Abstract
The aim of this paper is to bring together some of the foundational and recent literature interlinking corporate governance and the leadership role of the board of directors. Strategic leadership is widely assumed to be a responsibility that defaults to the Chief Executive Officers (CEOs). However, in practice, what most CEOs do is strategic management rather than strategic leadership. While strategic management does share key aspects of strategic leadership CEOs are expected to prioritize the managerial side over the leadership side. This is just one of the situations in which the board-room assumes the leadership role. This paper discusses how boards of directors conduct the process of strategic leadership in their organizations. In recent years there has been an increasing interest among scholars to understand how boards strategize from a behavioral point of view. This growing interest has resulted in the development of various typologies regarding boards’ involvement in the strategic leadership processes.
Highlights
The board of directors is the highest administrative body of a company
Previous literature placed too much emphasis on the supervisory function of the board of directors derived from the preponderance of the agency theory (Ruigrok, Peck, & Keller, 2006); the discussion about the role played by the board of directors in strategy formulation is an issue that has been gaining increasing relevance, after the financial crisis of 2008–2009
Proof of this has been the incorporation into national legislation and voluntary codes of corporate governance of this function as part of the essential tasks of the board of directors
Summary
The board of directors is the highest administrative body of a company. For that reason its duties constitute the central axis of corporate governance (Du Plessis, Hargovan, & Harris, 2018). The board of directors is at the apex of the organization Their duties include both internal and external functions, such as monitoring senior management and being involved in the strategic direction of the enterprise. According to Pugliese and others (2009), in the last four decades research on the relationship between boards of directors and strategy has proliferated. In what follows the discussion has been organized to address the main concepts of strategic leadership, theories of corporate governance and the main functions of a board of directors as presented by different researchers. This section identifies the central ways by which the boards of directors carry out the strategic function in their companies. While doing so it points out the increasing disenchantment in the literature with agency theory as a means to understand boardroom behavior and the rise of alternatives like stewardship theory
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