Leadership style in a board of directors: implications of involvement in the strategic decision-making process

Abstract

A key question regarding the impact of the board of directors (BOD) on a firm’s strategic choices is why some BODs are highly involved in the strategic decision-making process and others are not. We offer a novel explanation pertaining to the importance of individual non-executive board members’ attributes in leading such processes of involvement. Specifically, our research sheds light on the question of why an individual board member with particular qualities acts differently when serving on different boards. We explore the dynamics that emerge within the BOD that enable the involvement of such a member. Evidence is derived from fifteen open interviews conducted with non-executive board members, and analyses of twenty strategic decision events in a variety of companies (fourteen public, four private, one nonprofit and one government-owned company; six very large, seven large, four mid-sized and three small companies). Our findings highlight the importance of the BOD leadership style, the potential sources of leadership power and their influence on the work environment and norms that develop within the board with regard to its involvement. We point to the challenges that non-executive board members face in different environments and their considerations in choosing whether and how to promote the BOD’s involvement. Finally, we demonstrate the importance of the expert and referent sources of power and the shared values within the BOD in shaping the context and dynamics of the BOD’s involvement.