How can Board Members be Empowered if They are Spread Too Thin?
SAM Advanced Management Journal 2003, Autumn, 68, 4
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Publisher Description
In the post-Enron world, there are increasing calls for directors to be more active in monitoring corporate behavior and delivering returns to shareholders (e.g., Bexley and Duffy, 2000; Business Week, 2002). This continues a general trend of empowering more individuals within organizations to improve performance and increase responsiveness to stakeholders (e.g., Freeman and Gilbert, 1988). Far from being the passive, disinterested observers of the past, today's board members are expected to take a proactive role in several critical areas (Bexley and Duffy, 2000). Researchers have also come to recognize that boards perform several key functions (Phan, 2000). Board roles are often classified into three main categories: securing firm resources, administration and assistance to the top managers, and, most important, monitoring and control (Young, Ahlstrom, Bruton and Chan, 2001). When they fulfill these functions effectively, boards can enhance overall firm performance (Bexley and Duffy, 2000; Gompers, Ishii and Metrick, 2003), but if they are ineffective, firm performance can suffer (Monks and Minnow, 2001). Some observers are concerned that corporate directors may be failing in their responsibilities largely because of a lack of time and attention as duties become more complex and time consuming. One way board members overextend themselves is by joining multiple boards (The Economist, 2003). Because of these commitments, they may be too distracted to devote sufficient attention to each board they serve on (Rubin, 2002). In addition, some CEOs may attempt to subvert the governing function by trying to pack boards with overextended members who are unable to devote the needed time to the monitoring function (Phan, 2000).