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How two‐tier boards can be more effective

How two‐tier boards can be more effective Purpose – This study seeks to explore how non‐executive directors address governance problems on Dutch two‐tier boards. Within this board model, challenges might be particularly difficult to address due to the formal separation of management boards' decision‐management from supervisory boards' decision‐control roles. Design/methodology/approach – Semi‐structured interviews and a questionnaire among non‐executive directors provide unique insights into three major challenges in the boardrooms of two‐tier boards in The Netherlands. Findings – The study indicates that non‐executive directors mainly experience challenges in three areas: the ability to ask management critical questions, information asymmetries between the management and supervisory boards and the management of the relationship between individual executive and non‐executive directors. The qualitative in‐depth analysis reveals the complexity of the contributing factors to problems in the boardroom and the range of process and social interventions non‐executive directors use to address boardroom issues with management and the organization of the board. Practical implications – While policy makers have been largely occupied with the “right” board composition, the results highlight the importance of adequately addressing operational challenges in the boardroom. The results emphasize the importance of a better understanding of board processes and the need of non‐executive directors to carefully manage relationships in and around the boardroom. Originality/value – Whereas most studies have focussed on regulatory initiatives to improve the functioning of boards (e.g. the independence of the board), this study explores how non‐executive directors attempt to enhance the effectiveness of boards on which they serve. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Corporate Governance Emerald Publishing

How two‐tier boards can be more effective

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Publisher
Emerald Publishing
Copyright
Copyright © 2014 Emerald Group Publishing Limited. All rights reserved.
ISSN
1472-0701
DOI
10.1108/CG-02-2013-0018
Publisher site
See Article on Publisher Site

Abstract

Purpose – This study seeks to explore how non‐executive directors address governance problems on Dutch two‐tier boards. Within this board model, challenges might be particularly difficult to address due to the formal separation of management boards' decision‐management from supervisory boards' decision‐control roles. Design/methodology/approach – Semi‐structured interviews and a questionnaire among non‐executive directors provide unique insights into three major challenges in the boardrooms of two‐tier boards in The Netherlands. Findings – The study indicates that non‐executive directors mainly experience challenges in three areas: the ability to ask management critical questions, information asymmetries between the management and supervisory boards and the management of the relationship between individual executive and non‐executive directors. The qualitative in‐depth analysis reveals the complexity of the contributing factors to problems in the boardroom and the range of process and social interventions non‐executive directors use to address boardroom issues with management and the organization of the board. Practical implications – While policy makers have been largely occupied with the “right” board composition, the results highlight the importance of adequately addressing operational challenges in the boardroom. The results emphasize the importance of a better understanding of board processes and the need of non‐executive directors to carefully manage relationships in and around the boardroom. Originality/value – Whereas most studies have focussed on regulatory initiatives to improve the functioning of boards (e.g. the independence of the board), this study explores how non‐executive directors attempt to enhance the effectiveness of boards on which they serve.

Journal

Corporate GovernanceEmerald Publishing

Published: Jan 28, 2014

Keywords: The Netherlands; Board of directors; Boardroom effectiveness; Boardroom challenges; Boardroom independence; Non‐executive directors; Boardroom dynamics; Boardroom interventions; Two‐tier boards

References