Board Characteristics and Involvement in Strategic Decision Making: Evidence from Swiss Companies

Authors: Ruigrok, Winfried; Peck, Simon I.; Keller, Hansueli

Source: Journal of Management Studies, Volume 43, Number 5, July 2006 , pp. 1201-1226(26)

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Abstract:

Boards of directors have a number of roles. The board's monitoring function has been the subject of much work. Less examined is the role that the board has in setting company strategy. This paper uses agency and network perspectives in developing and testing the relationship between board characteristics and involvement in strategic decision making. Using primary and secondary data, our results suggest that the level of board involvement in strategic decision making is related to a number of governance variables. We demonstrate that involvement is generally lower where boards are highly interlocked. We also show that certain types of board interlocks - namely horizontal (same industry) and those involving direct links with the banking sector - are particularly associated with this negative effect. There is weaker evidence that board strategic involvement is lower where the roles of company chief executive and chair are combined. We find no evidence that factors such as board size, or the percentage of outside directors per se are related to board involvement in strategic decision making. In doing so, this paper adds to the growing literature synthesizing the structural features and processes of boards.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1467-6486.2006.00634.x

Affiliations: 1: University of St Gallen; Case Western Reserve University; University of St Gallen

Publication date: 2006-07-01