In theory…we should understand a lot about boards

But we don’t. Over 15 years ago Brown (2005, p. 317) concluded, “…much work remains to be done to establish the nature and…direction” of the relationship between governance behaviors and organizational success. We still don’t have a body of knowledge on the subject. Despite much theoretical study, there is a lean body of empirical work on boards, their processes, and how their decision-making impacts organizational effectiveness. Studies that adhere to a “gold standard” of research, i.e., large-scale representative studies of research are sparse. Because research is sparse, there is no conclusive evidence on the links between board processes and organizational performance. Far from drawing any conclusions, scholars point to a complex and indirect relationship between board decision-making processes and organizational results (Forbes & Milliken, 1999). Four years ago Ahrens and Khalifa (2013) described governance processes research as a “black box” and concluded that little is known about “the key processes that can make corporate governance effective” (p. 5).

Carver (1990) was the first to propose a framework of governance that can help a board define the distinct and separate roles of governance and management called the Policy Governance® (PG) model. Carver posited the board’s role as having the ultimate authority and accountability for organizational performance. A key principle of Policy Governance is the clarity in which the board delegates the means of organizational performance and operational authority to the CEO through policies. Another core concept is that organizational performance is equivalent to CEO performance (Carver, 1990).

Carver pointed out barriers leading to ineffective performance or problems in board governance. For example, boards often do not delegate effectively to management (i.e., CEO) — see John and Miriam Carver on PG — nor do boards have an effective system for monitoring management performance. Often the board’s focus is on administrative — rather than governance — issues. Carver’s work stimulated a good deal of discussion and literature on governance systems and processes. No matter what your position on Policy Governance or Carver’s work, we owe Carver thanks for opening up the discussion about what constitutes effective board behaviors and what may actually make a difference in organizational performance.

Note: There are four predominant theories about governing board behaviors: agency theory, stewardship theory, resource dependency theory, and stakeholder theory (for explanations and analysis of these four theoretical perspectives, go to the National Center for Biotechnology Information website).

References:
Ahrens, T., & Khalifa, R. (2013). Researching the lived experience of corporate governance. Qualitative Research in Accounting & Management, 10(1), 4-30. doi:10.1108/11766091311316176

Brown, W. A. (2005). Exploring the association between board and organizational performance in nonprofit organizations. Nonprofit Management & Leadership, 15(3), 317-339. doi:10.1002/nmi.71

Carver, J. (1990). Boards that make a difference: A new design for leadership in nonprofit and public organizations. San Francisco, CA: Jossey-Bass.

Forbes, D. P., & Milliken, F. J. (1999). Cognition and corporate governance: Understanding boards of directors as strategic decision-making groups. Academy of Management Review, 24(3), 489-505. doi:10.5465/AMR.1999.2202133

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