Abstract
This article provides a brief overview of the literature on board of director performance, highlighting the difficulties in attempting to directly measure the performance of boards of directors and how various studies have tackled this challenge. As an illustration, I show that two current measures of board of director performance, board meeting activity and director attendance, suggest that the boards of Asian firms do not compare favorably to the boards of firms from developed markets. Suggestions for future research on the performance of corporate boards are provided, as well as implications for board of director practices in Asia.
Highlights
Boards of directors are tasked with monitoring and advising firm management and play an important role in representing and safeguarding the interests of shareholders
How can we separately identify the influence the board of directors has on these firm outcomes? The simple answer is that we cannot
How can shareholders ensure that boards of directors are performing their monitoring and advising functions to the best of their ability? This article provides a brief overview of the literature, highlighting the difficulties in attempting to directly measure the performance of boards of directors
Summary
Boards of directors are tasked with monitoring and advising firm management and play an important role in representing and safeguarding the interests of shareholders. This is a question I have been pondering for a while and in seeking out different opinions on the issue, I was fortunate to interact with a group of company secretaries at a recent event in Hong Kong Their take on board performance is that a board of directors has performed well if they have made the best possible decisions with the information they have available. I found this view interesting as it suggests that to truly measure board performance, we should compare the actual decisions of the board to the optimal decisions that the board should have made, if they had optimal information. This is an extremely difficult, if not impossible undertaking. Wouldn’t it be interesting to know how many directors received a grade of “A” or “F” for their board performance during the year!
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