The Apex body of a corporate entity, i.e., a Board, continues to court controversies about its effectiveness in the popular press and management literature. The views expressed are on either end of the spectrum. Some see the ultimate answer to the well-being of a company “Nothing is more important to the well being of a corporation than its board of directors.” At the same time, there are others whose perspective is “the corporate board of directors is largely useless if mostly harmless institution carried on out of inertia.” The truth lies somewhere in between, depending upon a host of factors.
An information-processing-centric perspective of a Board’s role and few other interesting anecdotes are offered in the Academy of Management Annals (2016). In the article, the authors look beyond the Board Structure, Director Motivation, and Qualifications & abilities to establish the disconnect between the theoretical arguments and empirical findings. They diverge from the conventional view to raise a question, “Is it reasonable to expect that boards can offer
effective ongoing monitoring of firms, even if we assume that directors are sufficiently qualified and motivated?”
They argue that the existing assumptions about board monitoring and what directors are expected to do in their role might not be realistic. They conceptualize the board as an information-processing group and offer the barriers that prevent information processing by its board of Directors. Do you, as a Director or KMP, resonate with their ideas.
The barriers to the information processing by Directors may be identified and removed by ensuring that the opportunity of Board Evaluation addresses individual, group dynamic, and contextual factors. Reach out to us if you wish to improve the flow of information and consequent decision-taking.