Beyond the Black Box of Demography: board processes and task effectiveness within Italian firms

• Author: Fabio Zona,Alessandro Zattoni
• Published date: 01 September 2007
• DOI: http://doi.org/10.1111/j.1467-8683.2007.00606.x
• Date: 01 September 2007

Beyond the Black Box of

Demography: board processes and

task effectiveness within Italian f‌irms

Fabio Zona* and Alessandro Zattoni

In this paper we analyse boards of directors as workgroups, i.e. groups of people that perform

one or more tasks within an organisational context. Building on previous studies, we devel-

oped a model that relates group’s social-psychological processes to three different board tasks:

service, monitoring and networking. We tested our model through a survey on 301 large

manufacturing f‌irms in Italy. Our f‌indings support the idea that (a) process variables and, to a

limited extent, demographic variables signif‌icantly inf‌luence board task performance; (b)

board processes have a different impact on each specif‌ic board task; (c) board task performance

varies depending upon f‌irm and industry characteristics.

Keywords: Board processes, board task performance, Italy

Despite the increasing attention on boards

of directors, there is still scant evidence

on what determines their effectiveness (Daily

et al., 2003; Roberts et al., 2005). Previous

studies failed to provide clear evidence of the

hypothesised relationship between the board’s

demographic characteristics and the f‌irm per-

formance (Dalton et al., 1998, 2003; Hermalin

and Weisbach, 2003). This lack of empirical

evidence may be due to the adoption of

specif‌ic theoretical and methodological

approaches: the almost exclusive reliance on

agency theory and the extensive use of demo-

graphic variables may constrain our under-

standing of boards of directors (Daily et al.,

2003).

Agency theory dominates studies of corpo-

rate governance (Dalton et al. 1998; Daily et al.,

2003). Indeed, the agency framework pro-

vided the f‌irst satisfactory explanation of the

separation between ownership and control

in large American corporations (Jensen and

Meckling, 1976). It describes the board of

directors as an instrument designed to deal

with the conf‌lict of interests between manage-

ment and shareholders (Shleifer and Vishny,

1997) and places great emphasis on the board’s

monitoring role. Furthermore, from a method-

ological viewpoint, agency theory has the

advantage of being simple and of being

founded on a well-accepted model of human

behaviour (Daily et al., 2003); these features

have contributed to its widespread diffusion.

The extensive reliance on agency theory may

have led scholars to place too much emphasis

on the board monitoring task, diverting their

attention away from other perspectives (Daily

et al., 2003; Stiles and Taylor, 2001) such as

resource dependence (Pfeffer and Salancik,

1978) or stewardship theory (Davis et al., 1997).

Only few scholars have tried to compare

agency theory with competing approaches –

such as institutional theory (Judge and Zeith-

aml, 1992) – or to combine agency theory with

other complementary perspectives – such as

resource dependence (Hillman and Dalziel,

2003).

As to demographic variables, most research

on boards of directors has focused on estab-

lishing a relationship between these variables

(e.g. board size, CEO duality, outsider ratio

and CEO ownership) and the board or the f‌irm

performance (Daily et al., 2003; Johnson et al.,

1996). However, the ability of demographic

variables to capture the characteristicsof inter-

mediate processes leading to board effective-

*Address for correspondence:

Bocconi University, Strategic

Management Department,

Viale Isonzo 23, Milan, 20135,

Italy. E-mail: fabio.zona@

unibocconi.it

852 CORPORATE GOVERNANCE

Volume 15 Number 5 September 2007

© 2007 TheAuthors

Journal compilation © 2007 BlackwellPublishing Ltd, 9600 Garsington Road,

Oxford, OX4 2DQ, UK and 350 Main St,Malden, MA, 02148, USA