Challenge in the boardroom: Director–manager question‐and‐answer interactions at board meetings

• Published date: 01 July 2023
• Author: Helen R. Pernelet,Niamh M. Brennan
• Date: 01 July 2023
• DOI: http://doi.org/10.1111/corg.12492

ORIGINAL ARTICLE

Challenge in the boardroom: Director–manager question-

and-answer interactions at board meetings

Helen R. Pernelet | Niamh M. Brennan

Lochlann Quinn School of Business, University

College Dublin, Dublin, Ireland

Correspondence

Niamh M. Brennan, Lochlann Quinn School of

Business, University College Dublin, Belfield,

Dublin D04 V1W8, Ireland.

Email: niamh.brennan@ucd.ie

Abstract

Research question/issue: Corporate governance codes of practice require non-

executive directors (NEDs) to challenge and question managers. Prior literature and

best practice guidance remain silent on the precise meaning of, and on how directors

might execute, “challenge”, and how management might respond. We explore the

ways in which NEDs challenge, question, and dissent during board meetings, and

how managers respond. We observe, audio-record, and video-record three boards

during nine board meetings. Our boards are unique in holding part of their meetings

in public and part in private.

Research findings/insights: Our dataset comprises 418 questions and 510 answers.

We develop a typology of NEDs' challenge/questions comprising six categories/48

subcategories and managers' responses/answers comprising eight categories/69 sub-

categories. Our findings support the assertion that NEDs may be reluctant to offer

moderate (i.e., constructive) challenge in public. We find significant differences

between the level of dissent and the types of answers offered in public versus in pri-

vate. We find an association between the type of question asked and the type of

answer provided. Who asks and answers questions varies significantly in public ver-

sus in private, as do the questions and answers by each board.

Theoretical/academic implications: Our empirical findings suggest board behavior

varies in the presence of an audience of stakeholders. In public, boards go through

the motions by engaging in the performativity of governance, while more substantive

governance occurs in private.

Practitioner/policy implications: We show that regulatory calls for robust challenge

by NEDs have not been met, at least judging by the three boards in our study. There

is a lack of guidance and advice on how NEDs should exercise challenge and how

managers might respond.

KEYWORDS

board of directors, board meetings, boardroom dynamics, challenge, corporate governance,

questions and answers, video-recorded observations

Received: 3 December 2021 Revised: 27 September 2022 Accepted: 30 September 2022

DOI: 10.1111/corg.12492

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium,

provided the original work is properly cited.

© 2022 The Authors. Corporate Governance: An International Review published by John Wiley & Sons Ltd.

544 Corp Govern Int Rev. 2023;31:544–562.

wileyonlinelibrary.com/journal/corg

1|INTRODUCTION

Robust debate and constructive challenge are considered essential

features of effective boards. Corporate governance codes of practice

require non-executive directors (NEDs) to challenge and question

managers, and managers are expected to provide information in

response. Commenting on corporate governance failure, Judge and

Talaulicar (2017, p. 5) observe, “…every time the ‘black box’of board

functioning …is opened up and found to be negligent, both policy-

makers, media officials, and business practitioners become con-

cerned.”Regulators then implement reforms, resulting in constantly

evolving corporate governance codes and best practice guidelines.

Following the 2008 financial crisis, the UK Walker Review (2009,

p. 12) observed: “The essential ‘challenge’step …appears to have

been missed in many board situations and needs to be unequivocally

clearly recognised and embedded for the future.”Similarly, the House

of Commons (2018, p. 4) enquiry into the failure of Carillion PLC

captures the requirement to challenge well: “The company's non-

executives failed to scrutinise or challenge reckless executives …

Philip Green [chairman] …was an unquestioning optimist when his

role was to challenge.”Yet, regulators provide little guidance on how

to perform challenge in the boardroom.

The UK Corporate Governance Code (Financial Reporting Council

[FRC], 2018a, p. 6) advises NEDs to “provide constructive challenge …

and hold management to account.”The accompanying Guidance on

board effectiveness (FRC, 2018b, p. 4) advises: “The boardroom should

be a place for robust debate where challenge, support, diversity of

thought and teamwork are essential features.”For the first time, the

2018 version of the Guidance on board effectiveness includes sample

questions for NEDs to ask management.

However, the literature and best practice guidance remain silent

on the precise meaning of “challenge”and how NEDs might most

effectively execute it. Furthermore, there is scarce literature or guid-

ance addressing the types of management responses and their ade-

quacy. Yet, together, the challenge and its response comprise the

most important interaction in boardrooms as they underpin directors'

and managers' accountability. We position our study within this criti-

cal aspect of board interactions, which until the recent development

of recording board meetings, could not be explored. We thereby

respond to calls to consider behavioral aspects of boards (Van Ees

et al., 2009). Kumar and Zattoni (2019, p. 6) suggest that researchers

use qualitative methods, data collection, and analysis to explore board

processes and dynamics, including “case studies, text analysis …and

video or [similar] type recording.”Accordingly, we use a combination

of these methods in this study to dissect NEDs' challenge behavior

and the associated question-and-answer patterns in board meetings.

We observed, audio-recorded, and video-recorded nine board

meetings, identifying all the questions asked and answered. Our

analysis generated 418 questions and 510 answers, from which we

developed our typology informed by the prior literature. Thus, for the

first time in the corporate governance literature, our exploratory study

starts to unpack boardroom interactions in the form of question-

and-answer patterns.

We make four contributions to the prior literature. First, we

explore question-and-answer board interactions, recognized as being

critical to board effectiveness, but which have not yet been the sub-

ject of any research per se. We develop a detailed typology of ques-

tions asked and answers provided in board meetings. Our typology is

both concept-driven and data driven, drawn from the prior literature,

regulatory sources, and our data. Thain and Leighton's (1994)

framework of director dissent, a proxy for challenge in the form of

level of questioning, is the starting point for the typology of questions.

Our study greatly deepens their framework. Further, we develop an

extensive typology of managers' responses.

Second, we capture our boards in vivo as they execute corporate

governance. Much qualitative research into boards of directors

focuses on the perspectives and experiences of board members,

often relying on participants' retrospective descriptions (Watson

et al., 2020). We extend the observation-based video recording and

audio recording in vivo methods for studying board interactions, which

Pugliese et al. (2015) initiated. Their suite of papers offers many new

insights into boardroom dynamics. We extend Pugliese et al. (2015)

on director speaking time, turn taking, and silence; Nicholson et al.

(2017) on accountability routine/interactions; and Veltrop et al.

(2021) on chair participative leadership, board–chief executive officer

(CEO) cognitive conflict, and director monitoring. However, our study

shines a light into a different corner of the black box, focusing on a

specific interaction, i.e., the question-and-answer. In addition, rather

than analyzing the interactions for precise meaning, we analyze pat-

terns and co-occurrences to provide higher-level insights.

Third, our study draws from three boardrooms that regulation

uniquely requires to meet in public to demonstrate transparency and

which also meet in private to discuss sensitive issues. This context

guides our study. Observing boards in both public and private fora

offers an additional level of behavior and interactions not considered

in prior boardroom research.

Finally, we also extend Brennan et al.'s (2016) conceptual model

of knowledge-sharing processes, which enable NEDs to overcome the

information asymmetry inherent in boardrooms. Brennan et al. (2016,

p. 153) ask, “if boardrooms are assumed to be places of open dialogue

with the perfect opportunity for frank exchange of views, why does

this not happen in practice in many cases?”Their question dovetails

with our findings. Our study reveals that franker exchanges take place

during the private board meeting sessions, away from the formal

board meeting sessions in public. Samra–Fredericks (2000, p. 251)

recognizes this pattern of behavior when she notes “that a lot of

‘important’talk occurs outside the boardroom, in corridors, car parks,

personal offices and the men's toilets.”

2|CONCEPTUAL UNDERPINNINGS

2.1 |Board interaction processes and patterns

Prior research acknowledges the importance of studying board inter-

actions. Researchers theorize board interactions as improving board

PERNELET AND BRENNAN 545