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A framework for diagnosing board effectiveness

Nicholson, Gavin J. & Kiel, Geoffrey C. (2004) A framework for diagnosing board effectiveness. Corporate Governance: An International Review, 12(4), pp. 442-460.

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Abstract

Pressure on boards to improve corporate performance and management oversight has led to a series of inquiries and reports advocating governance reform. These reports largely reflect an agency perspective of governance and seek to ensure greater board independence from and control of management.

While board independence is important to good governance, we contend that frameworks, models and advice centred on one element of governance ignore the complexity of how boards work. We develop a holistic board framework of how boards work based upon the concept of board intellectual capital to address this concern.
Our framework proposes a series of inputs (company history, company constitution, legal environment) that lead to a particular mix of board intellectual capital. We contend that the balance of the elements of board intellectual capital will lead to a series of board behaviours. Further, the board needs to mobilize its intellectual capital to carry out a series of roles. The exact nature of these roles will depend on the company’s requirements. Thus, the governance outputs of organizational performance, board effectiveness and director effectiveness will depend on the match between the board’s intellectual capital and the roles required of it.

We conclude by demonstrating the benefits of this framework as a diagnostic tool. We outline how boards wishing to improve their governance systems can diagnose common governance problems by evaluating their own board’s capabilities in relation to the different components of the framework.

Impact and interest:

39 citations in Scopus
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23 citations in Web of Science®

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ID Code: 5005
Item Type: Journal Article
Additional URLs:
Keywords: Boards of directors, Board effectiveness, Board evaluation, director evaluation
DOI: 10.1111/j.1467-8683.2004.00386.x
ISSN: 1467-8683
Subjects: Australian and New Zealand Standard Research Classification > LAW AND LEGAL STUDIES (180000) > LAW (180100)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BUSINESS AND MANAGEMENT (150300) > Business and Management not elsewhere classified (150399)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Accountancy
Copyright Owner: Copyright 2004 Blackwell Publishing
Copyright Statement: The definitive version is available at www.blackwell-synergy.com
Deposited On: 14 Sep 2006
Last Modified: 29 Feb 2012 23:23

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