Board processes revisited: an exploration of the relationship between board processes, board role performance and board effectiveness in comparable European listed companies

• DOI: https://doi.org/10.1108/CG-08-2020-0361
• Published date: 21 June 2021
• Date: 21 June 2021
• Pages: 1337-1361
• Subject Matter: Strategy,Corporate governance
• Author: Peter AM Jansen

Board processes revisited: an exploration

of the relationship between board

processes, board role performance and

board effectiveness in comparable

European listed companies

Peter AM Jansen

Abstract

Purpose –This study aims to analyse the relationships between board processes, board role

performance and board effectiveness for a cross-country (UK and Romania) sample of comparable

Europeanlisted companies.

Design/methodology/approach –The research design is quantitative in nature and based on the

survey method,a self-administered questionnairewhich was send to 342 chairmen of selected Romanian

and British listed companiesand which contains validated statements measured through a seven-point

Likert-typescale and grouped in validated constructs.

Findings –This study found further empirical evidence that board processes are stronger

determinants of board effectiveness than board characteristics and that board roles mediate the

relationship between board processes and board effectiveness. It further confirmed the relevance of

the three board processes mentioned by Forbes and Milliken (1999) in their seminal work on board

decision-making.

Research limitations/implications –The main limitation of this study is the relatively small number of

responses (55),which indicates a reduced reliability and generalizabilityof the results. However, several

steps were taken to assure the homogeneity of the sample, starting with a unique data set of firms of

comparablesize and industry representation.

Practical implications –This study is useful to boarddirectors and chairmen of listed companies, as it

can help them to betterunderstand and manage board behaviour.

Originality/value –This studycontributes to the limited body of research thatinvestigates specific board

processconstructs derived from the small team literatureand their effect on board effectiveness.

Keywords Corporate governance, Board role performance, Board effectiveness, Board processes,

Board characteristics, European listed companies, UK and Romania

Paper type Research paper

1. Introduction

This quantitative study aims to analyse the relationships between board characteristics,

board processes, board role performance and board effectiveness for a cross-country (UK

and Romania) sample of comparable (in size and industry type) European listed

companies. Specifically, it tries to establish whether there is a relationship between board

role performance and board effectiveness, whether board role performance mediates the

relationship between board processes and board effectiveness and whether board

Peter AM Jansen is based

at London School of

Business and Finance,

London, UK.

Received 29 August 2020

Revised 2 November 2020

29 January 2021

2 March 2021

3 March 2021

Accepted 23 March 2021

DOI 10.1108/CG-08-2020-0361 VOL. 21 NO. 7 2021, pp. 1337-1361, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 1337

processes are stronger determinants of board role performance and ultimately board

effectiveness than board characteristics.

It is inherently difficult to examine the effectiveness of corporate boards owingto issues

of access and confidentiality (Adams et al., 2010). Therefore, most academic research

on corporate boards has taken a financial-economic perspective, using mainly

quantitative research methods such as board characteristics and firm performance as

proxies for board effectiveness (Kuoppama

¨ki, 2018). This traditional focus on the

impact of board characteristics on firm performance has come under close examination

for several reasons. Firstly, it disregards processes that connect inputs and outputs

and particularly how board processes affect board role performance (Minichilli et al.,

2009). Secondly, from a methodological point of view, there has been a dependence on

historical data, which do not shed light on what actually happens inside boards

(Finkelstein and Mooney, 2003). Finally, the empirical support for the impact of board

characteristics on firm performance has been incongruent at best (Lawal, 2012). Only

in the past two decades research was conducted which tries to shed some light on this

“black-box” of actual board behaviour by exploring the relationships and behaviour

between board members mutually and between the board and management, following

Forbes and Milliken’s (1999) seminal work on boards of directors as strategic decision-

making groups (Basco and Voordeckers, 2015;Heemskerk, 2019;Pugliese et al.,

2015). In line with these authors, this research adopts a more holistic input-process-

output (I-P-O) model of board effectiveness, assuming that board processes are the

main micro-determinants of board effectiveness (Figure 1).

Nevertheless, there is sufficient reason to include key board characteristics such as board

size (Kumar and Singh, 2013), board composition (Fern

andez-Temprano and Tejerina-

Gaite, 2019), non-executive ratio (Gill, 2013) and CEO-Chair duality (Abels and Martelli,

2013), as they make relevant control variables, as shown by Minichilli et al. (2012) and can

help explain some of the board process outcomes, the main focus of this study.

Additionally, board characteristics also constitute excellent control variables. Control

variables are variables the researcher is not primarily interested in,but which might have an

effect on the dependent variable (DV) (i.e. board effectiveness) that the researcher wants to

eliminate (Saunders et al.,2016).

Using Huse’s and Gabrielssons’s (2004) taxonomy of board research, this study can be

categorized as behavioural,where the behavioural perspective focuses on decision-making

processes and interactions inside the boardroom. Furthermore, the focus of this study is

limited to listed companies. Firstly, there are more publicly available data available about

listed companies owing to disclosure requirements. Secondly, in most countries voluntary

codes of corporate governance have become subject to capital market mechanisms and

Figure 1 Input-process-output(I-P-O) model of board effectiveness

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