Distinguishing between the board and management in company mission: Implications for corporate governance

Headnote

Keywords Mission statements, Corporate governance

Abstract A relationship between board/management "involvement" and "awareness" with organizational mission and their link to "employee commitment" and "organizational performance" was modeled by drawing on previous research. The model was tested with data from 339 large Canadian and US organizations. It was determined that "mission awareness" on the part of both the board and senior management is an important consideration in the determination of employees' commitment to the mission. However, the impact of board and management involvement with the mission is not identical. The results emphasize the strong and important role that the board performs when it is actively engaged in the development of the organization's mission.

Introduction

What is the proper role of the Board of Directors in terms of setting an organization's mission? Should boards restrict their activities to simply being aware of their organization's mission (with or without formal final approval) or should they be more actively engaged in terms of determining, evaluating, influencing and eventually approving the mission? Furthermore, what is the organizational outcome on intellectual capital development and performance when this takes place? While for many it may seem that these questions should have been addressed long ago, it is surprising that even today, after the recent scandals of Worldcom, Enron and Tyco, there is no clear definitive answer. An important factor contributing to this situation is the fact that there have been no empirical research studies investigating the potential impact or consequences that varying levels of board involvement with an organization's mission statement may have. Consequently, this study tackles this problem head-on by assessing the performance implications of both board awareness of and involvement with organizational mission.

Mission statements

Of all the management tools employed in the world at present, the one that has been cited as the most frequently used - and most popular - is the organizational mission statement (Bart, 1997a). In its most basic form, a mission statement is designed to answer the most fundamental questions for every organization: Why do we exist? What are we here for? What is our purpose? As such, mission statements form the corner-stone and the starting-point for any major strategic planning initiative (Bart et al., 2001). They are the launching-pad for setting organizational objectives....