The Quad Model for Identifying a Corporate Director’s Potential for Effective Monitoring: Toward a New Theory of Board Sufficiency

Abstract

We introduce a new theoretical perspective for predicting effective monitoring, which involves a two-stage logic. First, we focus on individual directors, arguing that effective monitoring is highly likely when a given director possesses certain qualities. Based on prior research not previously coalesced, we set forth this baseline proposition: a director’s likelihood of being an effective monitor in any given domain (say, financial matters) is greatly increased when he or she has all four of the following qualities: independence, expertise in that domain, bandwidth, and motivation. Second, we extend this quadrilateral model—or quad model—to make propositions at the board level. We argue that it is not sufficient for these four qualities to be distributed among all directors on a given board, since this makes it likely there will be no directors who can rise to the challenging task of monitoring. We propose that having just one quad-qualified director will be more predictive of board efficacy than will be any customary board descriptors. And we posit that if a board has two or more quad-qualified directors who can bolster and amplify each other, the company’s likelihood of governance failures will be especially reduced. We discuss theoretical and practical implications and lay out a research agenda.