Winning the Board Game : Increasing the Strategic Involvement of Boards of Directors

University essay from Uppsala universitet/Företagsekonomiska institutionen; Uppsala universitet/Företagsekonomiska institutionen

Abstract:

After the financial crisis and several corporate scandals, efforts to improve the quality of corporate governance have been made but extended regulatory actions can be seen as insufficient as issues still arise. According to several scholars and practitioners one way for boards to become more efficient is by increasing their involvement in strategy. However, there are discrepancies in what the boards are expected to do and what they are capable of doing. By researching what the barriers are for boards’ active involvement in strategy, the purpose of this paper is to fill, or at least partly explain, this empirical gap. Palepu (2012) has identified four potential barriers for boards’ strategic involvement; the role of the board, external pressures, access to information and boardroom dynamics. Based on Palepu’s framework 17 board members were interviewed with the aim to explore underlying issues and problems preventing strategic work in the boardroom. The results of this study show that the potential barriers for strategic involvement have two different effects on strategy. The role of the board, as well as the external pressure affect the amount of time spent on strategy in the boardroom. The boardroom dynamics and the access to information on the other hand have an impact on the quality of the strategic discussions. These four factors may then limit boards’ involvement in strategic questions if not handled correctly. Two main areas that have shown to be of utmost importance in improving the strategy engagement and the board work in full are increasing the level of engagement of the individual director and having more diversified boards in large. Diversification and higher levels of engagement are thereby two key factors which should be prioritized in order to ensure a sustainable development of corporate governance with more efficient boards actively involved in strategy. 

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