View from the top: what directors say about board process

Abstract

PurposeThis paper aims to use the argument that formal regulations alone may not be the defining factor in improving corporate governance and the decision making process of the BOD.Design/methodology/approachBased on 20 semi‐structured interviews with board chairs, members of corporate boards, CEOs, and upper/executive management at 12 Canadian companies, a bird's eye view is taken from the top. A content analysis of the interviews was performed. a clear picture about the interaction and behaviour of directors emerged. Subsequently, three objectives that are required for effective decision‐making were developed: knowledge; motivation; and transmission channels/internal control. The analysis offers three critical objectives, which all boards should endeavour to accomplish.FindingsThese interviews demystify board process and provide the bases for three critical objectives for effective corporate governance: ascertain and embellish the knowledge base of directors; motivate directors to share and gather information; and ensure clear and fluent transmission channels exist.Practical implicationsThe usual board measures such as CEO duality, insider and outsider ratio, number of board members and directors' share ownership may not be the only critical determinants of board effectiveness.Originality/valueConventional notions of decision making have neglected key human faculties and individual characteristics that combine to determine organizational outcomes. This paper fulfils a need for research in the area of board processes and board decision making and provides a roadmap to improve corporate governance within organizations.