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Inside the “black box”: the performance of boards of directors of unlisted companies

Inside the “black box”: the performance of boards of directors of unlisted companies Purpose – The purpose of this paper is to explore two under‐developed areas of board research: the corporate governance of unlisted companies; and board behaviour, focusing on process factors that contribute to a board performing effectively. Design/methodology/approach – The Board Effectiveness Questionnaire was completed by 67 directors, to gather views on how their board currently operates and how they think it should operate, across various behavioural areas relating to the relationships, decision making, the working climate and predispositions. Analysis of “process losses”, the pattern of sub‐optimal board behaviour, allowed the testing of four hypotheses concerning board effectiveness. Findings – The 18 most important and five least important behaviours were identified, plus 12 showing the greatest “process loss”. Quality of team “relationships” is the main cause of loss whereas evidence for the impact of leadership style is mixed. Size of the board is related to overall performance of the board but number and proportion of non‐executive directors are not. Research limitations/implications – This is a “purposive, judgmental” sample of all unlisted companies, derived from those who were willing and able to respond. Only one director's view of each board was sought. Practical implications – The picture of the “ideal” board provides a checklist for a company wishing to assess its board's performance as a working group, highlighting key characteristics that should be reflected on when discussing director/ board performance. The gaps in board behaviour identified could help other boards assess their own performance and researchers to focus on these areas. Originality/value – The paper explores two under‐researched areas. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Corporate Governance Emerald Publishing

Inside the “black box”: the performance of boards of directors of unlisted companies

Corporate Governance , Volume 10 (3): 14 – Jun 15, 2010

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Publisher
Emerald Publishing
Copyright
Copyright © 2010 Emerald Group Publishing Limited. All rights reserved.
ISSN
1472-0701
DOI
10.1108/14720701011051929
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to explore two under‐developed areas of board research: the corporate governance of unlisted companies; and board behaviour, focusing on process factors that contribute to a board performing effectively. Design/methodology/approach – The Board Effectiveness Questionnaire was completed by 67 directors, to gather views on how their board currently operates and how they think it should operate, across various behavioural areas relating to the relationships, decision making, the working climate and predispositions. Analysis of “process losses”, the pattern of sub‐optimal board behaviour, allowed the testing of four hypotheses concerning board effectiveness. Findings – The 18 most important and five least important behaviours were identified, plus 12 showing the greatest “process loss”. Quality of team “relationships” is the main cause of loss whereas evidence for the impact of leadership style is mixed. Size of the board is related to overall performance of the board but number and proportion of non‐executive directors are not. Research limitations/implications – This is a “purposive, judgmental” sample of all unlisted companies, derived from those who were willing and able to respond. Only one director's view of each board was sought. Practical implications – The picture of the “ideal” board provides a checklist for a company wishing to assess its board's performance as a working group, highlighting key characteristics that should be reflected on when discussing director/ board performance. The gaps in board behaviour identified could help other boards assess their own performance and researchers to focus on these areas. Originality/value – The paper explores two under‐researched areas.

Journal

Corporate GovernanceEmerald Publishing

Published: Jun 15, 2010

Keywords: Boards of Directors; Group dynamics; Directors; Corporate governance

References

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