Board of the Directors as an Active Participant in the Strategic Decision-Making Process: Theory and Practice (Empirical Evidence)

Abstract

The aim of this paper is to provide an overview of the world-wide discussion on the role of boards of directors in the strategic decision-making process. The first part outlines the evolution of the boards’ role in corporations over the last three decades. The second one presents the latest studies in this field, including the author’s own research, along with key conclusions and their implications for future studies of this kind. The main thesis of the paper is the need to create a new model of the board, playing a more active role in the strategic decision-making process. Active boards of directors increase their power inside corporations and, crucially, improve the quality of strategic decisions made by companies. However, according to research conducted by P. Stiles (2001,) McKinsey & Co. (2005) and D. W. Anderson, S. J. Melanson and J. Maly (2007), most boards are still not directly involved in formulating company strategy. Also Polish supervisory boards (the German model), investigated by the author of this paper, primarily perform monitoring and control functions, though their members believe that they should be advisory and initiating bodies as well. Finally, one should bear in mind that active and knowledgeable boards are an important factor in preventing crisis situations, e.g. by forcing managers to fully account for their strategic decisions and to provide alternative solutions.