The influence of board chairs on director engagement: A case‐based exploration of boardroom decision‐making

• DOI: http://doi.org/10.1111/corg.12234
• Published date: 01 May 2018
• Date: 01 May 2018

ORIGINAL ARTICLE

The influence of board chairs on director engagement: A case‐

based exploration of boardroom decision‐making

Pieter‐Jan Bezemer

1

|Gavin Nicholson

2

|Amedeo Pugliese

2,3

1

Auckland University of Technology, Faculty

of Business, Economics and Law, Department

of International Business, Strategy &

Entrepreneurship, 55 Wellesley St E, Auckland

1010, New Zealand

2

Queensland University of Technology, QUT

Business School, School of Accountancy,

Brisbane, Australia

3

University of Padova, Department of

Economics and Management, Padova, Italy

Correspondence

Pieter‐Jan Bezemer, Auckland University of

Technology, Faculty of Business, Economics

and Law, Department of International

Business, Strategy & Entrepreneurship, 55

Wellesley St E, Auckland, 1010, New Zealand.

Email: pieterjan.bezemer@aut.ac.nz

Funding information

Australian Research Council, Grant/Award

Number: DP07737330; QUT Business School;

University of Padova (DSEA Strategic Initiative

2016, Bird 163405)

Abstract

Manuscript type: Empirical

Research question/issue: This study seeks to better understand how board chairs,

as leaders and equals, shape the context for other directors to engage in their gover-

nance roles.

Research findings/insights: Using a combination of video‐taped board meetings

and semi‐structured interviews with directors at three corporations, we found a

generalized and negative association between chair involvement and directors'

engagement during board meetings.

Theoretical/academic implications: Our empirical results suggest that the chair's

role can be viewed as a paradox, requiring both (i) strong leadership to counter man-

agerial power, and (ii) a more subtle orientation as peer to fellow directors that

enables other board members to contribute to boardroom decision‐making. More-

over, our study revealed the transitory nature of both chair contributions and

directors' engagement during meetings, highlighting the potential and need for further

unpacking of the temporal dimensions of boardroom decision‐making processes.

Practitioner/policy implications: Our analysis suggests a revision of the implicit

prescription in the literature for board chairs to be active leaders who lead from the

front. Given that chair involvement appears to reduce director engagement during

meetings, our research hints at the need for a more supportive role of the chair during

boardroom decision‐making that is in line with non‐traditional leadership models

https://youtu.be/urcJHJHRXwc.

KEYWORDS

Corporate Governance, Chairpersons,Board Processes, IndividualDirector Issues, Qualitative Data

1|INTRODUCTION

Practitioners believe that the chair of a board has a strong influence

on effective corporate governance, particularly in Anglo governance

systems (Kakabadse & Kakabadse, 2007; Levrau & Van den Berghe,

2013; Roberts, 2002). Yet despite this practical importance, the aca-

demic literature highlights there is much to learn by “further examining

the board chair–firm performance relationship”(Withers & Fitza,

2017: 1352). Perhaps the key challenge in researching chairs lies in

the somewhat paradoxical nature of the position. On the one hand,

the chair holds no special legal authority (Baxt, 2009) and is uniquely

positioned in corporate life as “first among equals”(Pick, 2009). Yet

the chair is also widely considered the leader of the board (Furr & Furr,

2005; Garratt, 1999; Parker, 1990) and responsible for ensuring

effective board performance (Kakabadse & Kakabadse, 2007; Levrau

& Van den Berghe, 2013; Yar Hamidi, 2016).

Simultaneously being a leader and an equal complicates the

application of standard governance theory to the role of the chair. For

instance, agency theory would appear to rely solely on the leadership

dimension, emphasizing how a strong, independent chair can be

Received: 9 October 2016 Revised: 24 November 2017 Accepted: 22 January 2018

DOI: 10.1111/corg.12234

Corp Govern Int Rev. 2018;26:219–234. © 2018 John Wiley & Sons Ltdwileyonlinelibrary.com/journal/corg 219

important to balance CEO power and control management self‐interest

(Krause, Semadeni, & Cannella, 2014; Krause, Semadeni, & Withers,

2016;Withers & Fitza, 2017). Thus, separating the role of CEO and board

chair remains one of the most well‐accepted and long‐lived practitioner

recommendations for effective corporate governance (Aguilera &

Cuervo‐Cazurra, 2009; Zattoni & Cuomo, 2008). Yet nearly 20 years of

evidencesuggests that there is “no supportfor a systematic relationship”

between firm leadership structure and firm performance with multiple

meta‐analyses finding no clear relationship between firm performance

and the structure of the role (Dalton, Daily, Ellstrand, & Johnson, 1998:

280; Rhoades, Rechner, & Sundaramurthy, 2001). Somewhat counterin-

tuitively,Withers andFitza (2017)findthat itis the“equal”element ofthe

role of an independent chair—providing service and advice to manage-

ment—that appears better linked to firm performance.

The overall weight of literature suggests we need a nuanced view

on the role of a chair that provides perspective on the chair's position

as both a leader and an equal, with a particular emphasis on the con-

textual nature of how chairs may contribute. Early research that began

to diverge from a uniform application of agency logic highlighted that

the effect of role separation depended on the context of the firm—for

instance, separating the roles made more sense in stable, munificent

environments (Boyd, 1990), or when making decisions that more

clearly are about controlling agency costs, such as CEO remuneration

(Rhoades et al., 2001). When taken together with insights about the

importance of the advising role of an independent chair (Withers &

Fitza, 2017), this suggests that a good chair may need to do different

things at different times to be fully effective.

Practice‐oriented studies and advice have long provided a focus

that more easily integrates the leadership–equal status of the chair

by suggesting more generalized facilitative behaviors as important to

effective chairing of the board. For example, chairs are often seen as

facilitating the effective processing of information at the board table

via their role in developing and overseeing the agenda, ensuring direc-

tors are informed and participating, conducting the board meeting as

well as keeping track of decisions and their implementation (Harrison

& Murray, 2012; Kakabadse, Kakabadse, & Barratt, 2006; Leblanc,

2005). In agency terminology, their role is to facilitate the group's con-

trol of agency costs. Similar studies have pointed to the longer‐term

role that a chair plays in building the capacity of the board to engage

in its service or advising role by (i) composing and developing a com-

petent board (Neubauer, 1997; Parker, 1990; Roberts, 2002) and (ii)

managing relationships in and around the boardroom (i.e., building

strong ties with management and stakeholders, particularly share-

holders; Leblanc & Gillies, 2005; Yar Hamidi, 2016).

We see a way forward in addressing the complexity of the role in

studying how chairs go about their role of contributing to governance

in the boardroom. Given the notorious difficulties in obtaining access

(Leblanc & Gillies, 2005; Machold & Farquhar, 2013), there is very lim-

ited academic evidence of how chairs actually contribute during board

meetings. Consequently, several scholars have noted an “[overreli-

ance] on assumptions about board processes”(Krause et al., 2014:

270; Lorsch, 2017; Tuggle, Sirmon, Reutzel, & Bierman, 2010) and

the chair's role in governance research. We aim to answer calls for

“in‐depth qualitative studies of corporate governance, and specifically

of the role of the board chair”(Krause et al., 2014: 281) by studying

boards as “dynamic social systems”(Lorsch, 2017: 2) using “first‐hand

observation of boardroom behaviours”(p. 26). While we recognize

that a significant part of the chair's role might be executed outside

the boardroom (Huse, 2005; Kakabadse et al., 2006) and/or focus on

the chair–CEO relationship (Kakabadse et al., 2006; Krause et al.,

2014), we believe studying the chair's behavior in the boardroom is

important as it is the only arena in which boards have legal authority

to take decisions and is a core place for individual directors

discharging their legal duties (Baxt, 2009; Lawler & Finegold, 2006).

It also provides an opportunity to better understand the important

relationships between the chair and other directors (Vandewaerde,

Voordeckers, Lambrechts, & Bammens, 2011), another subject that

remains understudied in the literature.

Studying three board chairs in action allows us to illustrate how

chair behaviors affect the contributions of their fellow directors and

in so doing develop the literature in two ways. First, our results reveal

an unexpected pattern of influence that underlines the leader/equal

nature of the chair's role. In contrast to the prevailing prescription of

a strong chair, actively leading from the front to counterbalance the

CEO's power (Furr & Furr, 2005; Krause, 2017; Vandewaerde et al.,

2011), our findings highlight it is more important for the chair to behave

in a way that enables other directors to contribute. This hints at a less

“visible”role for the chair, more in line with concepts such as shared

leadership (Conger & Lawler, 2009; Vandewaerde et al., 2011), servant

leadership (Greenleaf & Spears, 2002), and transformational leadership

(Cikaliuk, Erakovic, Jackson, Noonan, & Watson, 2015; Dinh et al.,

2014). Effective chairing appears to rely on harnessing the power of

the group rather than relying on the chair's individual power per se.

Second, by documenting the transitory and variable nature of

boardroom behaviors, our research offers a potential explanation for

why boards composed of capable and motivated directors may not

always make the best decisions. The results document that both board

chair behaviors and directors' engagement vary significantly within

meetings. This means it would be difficult to imagine a uniform level

of role execution across items (i.e., their critical questioning and

provision of useful advice), a fact not unexpected in lengthy meetings.

However, our results suggest the chair plays a critical role in orchestrat-

ing the engagement of the group and so underlines the potential of

exploring the temporal dimensions of boardroom processes (Bezemer,

Nicholson, & Pugliese, 2014; Nicholson, Pugliese, & Bezemer, 2017;

Pettigrew, 1992; Pye & Pettigrew, 2005) in the pursuit of a better

understanding of board decision‐making and effectiveness.

The remainder of this paper is structured as follows. The next sec-

tion reviews prior research on the role and impact of the board chair

and develops our two central research questions that guided our

inductive study of boardroom decision‐making. We then describe

our data and methods before discussing the results emerging from

our research. Finally, we elaborate on our findings, their implications,

and avenues for future studies.

2|LITERATURE REVIEW AND CENTRAL

RESEARCH QUESTIONS

There is a broad consensus in the corporate governance literature

that effective board decision‐making is crucial to good corporate

220 BEZEMER ET AL.