I’m doing some work involving board evaluation, board disclosures and board balance. Whilst there are plenty of theories on board evaluation and disclosures, I can hardly lay my hands on any on board balance. Does anyone out there have an idea of theories in that area. I’m applying a standard board balance description as one where the group must be the right size, with the right balance of executive and non-executive directors, and have a good mixture of abilities, knowledge and experience. Any publications will also do.
Hi Erick,
Try the following links. You might find a solution to your question.
ftp://72.167.42.190/safetyleaders/secure_sharing/CMS/10196703.pdf
http://www.hbs.edu/faculty/Publication%20Files/04-044_7a4c9c93-f76f-4e14-8918-dfa910c554cd.pdf
http://www.directorscounsel.com/downloads/corporate_governance_and_board_composition_article.pdf
https://webkuliah.unimedia.ac.id/ebook/files/board-survey.pdf
http://hbswk.hbs.edu/item/3708.html
http://corpgov.law.harvard.edu/2013/02/01/preserving-balance-in-corporate-governance/
http://www.ijcem.org/papers72011/72011_11.pdf
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1297747
http://www.oecd.org/brazil/48510039.pdf
Regards
Jorge Gomes
Dear Erick,
There are a number of papers talking about board composition; I am sure you scanned them. However, I would like to emphasize that there is no right and wrong size of a board. All sizes can be justified. You may want to check my two papers about the effect of corporate governance on bank performance.
I review, in this paper of mine, the typical recommendations, based on good governance theory, for 'good' Boards (click link)
Roger Martin, in his "Fixing the Game: How Runaway Expectations Broke the Economy, and How to Get Back to Reality" makes a number of interesting observations about board balance. Particularly in the case of a publicly traded corporation, the board has a tricky task at the intersection between the expectation-driven equity market and the real markets the corporation is serving. Board members therefore have to act on behalf of outside shareholders, but also interact closely with executives who work for the real market yet are typically exposed to incentives arising from stock-based compensation. These executives have deep inside knowledge, and are thus always a few steps ahead of both directors and shareholders. This makes the job of the directors―ensuring that executives do not use their preferential access to information at the expense of shareholder value―a very difficult, if not impossible one. For Martin, this results in the hypothesis that (executives of) publicly traded corporations that mostly need a highly competent and balanced Board are not likely to have such a board, whereas (executives at) corporations that have already embraced a long-term perspective (not contingent on the opportunism of the capital markets) are most likely to have a strong and balanced board, although they are less likely to benefit from it.
I've extended this argument in a book forthcoming with Oxford University Press, titled "The Quest for Professionalism: The Case of Management and Entrepreneurship".
Many thanks to all of you for these exciting insights.Georges, your out of the box thinking and extended arguments are a great starting point for a theory on board balance.
Hi,
I suggest here a balance between new and old members of the board: experience and knowledge of the firm versus competencies of newcomers, see
Y Amihud, S Stoyanov, "Do staggered boards harm shareholders?", Journal of Financial Economics, 2017 forthcoming
Best regards
Theories of Corporate Governance
- Agency Theory.
- Stewardship Theory.
- Resource Dependency Theory.
- Stakeholder Theory.
- Transaction Cost Theory.
- Political Theory.