Board characteristics. The board characteristics that are most frequently discussed in academic research are the size of the board, background diversity, the representation of independent directors and the power relation between the CEO and the board. The characteristics each impact in their own way the effectiveness with which boards can fulfil their tasks and obligations. Board size The size of the board of directors has been proven to have a positive effect on the governance functions of the board. Large boards have a greater pool of available knowledge and expertise as well as more access to external networks that help in information gathering and problem solving. (Milliken & Xxxxxx, 1999) The larger size also makes it more difficult for the CEO to achieve a general consensus on actions that may not be in the best interest of the shareholders.(Xxxxxx & Xxxxxx, 2016) However, the larger a board becomes, the less cohesive it will be, with board members showing less commitment and being less satisfied due to the lack of participation. More potential interactions make larger boards more difficult to coordinate and can give rise to increased group conflicts. It is thus argued that larger board of directors, due to poor internal board processes, such as effort norms and cognitive conflict, slow down the strategic decision making. This makes them less likely to exhibit strategic change in turbulent environments, which is an important factor of board effectiveness with respect to their strategic role. Background diversity The board of directors consist of members with different underlying attributes, such as professional and educational background, technical know-how and personal characteristics. Each board member brings specific knowledge and expertise to the table in order to create value for the company. Having a greater board diversity is argued to facilitate the acquisition of critical resources for the organization. (Xxxxxx & Xxxxxx, 2016) It reduces the narrow mindedness of the board and can give rise to more creative solutions, due to the wider range of different perspectives. Milliken & Xxxxxx(1999) argue that boards need members that have either firm- specific knowledge or functional area knowledge and skills in order to make informed strategic decisions. High board diversity, however, has a negative effect on the board’s ability to take decisive action and initiate strategic change in turbulent environments. The large amount of different perspectives makes it more difficu...
Board characteristics. 4.3.2.1 Diversity on the board In various literature on board effectiveness, board diversity is widely discussed. Board members that bring various competencies and knowledge to the table, help the board in looking at complex issues from multiple points of view and improve its role as a challenger towards the management. The different directors in this empirical research also asses the background diversity within their boards to be very important. Several directors indicate that an equilibrium of competencies and representations should be present at the board. The more diverse the board is in terms of background, the more directors are able to challe nge the management and provide input form their experiences in the business world. Furthermore, director K argues that, when the board is diverse enough, it will automatically be able to balance a short- and long term focus. However, director F indicates that it is difficult to find directors with the right profiles, because if a person is too specialized in a certain field, he/she might not be independent anymore. Not only technological competencies are needed on the board, but competencies that progress the business, as is stated by directors L, I and X. These directors indicate that, in case of new technologies, several other aspects, such as financial and regulatory have to be considered. Next to technological competencies, HR, financial, marketing and legal profiles thus also have to be present in the board room. As an example, director L brings up the FDA approval process that is currently running for a disruptive technology of his company. As the management has no clue on how such a process is run, the legal expert in the board will take the lead in challenging and advising the management on how to deal with this. A final, interesting remark here, comes from director I, saying that, in the hospital, engineers are put first, mainly because they are process thinkers. This is needed, considering the complexity of the medical sector nowadays. As financial experts, are seldom real innovators, they mainly have an important support function in the board. This statement indicates that educational background could also be a criteria for appointing board members. Next to a well-diversified board with respect to background, directors D and K also advocate for rejuvenation at the board. Director D argues that an explanation for underrating digital photography by the multinational can be found in the fact that this b...
