Pawn or Vigilant Watchdog? How Board Vigilance and Board Tenure Moderate the Effects of Executive Tenure on Board Functioning

Abstract

Manuscript Type: Empirical. Research Question/Issue: Building on the notion that boards need to be willing and able to exercise their tasks, this paper examines how the level of cognitive conflict between executives and the board and board tenure shield boards from executive entrenchment. Research Findings/Insights: By employing a unique multi-source dataset comprised of board members of Dutch financial firms, we show that whilst executive-board cognitive conflict reduces the negative effect of executive tenure on board monitoring, it also strengthens the negative effect of executive tenure on board advice provision. Our results also demonstrate, however, that high levels of board tenure may prove beneficial because it limits the negative moderating effect of executive-board cognitive conflict on advice provision, while stimulating its positive effect for monitoring. Theoretical/Academic Implications: This study provides theoretical advancement of the governance literature by demonstrating that monitoring executives and providing advice to executives are differently affected by executive-board cognitive conflict. In a broader sense, our findings suggest that governance research may benefit from studying configurations of board characteristics that interactively impact board effectiveness. Practitioner/Policy Implications: Best practices attuned to increasing the board's monitoring role should not be viewed in isolation from their effects on the board's advice provision role. Practitioners and regulators also need to be aware that high levels of board tenure cannot be equated with a non-critical attitude towards executives and that limiting board tenure may actually reduce board efficacy.