Conditions for boards' governing corporations

Article type: Research Article

Authors: Weber, C. Edward

Affiliations: School of Business Administration, University of Wisconsin-Milwaukee, Milwaukee, WI 53201, U.S.A.

Abstract: Boards of directors can govern corporations effectively only when issues flow to them, their decisions are within the limits of rationality and appropriate approaches to decision making are applied. Issues flow to boards under seven conditions: strategic issues exist; the corporate ideology is that directors should govern; boards are part of dominant or rival coalitions; directors' status is equal to or greater than the chief executive's; procedures require problems to flow to boards; the load of problems on boards' agendas is light; and boards have independent sources of information. Boards' decisions are within the limits of rationality under five conditions: strategic issues are ambiguous; corporate ideology is one of directors' governance; causal relations exist between strategy and the corporate environment; directors are associated with dominant or rival coalitions; and directors' view of knowledge accepts contradictions and ambiguity. Four approaches to decision making are associated with boards' governance. The use of analytical decision making is a condition inimical to boards's governing, but dialectical and bargaining processses are sufficient for their governance. The case of fortuitous decision making leaves boards' governance problematic. Chairmen of boards need to be sensitive to changing conditions and assert the board's leadership only when the conditions are appropriate.

Keywords: Corporations, governance, boards of directors, strategic issues

DOI: 10.3233/HSM-1982-3207

Journal: Human Systems Management, vol. 3, no. 2, pp. 119-128, 1982