Boards are fascinating groups to study for a number of reasons. They do not resemble intact teams in the strict organisational sense. They differ in a number of significant ways.
For example, boards comprise a group of equals – seasoned, credentialed and expert in one or more fields – generally of equal status and independent minded. Their roles are entirely “cognitive” and their effectiveness depends entirely on how they interact and work as a group, not on the execution of an organisational outcome. In this context real power may lie with the governed i.e. management. This is because board members will always be operating with less information than management about the company situation or about running the company. This information asymmetry means the director’s task is to keep well informed without doing management’s job and frustrating management in the process.
Adding to this complexity of governing, is the reality that board members do not have the interaction frequency enjoyed by many other teams or the opportunity to develop the team norms that build up with regular and frequent interaction. They generally meet, as a group, episodically usually up to 12 times a year, not allowing for the ties to develop and strengthen as in the case of intact teams.
Finally the role of the board is ambiguous in nature as much of board tradition today has arisen out of norms derived from regulatory codes and based around the principal agent paradigm that has been influential over many decades. Such theories either ignore or are less sensitive to identities, interests, motivations and interactions between directors, as governance actors, embedded in the company context. How the director construes their own role on the board and how they fit into the board group will have an influence on how they individually approach their board work. That is to say a director is confronted with a network of relationships into which they must fit themselves, when they join a board. This is complicated by power differentials that may exist in the boardroom, which may influence how a director’s knowledge and skill is valued and used and the willingness of a director to exercise influence and independent mindedness.
Much of the theory of corporate governance has continued to be explicated using economic principles and infers what boards should do rather than what they actually do. Such theories while making an important contribution do not offer complete explanations of the board as a complex “social system”. A fuller more rounded understanding of boards will come by drawing on social psychology constructs, and undertaking board research with less reliance on the use of questionnaires and surveys, which has up to now only provided ‘distant perceptions of effectiveness’.
A deeper understanding of the human side of governance has a long way to go.
Written by Meena Thuraisingham
Director and Principal, Talent Invest
Meena Thuraisingham is a consultant, author, executive coach and thought leader in the area of People and Culture. An organisational psychologist by training, she founded TalentInvest, a niche consulting practice, advising global clients in the UK, Asia and Australia in Capability and Culture. Meena is also a regular speaker internationally on leadership effectiveness and culture change.
Her published books are The Secret Life of Decisions, Careers Unplugged and Derailed!. Get Your Copy Today