "shared understanding" about the problems and respective solutions and increased "board social capital". It can be argued that boards that do better at this "collective learning process" will display greater effectiveness and ultimately better firm performance. In learning organisation's terms, one can speak of "board learning capability" (BLC). The chairman of the board has a pivotal role in facilitating and mastering the collective learning process in the boardroom. Central to our model are the interplay between the "chairman role and skill set" and the "board learning challenges". Building on research literature that focuses on learning organisations and on boardroom processes, we propose a model of "board learning capability" (BLC), which could shed additional light on the boardroom process dynamics. In the future, an organisation could develop a "board's learning capability" measure to complement "good governance" indices which rely heavily on structure and composition proxies, despite limited empirical evidence. Empirical testing of the model can be of value for boardroom development and for risk and reputational concern minimization by uncovering differences in "boardroom learning capability" in different governance domains.

What do we know about what is going on inside the boardroom?

“…But, we do not know if this is or should be developed within boards of directors, a type of team that, contrary to typical work teams, regularly tackles non-repetitive, ambiguous and complex issues. According to Morais and Kakabadse (2013), corporate directors do enhance their skills effectively through team learning mainly because they refrain from asking questions fearing that they will be perceived as less competent than they should be. For boards of directors, the concepts of cohesion and group-think need to be balanced to produce maximum efficiency.…”

“…Team learning differs from individual learning because it goes beyond the mere pooling of individual knowledge. Morais and Kakabadse (2013) suggested that boards have the necessary characteristics for team learning, but there are also a number of challenges that might prevent them from learning effectively. They propose that Chairpersons have the ability to help boards transform individual inputs into collective learning.…”

“…Studying board dynamics is relevant for two main reasons. First, to be effective, corporate directors need to engage in complex and collaborative interactions (Morais and Kakabadse, 2013; Petrovic, 2008; Vandewaerde et al , 2011; Van Ees et al , 2009) that are not observed in other types of management team. Moreover, “because boards are large, episodic and interdependent, they are particularly vulnerable to process losses” (Forbes and Milliken, 1999, p. 492).…”

Regulatory Monitoring and Regulatee’s Firm Performance: Audit Thematic Finding on Water Operator Performance in Malaysian Water Services Industry

“…However, principal's obligation together with the effectiveness of the agent in performing their respective roles is important. Principal composition of knowledge capacities, human resource management effectiveness and decision-making style (Morais & Kakabadse, 2013) will reduce corporate failure resulting from poor governance practices (Dalton et al2010;Hampel 1998;Othman & Rahman 2011;Yasser & Mamun 2015). This finding supported by Bruton, Peng, & Xu (2015) emphasizing on the efficiency management and agents should have clear understanding of their role and fiduciary duty would reflect to the overall performance.…”