The hidden linkages between the formal and the informal structures of the board of directorsa transnational empirical study on boardroom behaviour

Resumen

Due to the corporate collapses in the past, regulations on formal structures of corporate governance and especially the board of directors have been tightened all over the world. As those regulations did not bring about the expected improvement in board effectiveness, the idea of a missing piece in the puzzle of board effectiveness emerged. The focus shifted towards the behaviour of directors as individuals and the board as a group. It is claimed that the gap between what board roles suggest and what boards really do is the human side of corporate governance. Hence, it is the behavioural factors that determine whether positive or negative board dynamics emerge and how they affect the decision-making process. In order to analyse the reasons behind their emergence, widening the scope from agency theory to a pluralistic or multidisciplinary approach of corporate governance is necessary, taking into account especially theories from the field of social psychology, such as decision-making theories and theories on group effectiveness. Also, instead of focusing too much on agency theory by addressing mainly the monitoring role of the board, stewardship theory could lead to more promising outcomes focusing also on the board’s advisory and strategy role. Furthermore, behavioural factors cannot be measured directly in a quantitative way, which has led previous studies to use qualitative research methods with small sample sizes. In order to bring more light into boardroom behaviour, research on a large scale is needed. Therefore, this doctoral dissertation addresses the behavioural side of corporate governance by using the method of Structural Equation Modeling (SEM) applying the Partial Least Squares (PLS) approach to a large sample of 87 listed companies of 3 different countries. As a result, and based on the literature-supported idea that cohesiveness is the driver behind all board dynamics having a positive effect on the monitoring and the advisory board tasks, a measurement model for behavioural factors is proposed: informal or behavioural characteristics are connected to formal and directly measurable characteristics. The model is also tested for cultural differences between the United Kingdom, Germany and Spain as representatives of the Anglo-American system, the Continental European system and the hybrid system, respectively.