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Article
Publication date: 20 February 2017

Gavin Nicholson, Amedeo Pugliese and Pieter-Jan Bezemer

Corporate accountability is a complex chain of reporting that reaches from external stakeholders into the organization’s management structure. The transition from external…

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Abstract

Purpose

Corporate accountability is a complex chain of reporting that reaches from external stakeholders into the organization’s management structure. The transition from external to internal accountability mechanisms primarily occurs at the board of directors. Yet outside of incentive mechanisms, we know surprisingly little about how internal actors (management) are held to account by the representatives of external shareholders (the board). The purpose of this paper is to explore the process of accountability at this transition point by documenting the routines used by boards to hold the firm’s management to account. In doing so, we develop the understanding of the important transition between internal and external firm accountability.

Design/methodology/approach

An inductive, case-based approach identifies recurrent behaviour patterns in two matched boards over three video-taped meetings. Sequential analysis of coded group and individual behaviours provides insight into boards’ accountability routines.

Findings

The boards engaged in clear, recurrent accountability routines. Individuals on the boards play different roles in these routines depending on the issue before the board, allowing both directors and managers to hold each other to account. The outsiders (directors) both challenge and support the insiders (managers) during board discussions, switching their behaviours with different agenda items but maintaining a consistent group level of support and scepticism across the meeting. This allows for the simultaneous development of trust and verification at the group level, a necessary condition for effective accountability.

Research limitations/implications

As board relationships and organisational context are highly variable, future research should concentrate on testing the generalizability of the results across different board and shareholder structures.

Practical implications

The results call into question the current governance focus on the independence of the individual director, as the authors identify that all directors appear to act as agents at one time or another in a meeting. Accountability at the boardroom level requires an effective group process not usually addressed in governance recommendations or regulation.

Originality/value

This study provides unique insights into board dynamics, documenting the accountability implications of group behaviours. By focussing on the group process, the authors highlight the potential mismatch of monotonic, individual-level approaches to governance and accountability prevalent in current agency approaches.

Details

Accounting, Auditing & Accountability Journal, vol. 30 no. 2
Type: Research Article
ISSN: 0951-3574

Keywords

Article
Publication date: 1 March 2004

Gavin J. Nicholson and Geoffrey C. Kiel

To date, corporate governance research agendas have tended to concentrate on one particular role that a board performs. For instance, agency theory concentrates on the…

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Abstract

To date, corporate governance research agendas have tended to concentrate on one particular role that a board performs. For instance, agency theory concentrates on the monitoring role, resource dependence theory concentrates on the board providing access to resources and stewardship theory concentrates on the board’s advice‐giving or strategic role. While these approaches provide practitioners with useful guidelines regarding issues such as board independence, we contend that practitioners need to take care not to act on the recommendations from a single theory in isolation from the others. To address this concern, we provide a model of board effectiveness that uses the construct of board intellectual capital to integrate the predominant theories of corporate governance and illustrate how the board can drive corporate performance. We further contend that boards that wish to improve their performance need to review their intellectual capital. We conclude by linking the model to a practitioner‐focused framework that identifies four key areas on which a board must concentrate to develop its intellectual capital.

Details

Corporate Governance: The international journal of business in society, vol. 4 no. 1
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 19 June 2020

Natalie Elms and Gavin Nicholson

The purpose of this paper is to explore why different directors feel different levels of accountability toward board tasks.

Abstract

Purpose

The purpose of this paper is to explore why different directors feel different levels of accountability toward board tasks.

Design/methodology/approach

The paper employs a reflexive three wave data and analysis process culminating in a rich data set of 49 interviews with Australian directors and 15 h of boardroom observations.

Findings

Differences in role identification lead directors to perceive their accountability differently resulting in wide variation in levels of firm specific knowledge, eventually affecting their breadth of contribution to board tasks.

Research limitations/implications

Researchers should question the application of traditional governance theory (such as agency theory) if it fails to account for individual differences in intrinsic self-interest.

Practical implications

Selecting board members for their functional knowledge alone may not always produce optimal outcomes for the board and firm. Board induction processes and ongoing director training are important tools to inform and remind directors of their role and accountabilities on a board.

Originality/value

This paper establishes that the strength of directors' identification with either the director role or expert role affects what they feel accountable for, the development of firm specific knowledge and long-term efficacy as a director.

Details

Accounting, Auditing & Accountability Journal, vol. 33 no. 8
Type: Research Article
ISSN: 0951-3574

Keywords

Content available
Book part
Publication date: 25 October 2017

Abstract

Details

Mid-Range Management Theory: Competence Perspectives on Modularity and Dynamic Capabilities
Type: Book
ISBN: 978-1-78714-404-0

Article
Publication date: 23 September 2014

Pieter-Jan Bezemer, Gavin Nicholson and Amedeo Pugliese

– This study aims to open up the black box of the boardroom by directly observing directors’ interactions during meetings to better understand board processes.

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Abstract

Purpose

This study aims to open up the black box of the boardroom by directly observing directors’ interactions during meetings to better understand board processes.

Design/methodology/approach

We analyze videotaped observations of board meetings at two Australian companies to develop insights into what directors do in meetings and how they participate in decision-making processes. The direct observations are triangulated with semi-structured interviews, mini-surveys and document reviews.

Findings

Our analyses lead to two key findings: while board meetings appear similar at a surface level, boardroom interactions vary significantly at a deeper level (i.e. board members participate differently during different stages of discussions), and factors at multiple levels of analysis explain differences in interaction patterns, revealing the complex and nested nature of boardroom discussions.

Research implications

By documenting significant intra- and inter-board meeting differences, our study challenges the widespread notion of board meetings as rather homogeneous and monolithic, points towards agenda items as a new unit of analysis and highlights the need for more multi-level analyses in a board setting.

Practical implications

While policymakers have been largely occupied with the “right” board composition, our findings suggest that decision outcomes or roles’ execution could be potentially affected by interactions at a board level. Differences in board meeting styles might explain prior ambiguous board structure-performance results, enhancing the need for greater normative consideration of how boards do their work.

Originality/value

This study complements existing research on boardroom dynamics and provides a systematic account of director interactions during board meetings.

Details

Qualitative Research in Accounting & Management, vol. 11 no. 3
Type: Research Article
ISSN: 1176-6093

Keywords

Book part
Publication date: 25 October 2017

Ron Sanchez, Jeremy Galbreath and Gavin Nicholson

In this paper we develop a model for researching the influence that a board of directors can have on improving an organization’s sustainability performance. Our model…

Abstract

In this paper we develop a model for researching the influence that a board of directors can have on improving an organization’s sustainability performance. Our model explores sources of cognitive flexibility of boards needed to recognize and respond to the need for improved sustainability performance. We first define concepts of sustainability, sustainability competence, and sustainability performance. We then analyze two forms of board capital (a board’s human capital and its social capital) and three aspects of a board’s information processing (its patterns of information search, discussion and debate, and information absorption) that we suggest affect a board’s cognitive flexibility and thereby influence whether a board decides to adopt sustainability performance goals. Our model also suggests that an organization’s strategic flexibility – as represented by its current endowments of resource flexibilities and coordination flexibilities – will moderate the relationship between a board’s decision to adopt sustainability performance goals and an organization’s subsequent achievement of those goals. We also suggest that our model is generally relevant to any research seeking to predict the influence of boards on strategic change in many forms, not just to research focused on sustainability issues.

Details

Mid-Range Management Theory: Competence Perspectives on Modularity and Dynamic Capabilities
Type: Book
ISBN: 978-1-78714-404-0

Keywords

Article
Publication date: 11 September 2009

Marion Hutchinson

The purpose of this paper is to identify some key issues for the analysis of corporate governance based on the papers within this special issue including the Guest…

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Abstract

Purpose

The purpose of this paper is to identify some key issues for the analysis of corporate governance based on the papers within this special issue including the Guest Editor's perspectives.

Design/methodology/approach

The five papers included in this special issue are summarized and their main contribution to the literature is highlighted.

Findings

The paper collectively deal with the role and impact of corporate boards on the quality of information provided to capital markets.

Practical implications

The theoretical and empirical research included in the special issue advance the understanding of corporate governance which provides impetus for practitioner and policy change.

Originality/value

The normative concepts of best practice need to be validated by empirical testing in the context of firms and their institutional settings. This suite of papers provides evidence of the effectiveness of corporate governance in improving accounting quality.

Details

Accounting Research Journal, vol. 22 no. 2
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 13 July 2015

Natalie Elms, Gavin Nicholson and Amedeo Pugliese

Director selection is an important yet under-researched topic. The purpose of this paper is to contribute to extant literature by gaining a greater understanding into how…

Abstract

Purpose

Director selection is an important yet under-researched topic. The purpose of this paper is to contribute to extant literature by gaining a greater understanding into how and why new board members are recruited.

Design/methodology/approach

This exploratory study uses in-depth interviews with Australian non-executive directors to identify what selection criteria are deemed most important when selecting new director candidates and how selection practices vary between organisations.

Findings

The findings indicate that appointments to the board are based on two key attributes: first, the candidates’ ability to contribute complementary skills and second, the candidates’ ability to work well with the existing board. Despite commonality in these broad criteria, board selection approaches vary considerably between organisations. As a result, some boards do not adequately assess both criteria when appointing a new director hence increasing the chance of a mis-fit between the position and the appointed director.

Research limitations/implications

The study highlights the importance of both individual technical capabilities and social compatibility in director selections. The authors introduce a new perspective through which future research may consider director selection: fit.

Originality/value

The in-depth analysis of the director selection process highlights some less obvious and more nuanced issues surrounding directors’ appointment to the board. Recurrent patterns indicate the need for both technical and social considerations. Hence the study is a first step in synthesising the current literature and illustrates the need for a multi-theoretical approach in future director selection research.

Details

Management Decision, vol. 53 no. 6
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 11 September 2009

Yi Wang and Judith Oliver

The purpose of this paper is to investigate the relationship between board composition and firm performance variance in the context of recent corporate governance reforms…

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Abstract

Purpose

The purpose of this paper is to investigate the relationship between board composition and firm performance variance in the context of recent corporate governance reforms, based on the agency and organisational literatures.

Design/methodology/approach

This paper uses 384 of the top 500 Australian companies as its dataset. Board composition measures include the percentages of affiliated, executive and independent members on the board. Firm risk is represented by the standard deviation of shareholder return. Several control variables are introduced in the regression analysis.

Findings

The results show a negative impact of executive directors on subsequent risk. Affiliated and independent directors, however, have no significant effect on the level of performance variance. Blockholders give a positive influence on firm risk. Moreover, companies with poor dividend payout or low managerial shareholdings tend to be riskier.

Research limitations/implications

This paper does not examine the actual risk preference of individual directors, which could involve an attitudinal survey of board members. Future research may also examine the specific attributes towards risk for each type of affiliated directors.

Practical implications

The findings cast doubts on the hope that promoting board independence would reduce agency conflicts relating to managerial risk aversion, and support the proposition that, although firms may comply with the demands for more independent directors, they could employ a number of tactics to neutralize the power of outsiders.

Originality/value

The empirical work surrounding this topic has been scant. This study may present the first Australian empirical evidence on the relationship between board composition and firm performance variance.

Details

Accounting Research Journal, vol. 22 no. 2
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 11 September 2009

Sebahattin Demirkan and Harlan Platt

The purpose of this paper is to investigate, using data on US manufacturing firms, how and when corporate governance affects managers' decisions to use discretionary…

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Abstract

Purpose

The purpose of this paper is to investigate, using data on US manufacturing firms, how and when corporate governance affects managers' decisions to use discretionary accruals and thereby artificially influence company financial reports.

Design/methodology/approach

Three‐stage least squares is employed to study the relationship between financial status, corporate governance and financial reporting discretion. The sample spans the years 2001‐2003 during a severe downturn in the US stock market. Financial status is measured with the Altman Z‐score.

Findings

A significant difference is found between firms not classified as healthy or failed (i.e. the mid‐range group) and the two extreme categories when examining governance quotient using a well‐known index. A positive relationship is found between discretionary accruals and the governance index. Strong governance appears to reduce the incidence of mid‐range firms engaging in accruals management. The least healthy and the most distressed companies have the weakest relationship with discretionary accruals. By contrast, mid‐range firms are more likely to resort to discretionary accruals.

Practical implications

Non‐executive members of boards of directors are warned to be particularly vigilant about discretionary accruals with firms transitioning between healthy and high‐failure risk.

Originality/value

The relationship between firms' financial health and discretionary accruals reveals an agency problem in credit markets with financially stressed firms. More attention is required on firms whose financial condition is uncertain. Also, it is documented that significant findings of importance to the earnings quality and corporate governance literature by documenting the role of corporate governance on discretionary accruals and financial status.

Details

Accounting Research Journal, vol. 22 no. 2
Type: Research Article
ISSN: 1030-9616

Keywords

1 – 10 of 62