How boards influence business performance: developing an explanation

Abstract

Purpose The purpose of this paper is to explore the relationship between boards and board activity and subsequent business performance, in the context of high-growth companies, through the lens of decision making and business performance. Design/methodology/approach A critical realist approach was used to conduct a longitudinal multiple-case study of two medium-sized, quasi-public high-growth companies. Data collection included first-hand observations of boards in session, semi-structured interviews with key actors and the inspection of board and company documentation. An iterative approach to analysis was used to gain an in-depth understanding of how the boards worked and how they sought to exert influence. Findings The paper provides empirical insight about board involvement in strategic management. A proactive involvement by boards in the strategy development process and assessment of strategic options, and a collaborative form of board involvement in strategic management together with management is indicated as being important if the board is to exert influence beyond the boardroom. A conceptual model of a collaborative form of board-management interaction is developed. Practical implications The paper provides guidance for boards, suggesting that a more direct level of involvement in strategic management by the board together with management may be material to improved business performance. Originality/value The paper responds to calls for more research on the relationship between boards and business performance. It contributes much-needed first-hand evidence from within the boardroom.

On value and value creation: perspectives from board research and practice in SMEs

“…Interestingly, research has been delivering inconclusive results regarding the connection between the structural aspects of board -the usual suspects (Finkelstein and Mooney, 2003) -and firm performance (Dalton et al, 1998;Huse, 1998Huse, , 2005. On the other hand the directors' perspectives regarding how to create financial value find support in the literature regarding organizational coherence, people and processes (Clark and Urwin, 2008) and strategy development (Crow and Lockhart, 2016), as well as leadership .…”

“…As expected, there are different perspectives on value and value creation presented in the articles included in this sample. As many as 11 articles in the sample (46 per cent) focus on monetary value (value in exchange) by focusing on the financial performance of the firm, using proxies such as ROI and ROA (Clark and Urwin, 2008;Crow and Lockhart, 2016;Darmadi, 2013;Di Pietra et al, 2008;Koufopoulos et al, 2008;Liu and Michelle, 2010;Maseda et al, 2015;O'Connor and Byrne, 2015;Smythe et al, 2015;Vera Ogeh, 2013). The other 13 articles, however, discuss value in other terms including social value (Meyskens et al, 2010), corporate citizenship , task performance , implementation of ethical codes , innovation and strategic change (Napoli, 2012), as well as transparency and information disclosure (Torchia and Calabro, 2016).…”

Searching for a Perfect Composition for a Board of Directors

“…The company board, as mentioned before, represents the interests of the owners, so its actions are monitored by owners (Crow andLockhart, 2016, pp. 1024).…”

“…However, it seems that boards themselves were usually ignored in the studies, until we began to observe the fall of large companies. Insolvency of companies became a trigger for comprehensive analyses of business entities, including their boards (Crow and Lockhart, 2016, pp. 1022-1037.…”

“…The board of directors (henceforth: board) is a specific link between the owners of the company and its management (Crow and Lockhart, 2016, pp. 1022-1037.…”