I got into the business of studying boards about 25 years ago, a few years after this journal was founded. (My initial book foray into corporate governance was Pawns and Potentates: The Reality of Corporate Boards, published by HBS Press in 1989). Since that time, the good news is that many young academics have focused their research on understanding various aspects of boards, e.g., who serves on them, how they function, and the decisions they make. But don’t go rushing to the academic journals for new practice ideas. There is little of practical value there. While the articles are conducted to meet the standards of academic rigor, there is no parallel requirement for practical relevance.
This is not surprising because most academics, especially young ones, have never been near a boardroom nor are they likely to have met a real director. Further, board meetings are not public forums for valid reasons: they are confidential events and scholars are not welcome. So most of the information in academic studies is from publically available sources — who’s on the boards and their demographics (occupation, age, ethnicity, and gender) and the publicly announced decisions that the board has made. None of this is sufficient to tell the researcher anything about how the board functions, how directors interact with each other and with managers, whether regulations are working, and how boards could be more effective.
Sounds pretty dismal? It is, but don’t give up on scholars yet. There are some, myself included, who understand that the key to doing useful research about boards is recognizing that the most obvious characteristic is that they are “small groups” and scholars do know a lot about such groups — most fundamentally, that they are systems. (This thesis is explored more fully in Back to the Drawing Board; others focused on this approach include researchers Rakesh Khurana and Katharina Pick in their 2005 Brooklyn Law Review article, “The Social Nature of Boards,” and Richard Leblanc and James M. Gillies in their 2005 book, Inside the Boardroom: How Boards Really Work and the Coming Revolution in Corporate Governance, published by Wiley.)
If we use such ideas, we can say a lot about how boards function and why. For example, in Back to the Drawing Board, my co-author, Colin Carter, and I discussed how boards could use this perspective to consider the role they should play in strategic thinking and decision-making. I am confident that these same ideas can be used to consider how to more effectively design other aspects of the work boards should do.
I know from personal experience over the years that there are consultants to boards who think this way and who help directors consider how to better design their boards to facilitate group decision making from a systems perspective. I can only hope that some readers will get intrigued with the possibility of taking this approach themselves. While the literature on boards as systems is still very small, as I’ve suggested earlier, the idea of understanding small groups as systems has a long history, and the literature about boards from that perspective is rich.
The alternative to ignoring the potential of thinking of boards as systems is a continuation of the current state, where academics contribute very little to the practical improvement of boards and board leaders themselves design their boards based on regulatory requirements or fads that they read or hear about. From my perspective, it’s not the best way to use the academic knowledge that is available.
2016 Fourth Quarter