How Long Shall We Talk? How Much Shall We Interact? The Impact of Board Room Communication on Board Functioning

Accounting

Further details

This study examines boardroom communication patterns and how they affect board functioning. Boards of directors are expected to operate as a ‘group’ – rather than being a sum of directors - hence aggregate their views prior to coming to decisions: research shows that the very nature of boards subject them to process-losses that limit their potential. This paper takes a board-level unit of analysis and explores whether and how the structure of board interactions matter. Video-observations of three board meetings are complemented with interviews with directors and documentary evidence. The rich data allowed an in-depth analysis of boardroom communication during meetings. Findings suggest that high levels of board interactions and evenness in directors’ contribution are associated with high-quality decisions. Qualitative data further clarify that board interactions enable the creation of accountability within the board (e.g. questioning and probing) and strategic decision-making. Our study offers the following contributions to board research: information infrastructure at a board-level matters and it is associated with better board functioning; the boardroom communication patterns revealed that in addition to the information provision activity an information processing activity is required to ensuring board functioning; next, we document that board interactions are the generative mechanism through which boards execute their control and strategy tasks, hence providing a tentative explanation for why theoretically distinct tasks oftentimes overlap in practice.

KEYWORDS: Board of Directors; Accountability; Decision-Making; Information Exchange; Video-Observations.