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Recent research developments underscore the need for research on the processes that link board demography with firm performance. In this article we develop a model of board processes by integrating the literature on boards of directors with the literature on group dynamics and workgroup effectiveness. The resulting model illuminates the complexity of board dynamics and paves the way for future empirical research that expands and refines our understanding of what makes boards effective.
Recent reviews of management research on boards of directors (Johnson, Daily, & Ellstrand, 1996; Pettigrew, 1992) have indicated that, although much has been learned, the time is ripe for reflection and for the exploration of new directions in board research. In particular, Pettigrew has observed that in many studies of boards, "Great inferential leaps are made from input variables such as board composition to output variables such as board performance with no direct evidence on the processes and mechanisms which presumably link the inputs to the outputs" (1992: 171). Pettigrew goes on to argue that future research on boards should focus on the actual behavior of boards, thereby supplementing our knowledge of what boards look like with evidence of what boards do.
The importance of studying board behavior directly is underscored by evidence that practitioners-in some cases, boards themselves-are also beginning to pay more attention to what boards do (Lublin, 1997; Schine, 1997). Whereas in previous decades boards of directors could be characterized as essentially formal and passive institutions that seldom came under public scrutiny (Mace, 1971), boards today are increasingly finding their actions closely monitored by institutional investors (Heard, 1987; Judge & Reinhardt, 1997) as well as by the media (Byrne, 1997; Orwall & Lublin, 1997).
Further evidence of interest in board behavior can be seen in the increased level of legal scrutiny to which boards are subjected and in the growing competitiveness of the market for corporate control (Kesner & Johnson, 1990; Monks & Minow, 1995). Moreover, Business Week reported recently that the board of Campbell Soup conducted an internal assessment, in which it determined
that it wasn't devoting enough time to long-range strategic planning; that some colleagues didn't speak up enough in meetings; that the quality of some committee reports needed upgrading; and that the company had to...