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  • October 2021
  • Article
  • Management Science

Directors' Perceptions of Board Effectiveness and Internal Operations

By: J. Yo-Jud Cheng, Boris Groysberg, Paul M. Healy and Rajesh Vijayaraghavan
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Abstract

We contribute to the growing literature on the effectiveness of corporate boards by examining the effect of two insights that have been largely unexplored in prior studies that use public data. First, since boards’ responsibilities are wide-ranging, more holistic performance measures may better capture the full range of their duties than specific public actions and outcomes (e.g., disclosure of risk management processes, financial restatements, acquisition returns, CEO turnover). And second, because corporate boards share many characteristics of other types of teams, their effectiveness is likely to be influenced by their internal operations. To examine the performance effects of these insights, we use data from 577 directors of U.S. public firms that responded to a survey we conducted in 2015–2016 and qualitative data from interviews of 75 directors. Our study establishes a strong relation between director perceptions of board performance effectiveness and internal board operations. Further, by highlighting the critical role of internal operations, identifying areas of relative strength and weakness in boards’ effectiveness in various activities, and probing director perceptions of their primary responsibilities, we are able to offer concrete suggestions for future research on board effectiveness.

Keywords

Boards Of Directors; Corporate Governance; Governing and Advisory Boards; Performance Effectiveness; Perception

Citation

Cheng, J. Yo-Jud, Boris Groysberg, Paul M. Healy, and Rajesh Vijayaraghavan. "Directors' Perceptions of Board Effectiveness and Internal Operations." Management Science 67, no. 10 (October 2021): 6399–6420.
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About The Authors

Boris Groysberg

Organizational Behavior
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Paul M. Healy

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More from the Authors
  • Beamery: Using Skills and AI to Modernize HR By: Boris Groysberg, Alexis Lefort, Susan Pinckney and Carolina Bartunek
  • Revenue Recognition at Stride Funding: Making Sense of Revenues for a Fintech Startup By: Paul M. Healy and Jung Koo Kang
  • The LPGA’s Long Drive Toward Gender Equity (B) By: Boris Groysberg and Alexis Lefort
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