Boardroom Strategic Decision-Making Style: Understanding The Antecedents

131
Corporate Governance: An International Review, 2013, 21(2): 131–146
Boardroom Strategic Decision-Making Style:

Understanding the Antecedents
Bernard C. Bailey* and Simon I. Peck
ABSTRACT
Manuscript Type: Empirical

Research Issue: The purpose of this study is to develop an understanding of the antecedents that lead to boards embracing
either procedural rationality or political behaviors as a particular style of strategic decision making.
Research Findings: Semi-structured interviews with 29 directors and officers of eight publicly-traded US companies were
conducted. Of the eight boards analyzed, there were clear differences in the predominant style of decision making
operationalized by each. More importantly, however, the variance between boards that tended towards procedural ratio-
nality versus political behaviors as the predominant style of strategic decision making was explained by three primary
factors. These included: (1) shared mental models; (2) balanced power relationships between the board members and CEO,
as well as amongst individual board members; and (3) board chair leadership skills. Our data allow us to identify important
antecedents of these factors.
Theoretical Implications: We add to the work seeking to understand the processes associated with board level strategic
decision making. We augment decision-making theories relating to procedural rationality and political behaviors with
board-specific factors and their characteristics.
Practitioner Implications: We isolate a number of antecedents relating to the conduct of boards and the environment of
board decision making. We also highlight the roles of the board chair and the CEO for creating a boardroom environment
conducive to engaging in quality decision-making processes.
Keywords: Corporate Governance, Decision Making, Qualitative Methods, Procedural Rationality, Political Behavior
INTRODUCTION scholars have advocated gaining deeper insights into the

inner workings of the so-called “black box” of board opera-
T he primary work of boards of directors is to make deci-

sions (Leblanc & Gillies, 2005; Useem, 2003) but, despite
the centrality of decision making in corporate governance,
tions (Finkelstein, Hambrick, & Cannella, 2009; Leblanc &
Gillies, 2005; Leblanc & Schwartz, 2007; Pettigrew, 1992;
Roberts, McNulty, & Stiles, 2005; Vigano, Zattoni, Hoskis-
we have little insight into how board decision-making pro- son, & Huse, 2011). As McNulty and Pettigrew observed,
cesses differ or their outcomes. Much of the research on “there is a need to get closer to boards and directors to
corporate boards focuses on two board characteristics – collect primary data about processes of contribution, power,
structure and composition (Useem & Zelleke, 2006; Zahra & and influence” (1999:52).
Pearce; 1989) – though for more than a decade, there have Consistent with this call, this paper seeks to understand
been repeated calls for new directions in research on boards more about the context and processes by which boards make
and corporate governance, with a specific focus on develop- strategic decisions. This article examines the strategic
ing a better understanding of the working processes and decision-making styles deployed by boards of directors of
effects of boards of directors (Daily, Dalton, & Cannella, eight US publicly-traded (NASDAQ) companies and in
2003; Davis, 2005; Gabrielsson & Huse, 2004; Hambrick, doing so, we seek to define the factors that are most likely to
Werder, & Zajac, 2008; Pye & Pettigrew, 2005; van Ees, Gab- influence a board’s decision-making style.
rielsson, & Huse, 2009a). To facilitate this understanding, We conducted in-depth, semi-structured interviews with
29 corporate directors and officers from the selected eight
firms. The literature informs our ability to locate our boards
*Address for correspondence: Bernard C. Bailey, Weatherhead School of Management,
Case Western Reserve University, Cleveland, OH 44106, USA. Tel: 469-737-4033; on a typology by the extent to which they display levels of
Fax: 469-737-4405; E-mail: bcb34@case.edu procedural rationality and/or overt political behavior in
© 2012 Blackwell Publishing Ltd

doi:10.1111/corg.12008
132 CORPORATE GOVERNANCE
their strategic decision making. The conceptual home for The idea that the processes and outcomes of strategic deci-
this study is the literature on procedural rationality and sions are partly shaped by politics is also a central theme in
politics in decision making which we augment with the decision-making research (Dean & Sharfman, 1996; Eisen-
broader governance literature. Our analysis suggests that hardt & Zbracki, 1992) and represents a second style of
three key factors appear to drive board-level strategic deci- decision making. In organizations, it is common to find coa-
sion making that we synthesize and are consistent with the litions of people with competing interests relative to the
extant literature. These factors are (1) compatible shared outcome of strategic decisions and as a result they will tend
mental models; (2) a stable and balanced power relationship to exert influence – either formally or informally – on the
between the board members and CEO, as well as amongst decision-making processes (Pfeffer, 1972); as Hickson com-
individual board members; and (3) strong board chair lead- mented, “in a decision-making process . . . the search is not
ership skills. However, by going further into our rich quali- only for problem-solving information but for interest-
tative data, we are able to identify important characteristics accommodating alternatives” (Hickson, 1987:173). A nega-
that appear to determine these factors. Our analysis high- tive impact on strategic decision-making effectiveness is
lights these characteristics, and we use this to inform our observed when excess political behavior, such as the focus
underlying model of board-level strategic decision-making on personal interests at the expense of organizational goals
style and advance a number of propositions that extend our or the resistance to share relevant information, results in the
understanding of board decision-making dynamics. organization creating decision outcomes that fail to align
In the following section we provide a review of the rel- with its goals (Eisenhardt & Bourgeois, 1988; Ravasi &
evant theoretical background that informed this study. An Zattoni, 2006).
overview is then provided of the research methodology and Several common actions, often covertly applied, are asso-
data analysis techniques that were utilized. We then provide ciated with a political decision making (Pettigrew, 2001) style.
the findings from our research. The paper concludes by dis- These behaviors are enacted with the intent of enhancing the
cussing the significance of these findings while addressing power of one group over another in an effort to influence
the limitations of our study as well as outlining the impor- decision outcomes to their personal advantage and include
tant implications associated with future research and offline lobbying, controlling agendas, withholding informa-
practice. tion, behind-the-scenes coalition building, and cooptation.
Political behaviors contrast with procedural rationality in
THEORETICAL BACKGROUND that the problem definition, data collection, data analysis,
evaluation criteria, and presentation of alternatives can
Unlike routine decisions that are made on a regular basis in become “weapons used to manipulate decision outcomes
the normal course of carrying out the functioning of an towards personal ends rather than tools to inform a final
organization, strategic decisions are those choices that shape decision” (Dean & Sharfman, 1993:1071). While previous
a firm’s general direction by committing resources, setting research (Eisenhardt & Bourgeois, 1988) has shown political
important precedents, and/or directing important firm- behaviors to be detrimental to effective decision making,
level actions (Mintzberg, Raisinghani, & Théorêt, 1976). other studies have argued the instrumentality of political
Many normative decision-making models have been devel- behaviors to an effective strategic outcome (Pettigrew, 2001;
oped, all suggesting a series of stages which move the deci- Pfeffer, 1980). Like procedural rationality, we suggest that
sion from conceptualization through analysis of alternatives political behaviors represent a variable construct with highly
to final decision outcome (Bazerman, 2006). Progression political behaviors at one end and no political activity at the
through these stages, coupled with the interactions of team other.
members, including how they gather and share information,
build knowledge, and create decision outcomes define the Coexistence of Procedural Rationality and
decision-making processes within the boardroom (Carter & Political Behaviors
Lorsch, 2004).
Strategic decisions are complex decisions in that they often
Procedural Rationality and Politics in involve interdependent relationships, uncertain outcomes
and conflicting views held by the various actors. As a
Decision Making result they are often inherently political. In an effort to
Theoretical context for this study is provided from the define the relationship between procedural rationality and
insights of prior research into organizational decision political behaviors, Dean and Sharfman (1993) conducted a
making. The concept of rationality has had a long and pro- study involving 61 strategic decisions in which they found
found impact on organizational studies from economics to procedural rationality and political behaviors to be inde-
organization theory and psychology (Dean & Sharfman, pendent dimensions within the strategic decision-making
1993). Procedural rationality as a decision-making style is process. In other words, both styles of strategic decision
defined as the process by which decision makers collect making – procedural rationality and political behaviors –
information relevant to the decision and rely upon the analy- can be present or absent to varying degrees in each
sis of this information in making the decision (Dean & Sharf- decision.
man, 1993). Fundamental to this definition is the implicit It is important to emphasize that strategic decision-
understanding that rationality is a variable construct, making processes are patterns of behavior that develop in
anchored on one end by complete rationality and on the organizations and as such are visible to the actors involved
other by the absence of rationality. (Fredrickson & Mitchell, 1984). Political behaviors are dis-
Volume 21 Number 2 March 2013 © 2012 Blackwell Publishing Ltd

THE ANTECEDENTS FOR BOARDROOM DECISION MAKING 133
tinguishable from procedural rationality when it is clear that CEO (Pick, 2009). In one study, the dyadic relationship
either no over-arching organizational goal exists or if it does between the chair and the CEO was examined, identifying
exist the decision outcome is inconsistent with the attain- the critical role that an outstanding chairperson is able to
ment of the goal (Pfeffer, 1980). The extent to which boards play in raising submerged concerns as part of the decision-
deploy procedural rationality and/or political behaviors making process (Kakabadse, Kakabadse, & Barratt, 2006).
during their decision-making processes defines their Linking board structure, board process, and power influ-
decision-making style. Below we draw out several factors ences, McNulty, Pettigrew, Jobome, and Morris (2011) found
from the literature influencing the extent to which proce- evidence for differences in how chairs execute their roles
dural rationality or political behaviors are likely to be the and exercise influence on the board. In a separate study,
dominant mode of decision-making style. chair leadership was examined in a small business environ-
ment where a linkage between chairperson leadership effi-
cacy and enhanced involvement in firm strategy was found
Factors Determining Decision-Making Style under conditions of CEO duality (Machold, Huse, Minichilli,
Power in the Boardroom. An important theoretical per- & Nordqvist, 2011).
spective on strategic decision making involves the impact of
power differentials. For example, Tost, Gino, and Larrick Shared Mental Models and Decision Making. Signifi-
(2011) showed heightened team leader power to be attrib- cant research exists around a group-level phenomenon
uted to a reduction in team open communications. The vast referred to as the “group mind.” Terms such as shared
literature on power in the boardroom largely focuses on the mental models, shared assumptions, and belief structures
extent to which board power relative to CEO power affects are examples of the disparate terms used to explain an emer-
the incentives and ability of the former to monitor the latter gent group characteristic for how key matters are conceptu-
(Pearce & Zahra, 1991; Pettigrew & McNulty, 1998). West- alized, resulting in variances in team problem formulation,
phal and colleagues have been able to inform us as to how strategic decision making, team development, and perfor-
management and boards are able to either work around the mance (Klimoski & Mohammed, 1994). Researchers have
independent behaviors of directors or discipline them argued that how an issue is represented is often the most
(e.g., Westphal, 1998; Westphal & Khanna, 2003; Westphal crucial stage in the decision-making process (Mintzberg
& Milton, 2000; Westphal & Zajac, 1995). Similarly, other et al., 1976).
researchers have shown how management is able to avoid Shared mental models do not imply identical mental
the control mechanisms instituted by vigilant board direc- models, but rather assume that board members hold com-
tors (Walsh & Seward, 1990). patible, rather than divergent models; these in turn lead
Previous research on board power has examined the cau- to a common set of expectations. Shared mental models
sality of board structure and composition on firm perfor- have been found to enhance group decision making
mance. Surrogate measures of the power relationship (Walsh, Henderson, & Deighton, 1988). However, a delicate
between the board and corporate management, such as balance between compatible and divergent mental models
CEO duality, where the CEO occupies both the Chairman is required for effective decision making. For example,
and CEO roles (e.g., Boyd, 1995; Rechner & Dalton, 1991), extreme diversity in mental models has been found to be
and the ratio of non-executive to executive directors (e.g., destructive to group decision making due to excessive affec-
Daily & Dalton, 1993) are examples of this type of analysis. tive conflict (Amason, 1996). On the other hand, overly con-
Other sources of power include ownership, expertise, vergent mental models have resulted in a dysfunctional
and prestige. However, the possession of power is merely group decision-making dynamic known as “groupthink”
a route to potential power; board members’ and/or (Allison, 1971).
executives’ willingness and skill in exercising power In an examination of a multi-issue decision-making exer-
plays a critical role in how this gets manifested in board- cise, researchers found that the failure to develop shared
room decision-making processes (Pettigrew & McNulty, mental models underlying a decision was negatively
1998). related to the satisfaction and subsequent effective imple-
mentation of the decision (Mohammed & Ringseis, 2001).
Leadership in the Boardroom. CEO duality as a measure In a separate study, van Ginkel and van Knippenberg
of power has received considerable attention from both gov- (2012) suggest that team leaders play an important role in
ernance researchers and public policy analysts. However, creating shared mental models through their leadership
research findings provide no clear support for a relationship behaviors rooted in their own representation of the team’s
between board leadership structure and firm performance task.
(Dalton, Daily, Ellstrand, & Johnson, 1998). Effective board processes are more likely to result in better
In a similar vein, the leadership role of the board chair has board decisions and subsequently better firm outcomes
received considerable attention from practitioners and (Forbes & Milliken, 1999). However, extant research on stra-
scholars alike, with some arguing that the non-executive tegic decision making implies that there are myriad factors
chairman serves as the “lynchpin in improving the agency associated with the behavioral characteristics of board
relationship between capital (the shareholders) and enter- members as well as their interactions which impact the
prise (the management and company)” (Wolfe, 2010:29). decision-making processes deployed within the boardroom.
Others have argued that the legitimacy and authority of the The purpose of this study is to advance our theoreticial and
chair can serve to create a safe place for open dialogue, both empirical undertsanding of the antecedents of board
amongst board members as well as between the board and decision-making style.
© 2012 Blackwell Publishing Ltd Volume 21 Number 2 March 2013

TABLE 1
Description of the Eight Firms Studied
Company* Number of Annual Significant change Chair Board Number of CEO Chair
employees revenues during past 2 yrs. size interviews tenure tenure
Burning Tree 1323 $526M Sale of asset / New CEO Non-exec 9 3 1 yr. 7 yr.
Columbia 553 $98M Acquisition / New CEO Non-exec 6 5 2 yr. 8 yr.
Congressional 216 $42M Divestiture / New CEO Non-exec 7 3 <1 yr. 7 yr.
En-Joie 450 $126M Major acquisition CEO 6 3 10 yr. 10 yr.
Las Colinas 203 $53M New CEO Non-exec 6 3 <1 yr. 3 yr.
Potomac 900 $165M Proxy fight – Board change Non-exec 7 4 2 yr. <1 yr.
Sawgrass 1400 $131M Multiple acquisitions Non-exec 8 4 10 yr. 38 yr.
Turnberry 646 $180M Board re-constituted CEO 10 4 13 yr. 13 yr.
*Pseudo-names provided to protect confidentiality.
RESEARCH METHOD making with greater board involvement (Eisenhardt & Bour-
geois, 1988). The companies were identified from a database
Given the nature of our theoretical discussion on how of approximately 1,100 firms in which one or more of the
boards of directors engage in decision-making processes, directors were members of a national association of corpo-
we employed a multiple-case approach which included the rate directors providing governance training and board edu-
robustness of comparative analysis (Eisenhardt, 1989; Yin, cational services for their members. Of the 1,100 firms, 71
1994) as well as the central mechanism for meaning making firms met the criteria for being publicly-traded high-
provided through narratives (Floersch, Longhofer, Kranke, technology firms. We then gathered detailed qualitative and
& Townsend, 2010). We deployed an iterative process quantitative data on these firms to assure they had a diffuse
(Glaser & Strauss, 2008), of constant comparison referring to ownership structure and had undergone at least one signifi-
the simultaneous collection and analysis of data, a process cant transformation during the past two years; assuring our-
that affects the size and composition of the sample based on selves that the board would have had to deal with at least
the identification and interpretation of emerging themes and one major strategic decision. We defined a significant trans-
patterns (Suddaby, 2006). By comparing evidence across formation as a strategic divestiture, merger or acquisition, a
several cases we were able to discern patterns while also major financing transaction, a change in the CEO, a majority
discovering the emergent themes related to the observed turnover of board membership, or a major change in the
differences. ownership structure of the company. The requirement for a
diffuse ownership structure gave us confidence that there
Sample would be minimal multiple interests associated with the
firm’s ownership, thereby setting profit maximization as
Our study was conducted on eight large, US publicly-traded potentially the board’s primary objective. Seventeen of the
(NASDAQ) technology firms. Gaining research access to firms met these criteria. We then approached these firms,
corporate boardrooms is extremely difficult. As Leblanc and from which the final eight were selected after agreeing to
Schwartz observed, boards “tend to be closed groups, bound participate in our research (see Table 1).
by confidentiality, privilege and custom, with significant
access difficulties and other practical limitations as well”
(2007:845). To overcome concerns with confidentiality, the
Data Collection
researchers assured complete anonymity to the firms under Our study followed a multiple-case embedded design,
investigation as well as the board members and company allowing us to conduct our analysis across several units
officers. The researchers also enhanced credibility and while examining both the content and processes associated
access by gaining sponsorship through the leadership of a with strategic decision making (Yin, 1994). For each
national directors’ organization. company, we first examined the backgrounds and demo-
Case selection relied upon both purposeful selection graphics of each board’s members, as well as the key execu-
(Maxwell, 2005) and theoretical sampling (Corbin & Strauss, tive officers. Next we reviewed the historical strategic
2008). We chose to limit our sample to publicly-traded activities of the company in an effort to ascertain the poten-
instead of privately-owned companies, allowing us to access tial issues brought to the attention of the board. These first
public documents for information on corporate strategic ini- two steps provided us with a contextual background to
tiatives as well as ownership structure, board composition, understand the observed decision-making processes. We
financial performance, and other pertinent board and then investigated each of the strategic decisions in an effort
company demographic information. to better understand how the issue was raised to the board
We targeted the high-technology sector which provided level, the deliberations and discussions that unfolded, and
an opportunity to address rapid-pace strategic decision finally how decision closure was attained.

Data collection involved two primary sources: archives Validity and reliability of the results were tested through
and interviews. Archival information was obtained from triangulation, analysis with multiple researchers, and dis-
publicly-filed documents, business press coverage, and a cussions with interviewees and industry experts. Strict con-
review of board minutes and agendas. However, the fidentiality and anonymity of all interviewees as well as
primary method of data collection was semi-structured their participant companies was maintained throughout the
interviews conducted with board members and key study.
company executives.
Semi-Structured Interviews. In-depth semi-structured

interviews were conducted with 29 board members and key
Data Analysis
executives of the eight firms. Interviews were conducted In the initial phase, within each case under our study, we
with three to five individuals from each of the eight firms. conducted thematic analysis with no a priori hypotheses.
Interviewees were selected with the intention of securing Thematic analysis is a commonly used process for encoding
the most knowledgeable and representative informants qualitative information that can be used in conjunction
associated with the board’s behaviors and decision-making with multiple qualitative methodologies (Boyatzis, 1998) to
processes. A diverse set of perspectives was sought in order elucidate descriptive patterns. The data were analyzed
to minimize the prospect of realizing a biased representation using software, Atlas.ti, by assigning open codes to the
of the actual proceedings. As a minimum, the chairman of interviews (line by line) in which we “broke the data apart
the board and the CEO were interviewed; the remaining and delineated concepts to stand for the blocks of raw
interviews were conducted with outside directors or data” (Corbin & Strauss, 2008:198). Portions of potentially
company officers who were intimately familiar with the salient text – “codable moments” – were identified and
board’s proceedings. labeled (Boyatzis, 1998). These “codable moments” were
The research interviews, which ranged from 40 to then assigned to either existing or newly created codes. We
90 minutes, were audio recorded and subsequently tran- continued to identify additional relationships between the
scribed by a professional service. To assure consistency in collected data and new discoveries by testing the coding
the interview process, all interviews were conducted by the schema as well as reviewing and analyzing patterns and
principal researcher. Short follow-up telephone interviews themes. These open codes were then grouped under more
were scheduled with a few respondents to clarify or amplify abstract codes – commonly referred to as axial codes – by
responses. While structured questionnaires were developed the patterns and themes that emerged from comparing
prior to the interview, the interviewer was at liberty to their shared meanings and characteristics. Greater confi-
advance the discussion into areas that appeared to provide dence in our coding reliability was established by having
additional value. one researcher working independently to code each of
We began the interviews by asking the informants to the interviews while a second researcher validated the
describe their personal and professional backgrounds. This process and the coding discipline. Validity of this data-
was followed by a description of a typical board meeting set was produced by double-checking to assure that the
including the agenda and how it was developed, what roles codes were: (1) consistently applied across all interviews
each board member played as well as the dynamics that (memos describing the meaning of each code were written
typically occurred between board members and the CEO. to assure consistency in definitions); (2) appropriately
The informant then described their own particular role on grouped under the axial codes; and (3) properly grouped
the board and any particular beliefs and values they felt were under the thematic codes.
critical in their boardroom interactions and deliberations. These themes were then organized under higher-level
The interview then turned to a recent strategic decision constructs to show how emergent themes could be used to
that the board was involved in. Consistent with critical inci- develop a conceptual framework for better understanding
dent interview techniques (Boyatzis, 1982; Flanagan, 1954; strategic decision making. A comparison of the within-case
McClelland, 1998), informants were asked to contrast coding outcomes reinforced our confidence in the reliability
approaches to decision making that they observed. The first of the assessment of the prevailing activities associated with
description was regarding a decision they felt was handled strategic decision making within the boardroom. In the next
particularly “effectively” by the board. The second entailed phase of analysis, drawing on case study methods, we
a decision that they felt was handled “ineffectively.” Infor- coupled our within-case analyses with a cross-case search
mants were given the latitude to use their own criteria for for patterns (Eisenhardt, 1989), examining intergroup differ-
defining both effective and ineffective decisions, but were ences and similarities around the predominant decision-
asked to describe why they felt it was effective or ineffec- making styles of procedural rationality and political
tive. In each case the informant was asked to provide a behaviors.
detailed description of the decision process, tracing the As new insights emerged from the iterative process, addi-
story from inception to closure while discerning facts and tional data collection was called for which lead to an enrich-
events from personal observations. Because the unit of ment of our explanations. Following Eisenhardt (1989), we
analysis for our study was the board’s decision-making pro- referred to existing literature in an effort to continually
cesses, we were seeking to ascertain a robust description of refine our inductively derived theoretical insights. Addition-
these processes. As a result, it was not necessary for all of ally, through cross-case analyses we were able to either
the informants within each case to address a common stra- confirm or disconfirm inferences that were drawn from the
tegic decision. cases as our research evolved.

FINDINGS rationality as the predominant decision-making style. We

labeled these boards as “Engaged,” as members of these
Our research examined the antecedents associated with the boards demonstrate a strong commitment and involvement
predominant strategic decision-making styles utilized by in the governance processes as well as the strategic direction
boards of directors. As posited by Dean and Sharfman of the company. Deliberations around strategic decisions
(1996), the boards in our study supported procedural ratio- include open discussions, vigorous debates, and analysis of
nality and political behaviors as two separate constructs. As alternatives.
a first step in our analysis, we were able to plot each Board members from this group define an effective stra-
company board along both dimensions of decision-making tegic decision primarily by the attributes of the process
style (see Figure 1). It became apparent that a predominant utilized to reach a collective decision. While this group
pattern of strategic decision making emerged from the referenced outcome when discussing effective strategic
eight organizations, resulting in the 2 ¥ 2 matrix shown in decisions, their focus was on the process preceding decision
Figure 1. We labeled these typologies as Engaged (high pro- closure. Prominent in their narratives were terms such as
cedural rationality, low political behavior), Contested (low “process driven,” “deliberate,” “thorough,” “collaborative”
procedural rationality, high political behavior), and Adaptive and “consensus.”
(high procedural rationality, high political behavior). A Additionally, these boards tend to bring strategic deci-
fourth typology, Caretaker boards, represents those compa- sions to closure by converging as a group on the final deci-
nies with both low procedural rationality and low political sion outcome. Rather than ceasing board deliberations when
behaviors. Similar to the Caretaker boards identified by there is majority support for a particular position, these
Pearce and Zahra (1991), these boards are a legal necessity, boards tend to work issues until all board members are at
incapable of exercising decision-making power and there- least comfortable with the final decision of the board. As one
fore not particularly relevant to this research question or informant explained:
study. None of the companies studied exhibited the charac-
teristics associated with this typology. And I think (the chair) was savvy enough to kind of convince
Before describing the factors that influence the board’s the CEO that if he doesn’t get the board comfortable, it’s not
adoption of a particular decision-making style, we begin gonna happen. And so he has to kind of really open up and talk
with a description of the three decision-making typologies and communicate and deal with our concerns in an honest way.
that emerged from our study. Contested Boards. Three of the boards in our study –
Potomac, En-Joie, and Sawgrass – converge around a
decision-making typology we labeled “Contested.” Rather
Defining the Strategic Decision-Making than displaying a commitment to procedural rationality,
Board Typologies these boards tend to exhibit the decision-making character-
istics associated with highly political processes as described
Engaged Boards. Three of the boards in our study – Las by Eisenhardt and Bourgeois (1988). While we recognize
Colinas, Burning Tree and Columbia – deploy procedural that political activity is a reality in most decision-making
processes, Contested boards tend to exhibit an excess of
these activities, making politics a normal part of their
decision-making processes and thereby driving out evi-
FIGURE 1 dence of procedural rationality. Behind-the-scenes coalition
Board Typology for Strategic Decision-Making Styles building, off-line lobbying, withholding of information,
attempting to change decision positions through private
cooptation, and controlling agendas are all behaviors
exhibited by Contested boards. One independent director
expressed the process and behaviors within Potomac as
follows:
When the decision was made to (fire) the CEO, the meeting that
had been called was not called for that issue. It was called to look
at a potential buyer of the company, but then the chairman
brought up the issue of wanting to separate the CEO. My
feeling was that it was a ruse to get us to a board meeting, and
the decision was pre-made. There was no real open discussion of
the pros and cons of separating the CEO. The chairman was
going through the motions and had already lined up the votes
he needed to move the issue in the direction he wanted to take it.
He could control the board. That’s what he did.
Contested board members are less interested in achieving
a consensus on each decision and tend to describe an effec-
tive board-level strategic decision using terms such as “effi-
ciency,” “majority vote,” and “fait accompli.” We labeled
high political behavior–low procedural rationality boards as

Contested due to the high level of affective conflict that In attempting to understand the differences associated
exists between factions within each of the boards as well as with these decision-making styles, our analysis yielded evi-
between the board and the management team. Decision dence related to the three previously advanced prevail-
making was often a contest to see which faction within the ing factors, namely “Shared Mental Models,” “Balanced
board, or whether the board or executive team, would Power Relationships” and “Board Chair Leadership Skills.”
“win.” However, the richness in our data allowed us to further
reveal underlying emergent characteristics that contributed
Adaptive boards. Two boards in our study – Turnberry to differences in these factors.
and Congressional – deployed decision-making processes
that utilized high levels of both procedural rationality and
political behaviors. Adaptive boards represent a hybrid of Factor 1: Creating Shared Mental Models
the characteristics associated with both Engaged and Con-
While board structure and composition, specifically through
tested board typologies. Similar to Engaged boards, Adap-
board structural independence and the presence of skills
tive board members are actively involved in setting the
have been offered as essential for processes of open discus-
strategic direction of the company. Additionally, Adaptive
sion, debate, and cohesiveness within the boardroom
boards engage in open dialogue, debate, and discussion as
(Forbes & Milliken, 1999), the evidence from our research
part of the strategic decision-making process. Where these
suggests that alignment around a set of attributes we aggre-
boards differ from Engaged boards and take on the charac-
gate and call “Shared Mental Models” suggests a more com-
teristics of Contested boards is in the delineation of board
prehensive view. This factor as a differentiator in strategic
member allegiances. In Adaptive boards, while the majority
decision-making style is supported by four characteristics
of directors identify with the overall success of the company,
which emerged from our study – identification, hope and
a small minority of directors align themselves with narrower
shared vision, strategic involvement, and clarity regarding the
interests such as a class of shareholders or employees.
board’s role.
Rather than just exerting the will of the majority on the
minority, Adaptive board members often serve to mediate
Identification. There is a paucity of literature about how
the interests of the minority faction. We labeled these boards
CEO identification with the organization can reduce
as Adaptive, since members tended to make strategic deci-
“agency costs” (e.g., Boivie, Lange, McDonald, & Westphal,
sions by adapting their decision-making style based upon
2011), but none on how board identification can influence
the divergent interests of board members.
processes. Notable amongst the board members of Engaged
As evidenced by our study and consistent with highly
boards was their identification with the interests of the
political processes (Eisenhardt & Bourgeois, 1988), Adaptive
company. Rather than align themselves to a particular con-
boards tend to bring strategic decisions to closure once it is
stituency or stakeholder interest, these directors spoke of
clear there is majority support amongst the board members
their allegiance being to the success of the company. Some
for a decision. However, the majority position is determined
members of Contested boards differed from Engaged board
through a procedurally rational process, and instead of
members in that they often viewed their role as representing
muting the voice of board members who represent diver-
the interests of a particular constituency. In many instances,
gent interests, they are given an opportunity to influence the
their allegiance – consistent with agency theory – was
outcome. The role of the chair is especially significant in
aligned to the shareholders; although they acted in the best
Adaptive boards as they serve to facilitate the political pro-
interests of a particular coalition of shareholders. This was
cesses amongst board members in order to assure an overall
particularly evident at Potomac where members attained
effective decision-making process. This is shown in the
their directorships through a proxy fight driven by minority
example provided by the Congressional chairman:
shareholders. This perspective is exemplified in the
I know where the power on the board is. There’s usually one comment below:
leader, the alpha dog . . . And then two or three that are right
We had new Board members come in, four of whom had an
below that level. That group is the influence on the board. The
association with a company that we had recognized for about a
way they go, so goes the rest of the board . . . However,
year and a half was interested in taking over (the Company).
(NAME) is the founder of the company and the largest share-
They had enough shares that they could, by proxy, get them on
holder; he is also the technical heart of the Company. While he
the Board. From that point on, regardless of the efforts on the
often has a different perspective on strategic decisions, it is
part of other board members to try to build a team, we could not
important to make sure he has an opportunity to influence the
be successful. (Director, Potomac)
outcome. So I spend a lot of time educating (NAME) and
making sure we all understand his concerns so that everyone is
Hope and Shared Vision. The body of work on emo-
comfortable with the eventual outcome of the board’s decision.
tional intelligence and leadership (Boyatzis & McKee, 2005;
Goleman, Boyatzis, & McKee, 2002) demonstrates an impor-
Defining the Factors Associated with tant link between effective organizations and their sense of
hopefulness for the future. Grounded in positive organiza-
Decision-Making Styles tional psychology, hope is derived from an integrated sense
Figure 2 illustrates the final data structure, showing the of being able to clearly articulate goals that are believed to be
codes and themes from which we developed our findings attainable and the development of a plan to meet those
and the relationships between them. goals; all coupled with the sense of well-being associated

FIGURE 2
Data Structure
from this process (Snyder, 2002). Shared vision is inextrica- We have a clear strategic plan that we are all – the board and
bly linked to hope in that it provides the organizational level management team – very excited about. We all know where
dreams necessary to inspire hope. Unlike rote strategic the company is going. Everybody can understand the vision of
visions and the subsequent plans that flow from them, what we’re trying to create here, and at the same time, as
shared vision involves “the elements of heart and passion things are brought forward, they’re brought in the context of
that are essential for building commitment” (Goleman et al., the strategic vision for the company – one that we are all
2002:208). In each of the cases associated with Engaged passionate about, and committed to achieving. (Director,
boards, it was clear from the interviews that the CEO and the Columbia)
board had a strong shared vision for the strategic direction
of the company. Strategic Involvement. Engaged boards were very
This level of hope and shared vision translated to more involved in working with management to define, set, and
than board/CEO alignment, but instead was better identi- implement the strategic direction of the company. These
fied as attunement – “alignment with the kind of resonance boards participated in ways that were consistent with what
that moves people emotionally as well as intellectually” McNulty and Pettigrew (1999) referred to as “shaping of the
(Goleman et al., 2002:208). As one director of an Engaged content and context of the strategy.” The chairman of
board noted: Burning Tree described his approach:

What we need to do in there is eight people get together and ask Taken together our evidence supports alignment around
the right questions, understanding the answers, and being able Shared Mental Models as an important theme in determin-
to sit with the CEO and his management team, put our feet up ing the level of procedural rationality as the predominant
on the table, take our ties off, and dialogue with folks. Does this strategic decision-making style within the boardroom. As a
make sense? Have you thought about that? What about over result, we advance the following:
here? That’s getting involved.
Proposition 1a: The more compatible the board’s Shared Mental
Contested boards, on the other hand, participated in the Models, the more likely boards are to adopt procedural ratio-
strategic planning process with what McNulty and Petti- nality as a predominant strategic decision-making style.
grew (1999) referred to as “taking strategic decisions.” Their
involvement tended to come at the very end of the process Proposition 1b: The more divergent the board’s Shared Mental
when they had no ability to shape or influence the direction Models, the more likely boards are to adopt political behaviors
of the company. Instead they were expected to simply as a predominant strategic decision-making style.
approve the plans as presented by the executive team. As
one non-executive Chair described it:
So while we were good at corporate compensation; we were Factor 2: Developing Balanced Power Relationships
good at corporate governance; we were good at auditing; we Contrasting the power relationships found in Engaged and
were good at finance; we were good at all these board functions Contested boards (namely low and high political behavior
out there, and we did great with Sarbanes-Oxley, by the way, boards respectively) helped us to identity two characteristics
we didn’t have a clue as to what it was that the company did. which combine in explaining much of the observed differ-
We pretty much left that up to the executive team. ences associated with the development of balanced board
power relationships both within the boardroom as well as
Clarity regarding the Board’s Role. Another significant between the board and CEO. The two characteristics that
difference between Engaged and Contested boards is their emerged from our analysis to define Balanced Power Rela-
alignment around the role of the board. Members of tionships were intra-boardroom respect and CEO/board member
Engaged boards recognize the line between oversight and trust.
management. As such they are able to distance themselves
from day-to-day management of the company – leaving that Intra-Boardroom Respect. Sonnenfeld (2002) describes
to the management team – but still able to intervene when respect as the genesis of a virtuous cycle that drives quality
they determine it to be necessary. Evidence of this was strategic decision-making processes:
described by a director of Las Colinas:
Team members develop mutual respect; because they respect
Today, I think the board is focused on longer-term strategic one another, they develop trust; because they trust one another
issues. We’ve gotten away from the day-to-day operations. I they share difficult information; because they all have the same
think we had to focus for a while on day-to-day operations reasonably complete information, they can challenge one anoth-
because the company was missing too many of its forecasts. We er’s conclusions coherently; because a spirited give and take
were not making money; we were losing money. Management becomes the norm, they learn to adjust their own interpreta-
was somewhat misdirecting our attention and/or – frankly, my tions in response to intelligent questions (2002:109).
opinion was that management was not strong enough, there
was not sufficient expertise in the company to properly manage In boardrooms we identified as Engaged, informants often
and lead the company. The board finally realized that and we spoke of the salient role respect played in their willingness
replaced management; I think we made a good step forward, to engage in quality strategic decision-making processes.
and I think we’re now, as a board, focused on what are the right Similarly, Contested board members openly addressed the
long-term strategic directions for the company. failure of all board members to feel respected and as a result
they felt marginalized in the decision-making process. The
As expressed by one executive director, the board of two contrasting positions are exemplified by the following
Sawgrass, typical of Contested boards, was divided in their comments from board members of Engaged and Contested
understanding of the board’s role: boards:
I think there has been, at times, some differences as to exactly We had a really solid block and some tremendous people on the
what the role of the board is, and just to what extent it’s board. Nobody would buck that group ‘cause they had so much
appropriate for them to get into areas that other people might respect for it. (Chair, Engaged Board)
think is really the purview of management. For example, for
The two (board members) grew to hate each other. And they
years we had a finance committee that met monthly, they
would scream and holler at each other at board meetings –
spent an hour and a half, on average, to go through that
”You’re an xxx!” – in the middle of board meetings. I’d have to
month’s financial performance – what’s happening with cus-
stand up like a referee. It was absolutely horrible. (Chair, Con-
tomer orders; what’s happening with key operating activities;
tested Board)
what’s cash flow been. That’s been the mentality for years,
and still exists, the level of detail directors like to see, and To better understand what directors refer to when they
think is necessary to really get a feel for what’s happening speak of respect in the boardroom, we are informed by
with the business often feels like it should be management’s Cronin who asserts that “respect is always about feeling
role. valued or important rather than marginalized or dismissed”

and “(a)t some level this feeling relates to one’s basic human Proposition 2a: The more balanced the board power relation-
dignity (Margolis, 2001; Rawls, 1971), yet it can also relate to ships both amongst board members and between the TMT and
one’s self standing in the peer group (Smith & Tyler, 1997)” board, the more likely boards are to adopt procedural rationality
(Cronin 2010:6). Essentially, respect is about the esteem or as a predominant strategic decision-making style.
“sense of worth or excellence” that an individual feels.
Proposition 2b: The more asymmetrical the board power rela-
CEO/Board Member Trust. The intertwined complexity tionships both amongst board members and between the TMT
of trust and governance has been addressed in extant and board, the more likely boards are to adopt political behav-
research (Puranam & Vanneste, 2009). Scholars have also iors as a predominant strategic decision-making style.
argued that trust is at the heart of one of the key paradoxes
associated with the role of the board; the necessity to
embrace the simultaneous need for control and collaboration Factor 3: The Critical Role of Board Chair
(Demb & Neubauer, 1992; Sundaramurthy & Lewis, 2003). Leadership Skills
One of our informants captured the essence of this paradox:
The importance of the board chair in determining the
(T)rust plays an important role, but I think it’s a two-tier decision-making style is evidenced by the following
concept in my mind. Almost entirely, the reason why you have comment from an independent director of a Contested
a board is because there’s a lack of trust, in some sense. The role board:
of the board is oversight. So at that level you should have a Quite frankly, the chairman drove the company to the bottom
freedom to express lack of trust in somebody’s proposal, chal- with his own personality and his own agenda, which was sup-
lenge it, and all that stuff. But you need to also have ‘big T’ ported by three of the other board members. Some to a lesser
trust in the board so when you express something like that extent, some to a greater extent, but the fact of the matter is that
people are not going to question your motives or you feel inhib- he believed that as chairman of the board, he was first among
ited that somebody will think that you’re not a loyal board equals and had more power and influence than anybody else,
member. and because he had a 4-3 vote on the board, he could do it. So he
hurt people, he drew the company down, in my view, in a sad,
Mayer, Davis, and Schoorman define trust as “the willing-
sad way. I mean, from the very beginning as the chairman of the
ness of a party to be vulnerable to the actions of another
board, he thought he was in charge of the company. He thought
party based on the expectation that the other will perform a
he was running the company. (Director, Potomac)
particular action important to the trustor, irrespective of the
ability to monitor or control that other party” (Mayer, Davis, Contrasting this statement with the comments from the CEO
& Schoorman, 1995:709). While the importance of trust in of an Engaged board gives further credence to the important
board relationships is understood, there has been limited role that board leadership plays in strategic decision making:
empirical research on the subject. An exception (Huse &
(The chair) takes the leadership role of not only managing the
Zattoni, 2008) investigated the role of trust in a setting of
board meetings, but ensuring that not only during board meet-
small to medium enterprises (SME) and determined that
ings but in between board meetings there is an open and con-
different types of trust, driven by phases in a firm’s life cycle
tinuous flow of dialogue among the independent directors. He’s
drove differing board empowerment levels. Another study
also the focal point of independent director interaction.
(van Ees, van der Laan, & Postma, 2009b) found support for
trust as a moderator between board decision-making pro- (The chair) recognizes the difference between managing and
cesses and task outcomes. governing. He is very careful not to get into attempting to
The importance trust plays in creating a functional board manage the company, but rather manage the board and the
decision-making environment was exemplified by the fol- accountability and governance side of the equation. He and I
lowing comment from the chair of an Engaged board: meet periodically between board meetings. We typically spend a
couple hours a month, aside from e-mail, voicemail, and tele-
On our board there is clearly a high level of trust and respect phone communication, which is both updates of what is going
that exists between the CEO and the Chair, and that also on in the company and formulating issues and discussions for
permeates to the entire boardroom. (Chair, Burning Tree) future board meetings. (We) work the agenda together. (The
chair) manages the meetings and the interaction among the
The importance of trust between the CEO and the Board
committee chairmen.
takes on special significance because of the unique informa-
tion asymmetry that exists between the two parties. The Our research identifies three characteristics which embody
primary source of information for a board member is the top the primary differences associated with effective and ineffec-
management team (TMT), and specifically the CEO of the tive board leaders. These include: (1) facilitation skills, (2)
company, who have significant control over available infor- organizational awareness, and (3) relationship with the CEO.
mation. This information asymmetry can often be used by
the CEO to control the power balance between the board Facilitation Skills. A principal task of the board chair is
and CEO. the management of the board meeting. How the agenda is
Our analysis points to the importance of balanced power set and discussions are conducted has a significant impact
relationships as a critical factor in driving procedural ratio- on the conduct of decision-making processes. Our evidence
nality within the boardroom, and leads to the following shows that Engaged board chairs allow for considerably
propositions. more open discussion and debate amongst all members of

the board. As one independent director of Las Colinas com- in our analysis. In our study, each of the Engaged board
mented: “We’ve had meetings where everybody’s around chairs was independent, both structurally and in mindset. In
the table, everybody has a chance to talk about it, everybody two of the three Engaged boards – Burning Tree and Colum-
has expressed their views, and everyone, they knew what bia – the CEO of the company had been a non-executive
was going on, they had been briefed on it, and so when it independent board member of the company prior to assum-
came to the formalities, it was an automatic.” Contrast that ing the role of the CEO. In each of these companies, it was
with the approach described by a director from a Contested clear that the CEO had a firm understanding of the board’s
board: role. Additionally, there were apparent strong relationships
between the chairs and the CEOs.
The chair basically would discuss issues with members of the At Las Colinas, the CEO had been an outside hire who
board on how he wanted issues to go at the board meeting. We joined the company just a little over one year ago. This was
were outside the circle of influence to the board. When it came the CEO’s first time serving as a publicly-traded company
to the agenda, we didn’t necessarily have a lot of input. We may CEO. The chair had considerable industry related experi-
have provided it, but it wasn’t necessarily listened to. At the ence as a successful public company CEO prior to joining
board itself, when input was provided, it wouldn’t necessarily the board. Five independent board members of Las Colinas
be heard. It may be heard, but it wasn’t listened to. averaged over 13 years of experience in the company and
therefore had a strong understanding of the company, its
Organizational Awareness. Chairs of Engaged boards personnel and markets. Additionally, for the six months
demonstrate an understanding of the interpersonal dynam- prior to the hiring of the CEO, the Las Colinas indepen-
ics present within the board environment and work to miti- dent chair served in the capacity of acting CEO, gaining
gate potential issues. These individuals were able to sense important insights into the operations of the company
the climate in the boardroom while understanding the feel- and its employees. As a result, for this first year the incom-
ings and thoughts of other board members. More impor- ing CEO worked closely with the board chair, gaining
tantly, these chairs had the ability to build on this awareness insights and support for carrying out his duties and
by facilitating smooth, effective interactions. Our evidence responsibilities.
shows that Engaged board chairs allow for considerably In contrast, the chairs of Contested boards provided a
more open discussion and resolution of issues. The follow- different picture. While two boards, Potomac and En-Joie,
ing example describes the process used by an Engaged had duality in their leadership structure, all three board
board: chairs were entrenched; either through tenure in their role
or, in the case of the Potomac chair, by a recent proxy fight.
Clearly the chairman, who happens to be an independent chair Additionally, within a year, the Potomac chair drove the
in this case, realized that the board is not aligned and there are board to fire the CEO, assuming the role himself. Typical of
tensions. the dysfunction within Contested boardrooms, one director
He called me and said, “I see that you’re troubled. What’s going commented:
on?” So I explained to him that I’m worried that this is being
pushed down our throats and I’m not sure that we are getting It was very frustrating trying to challenge the CEO. Whenever
the best deal or not – from the CEO’s perspective he’s cashing we met in executive session (without the Chair/CEO present)
out we might not be getting some sort of objective opinion and there was significant discontent raised by the directors regard-
I don’t know that we are maximizing the shareholder value or ing the CEO. However, when we came together in the board-
if it is actually the right thing to do. And on the other hand I’m room all of the directors immediately caved to whatever the
also concerned that if we say no, these three guys (the executive CEO requested. In fact it had become a standing joke that we
team) can quit on us. Quit on us in the sense of not resigning spent all of our board time on strategy – the strategy of how to
literally but actually not do the work anymore, in which case provide the CEO with additional increases to his compensation
the value of the company would be low. So we’re boxed in a package. (Director, En-Joie)
little bit here.
Summary. Our evidence indicates the important role of
And he said, “You’re not the only one.” He said, “I am also the chair’s leadership skills on the strategic decision-making
troubled, actually, personally.” So the two of us are the most style within the boardroom. This leads to the following
troubled, there were four other board members who – indepen- propositions:
dent board members who had said – who were less skeptical.
Proposition 3a: The stronger the leadership skills of the board
So we said, “Okay, we need to hash it out ourselves.” So the chair, the more likely boards are to adopt procedural rationality
chair called a separate conference call just for the independent as a predominant strategic decision-making style.
board members, and we laid all our concerns on the table. We
discussed it. And he went back to CEO and said, “You know, Proposition 3b: The weaker the leadership skills of the board
people don’t have any problem with the concept, but board chair, the more likely boards are to adopt political behaviors as
members are worried about the process, how we came to this a predominant strategic decision-making style.
conclusion.
Pulling together our findings for board level strategic deci-
Relationship with the CEO. The relationship between sion making into a single framework results in the concep-
the CEO and chair in each of these cases played a critical part tual model provided in Figure 3.

FIGURE 3
Conceptual Model
DISCUSSION effectiveness. Instead they suggest that the behavioral

dynamics of the board, coupled with the group and inter-
A rich body of literature is beginning to evolve to address personal relationships between “outside” directors and
the impact of behavior within and around the boardroom executive team members have a more far-reaching impact on
(e.g., Huse, 2005, 2007, 2009a; Leblanc & Gillies, 2005; the board’s ability to perform its tasks. Sonnenfeld expands
McNulty et al., 2011; van Ees et al., 2009a) and this work on this thinking by identifying exemplary boards as “robust,
adds to this research stream. We believe that the findings of effective, social systems” (2002:109). Nadler goes even
our study provide a contribution to the understanding of further by stating that “better corporate governance lies in
board-level strategic decision making in that they provide the working relationships between boards and managers
deeper insights into our understanding of how boards (and) in the social dynamics of board interactions” (Nadler,
engage in strategic decision-making processes. Specifically 2004:102). In defining a framework for understanding the
we identify three factors, namely the existence of shared dynamism of relationships both inside and outside the
mental models, power differentials in the boardroom, and boardroom, Huse (2005, 2007) addresses these concerns by
board leadership as important for determining the levels of highlighting the importance of the board’s “decision-
procedural rationality or political behavior as a decision- making culture.” Support for these conclusions is an impor-
making style within the boardroom. Using the richness in tant finding in our research.
our qualitative data, we reveal characteristics that serve as A second finding in our study expands on the behavioral-
antecedents to these factors, and thus inform the growing based theory for boardroom decision making advanced by
literature focusing on the processes and the conditions Forbes and Milliken (1999) that argues for addressing the
under which boards operate. importance of many of the behavioral characteristics
required for implementing procedurally rational decision-
making processes. Other researchers have, through empiri-
Theoretical Implications cal studies, explored the importance of these behavioral
Much of the common thinking on boards of directors traits, especially trust (Huse & Zattoni, 2008; van Ees et al.,
projects them as rational decision-making bodies, little influ- 2009b) and board power (Golden & Zajac, 2001; McNulty
enced by the dynamics normally associated with other cor- et al., 2011; Pettigrew & McNulty, 1998; Wenstop, 2009).
porate groups. Behavioral research studies of boards of Where our research seeks to elaborate on their work is
directors serve to diminish this view. Still it is another sig- through the identification of three factors – shared mental
nificant leap to extend our view of board members as pas- models, balanced power relations, and board chair leader-
sionate and emotionally engaged decision makers. Our ship skills – that we propose are critical for engaging in
findings provide support for this view. high-quality board-level strategic decision-making pro-
As Roberts et al. (2005) argue, board structure and com- cesses. We also identify the primary characteristics that
position at best condition, rather than determine, board serve as antecedents for each of these factors.

A third contribution of our study, contrary to other between board members and the TMT. Similarly, all of the
studies on strategic decision making (e.g., Dean & Sharfman, boards demonstrating low procedural rationality and high
1996; Eisenhardt & Bourgeois, 1988), is our support for the political behaviors have chairs who are clearly conflicted.
instrumentality of political behaviors in assuring more
robust strategic decision-making processes. As demon-
strated by Adaptive boards, political behaviors, appropri-
Limitations
ately applied and enacted in the interests of the collective These findings should be considered in light of several
organization rather than self-interests, can facilitate, rather potential limitations. The research sample was small, non-
than suppress, procedural rationality. This finding builds on random and focused on US publicly traded (NASDAQ)
the work of Ravasi and Zattoni whose evidence suggests that companies and therefore is not necessarily representative of
boards play an important role in “facilitating the reconcilia- all corporate boards of directors, particularly non-US enter-
tion of diverging goals of represented shareholders” prises. Additionally, in capturing the decision-making style
(2006:1697). Through legal statute, board members of pub- deployed in each case, sensitivity to the influence of context
licly traded companies are expected to represent the inter- on the decision process could result in biases.
ests of all shareholders, not a narrow set of constituents. But Research data was collected by conducting interviews
as we observed, the differing mental models and identities with open-ended questions of critical incidences that exam-
that board members bring to their role can often result in ined both effective and ineffective strategic decision making
conflicts which lead to political behaviors. Left uncontrolled, within the board environment. The interviews relied on rec-
as we saw in Contested boards, this can lead to dysfunc- ollection of past actions and events and responses were thus
tional decision-making processes. However in Adaptive subject to recall bias. Some recollections may have been
boards, these conflicts were dealt with by applying political incomplete or some “facts” recalled and redefined to fit
behaviors in an effort to mediate the differences within the present-day positions. Additionally, there is a human ten-
boardroom. The result is a more functional decision-making dency to reflect on one’s past actions in a “best light” mode
process that includes high levels of both procedural ratio- and informants may reconstruct events that align with their
nality and political behaviors. self-view (Pasupathi, 2001). This risk has been noted to be
relevant particularly in strategy research which relies on
Advancing Support for the Role of Leadership in the retrospective data from strategic-level managers (Huber &
Boardroom. Finally, our findings contribute to the body of Power, 1985). However, interviewing multiple informants
literature on board leadership. More directly, we find within the same case who described the same or similar
support for the claim that board leadership plays a signifi- interactions served to mitigate this risk.
cant role in determining the extent to which engagement
and collaboration play a role in board decision-making pro-
cesses. While Machold et al.’s (2011) investigation of board
Implications for Future Research and Practice
leadership in small Norwegian firms found empirical The resulting empirical findings reveal that boards have sig-
support for the determination of the board chair as a critical nificant and divergent approaches to engaging in strategic
characteristic in board engagement, our study extends this decision making. While there has been significant research
finding to large US publicly traded companies. The chairper- on board-level decision making, work examining the actual
sons of Engaged boards played a critical role in establishing behavior of boards is still rare and necessitates calls to gain
a boardroom environment that encouraged open dialogue, access to process data (e.g., Huse, 2009b; Pye & Pettigrew,
debate, and knowledge integration. An important outcome 2005; Vigano et al., 2011). A challenge for future research is
of the chair’s leadership in Engaged boards was higher to synthesize the insights that come from the rich data that
levels of collaboration between board members and the qualitative techniques allow with the literature that has been
TMT on the strategic direction of the company, allowing for largely driven by quantitative techniques and a relatively
alignment around a shared vision for the company. small number of theoretical perspectives. This is a challenge
Expanding this further, it was apparent in both Engaged because genuine theoretical synthesis is difficult as more
and Adaptive boards that the board chairs value not only the grounded work often fails to connect with the existing lit-
decision outcomes but the relationships that result from erature. For researchers, this study provides an additional
the interaction processes. Consistent with procedural justice step in helping to clarify the complexities associated with
theory (Tyler & Blader, 2000, 2003; Tyler & Lind, 1992), the board-level decision-making processes, but also points
chairs of Engaged and Adaptive boards implemented toward the importance of measurement issues associated
decision-making processes that validated the standing of with board-level characteristics and processes.
board members, reinforcing their commitment to each other Our findings point to a continuing need for specific
as well as the organization. further research. Of special interest is the leadership role of
Our research also provides support for the separation of the board chair in facilitating the strategic decision-making
the role of the chair from the CEO. A critical factor in assur- processes within the boardroom. While research has
ing the deployment of procedural rationality was separating documented heterogeneity of board chair arrangements
the roles of decision management from decision control. All (McNulty et al., 2011), and we note some important charac-
of the boards in our study implementing high procedural teristics of how the chair interacts with the board, more
rationality and low political behaviors are comprised of research is needed to reveal how this matters to board effec-
independent chairs, who demonstrated an ability to facili- tiveness. More generally, how the factors identified in this
tate open dialogue and debate amongst board members and study as well as the strategic decision-making styles impact

board task performance and ultimately firm performance Carter, C. B. & Lorsch, J. W. 2004. Back to the drawing board:
would provide great benefit. While our focus has largely Designing corporate boards for a complex world. Boston, MA:
been on the board as the unit of analysis, a third area of Harvard Business School Press.
exploration would be an examination of the individual com- Corbin, J. & Strauss, A. 2008. Basics of qualitative research: Tech-
niques and procedures for developing grounded theory, Third
petencies required for effective board leadership or mem-
edn. Thousand Oaks, CA: Sage Publications.
bership. This study examined the decision making of boards Cronin, M. A. 2010. The attitude of respect and its consequences for
over a relatively short window or point in time. An interest- engagement. Unpublished Paper. George Mason University,
ing area for future research would be to examine how a Fairfax, VA.
board’s decision-making style changes over time, specifi- Daily, C. M. & Dalton, D. R. 1993. Board of directors leadership and
cally what are the contextual factors (e.g., poor company structure: Control and performance implications. Entrepreneur-
performance) that would result in a shift in decision-making ship Theory and Practice, Spring: 65–81.
style. Daily, C. M., Dalton, D. R., & Cannella A. A., Jr 2003. Corporate
For practitioners, our findings point to the importance of governance: Decades of dialogue and data. Academy of Manage-
selecting and evaluating board members; not only on their ment Review, 28: 371–382.
Dalton, D. R., Daily, C. M., Ellstrand, A. E., & Johnson, J. L. 1998.
knowledge and skills, but also their behaviors and inclina-
Board composition, leadership structure, and financial perfor-
tions, in an effort to gain alignment around shared mental mance: Meta-analytical reviews and research agenda. Strategic
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the importance of the chair’s leadership and facilitation skills Davis, G. E. 2005. New directions in corporate governance. Annual
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ACKNOWLEDGEMENTS range theory. Academy of Management Journal, 31: 737–770.
Eisenhardt, K. M. & Zbracki, M. J. 1992. Strategic decision making.
The authors are grateful to the reviewers and participants at Strategic Management Journal, 13: 17–37.
the September 2011 workshop on qualitative governance Finkelstein, S., Hambrick, D. C., & Cannella A. A., Jr 2009. Strategic
research held at Bocconi University in Milan, Italy. The leadership: Theory and research on executives, top management
authors would also like to acknowledge the early guidance teams, and boards. New York: Oxford University Press.
Flanagan, J. C. 1954. The critical incident interview technique. Psy-
provided by Dr. Terry McNulty as well as three anonymous chological Bulletin, 51: 327–358.
reviewers on earlier versions of this manuscript. Of course Floersch, J., Longhofer, J. L., Kranke, D., & Townsend, L. 2010.
all errors remain the responsibility of the authors. Integrating thematic, grounded theory and narrative analysis: A
case study of adolescent psychotropic treatment. Qualitative
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131

Corporate Governance: An International Review, 2013, 21(2): 131–146

Boardroom Strategic Decision-Making Style:

Manuscript Type: Empirical

INTRODUCTION scholars have advocated gaining deeper insights into the

T he primary work of boards of directors is to make deci-

© 2012 Blackwell Publishing Ltd

Volume 21 Number 2 March 2013 © 2012 Blackwell Publishing Ltd

© 2012 Blackwell Publishing Ltd Volume 21 Number 2 March 2013

*Pseudo-names provided to protect confidentiality.

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Semi-Structured Interviews. In-depth semi-structured

© 2012 Blackwell Publishing Ltd Volume 21 Number 2 March 2013

FINDINGS rationality as the predominant decision-making style. We

Volume 21 Number 2 March 2013 © 2012 Blackwell Publishing Ltd

© 2012 Blackwell Publishing Ltd Volume 21 Number 2 March 2013

Volume 21 Number 2 March 2013 © 2012 Blackwell Publishing Ltd

© 2012 Blackwell Publishing Ltd Volume 21 Number 2 March 2013

Volume 21 Number 2 March 2013 © 2012 Blackwell Publishing Ltd

© 2012 Blackwell Publishing Ltd Volume 21 Number 2 March 2013

DISCUSSION effectiveness. Instead they suggest that the behavioral

Volume 21 Number 2 March 2013 © 2012 Blackwell Publishing Ltd

© 2012 Blackwell Publishing Ltd Volume 21 Number 2 March 2013

Volume 21 Number 2 March 2013 © 2012 Blackwell Publishing Ltd

© 2012 Blackwell Publishing Ltd Volume 21 Number 2 March 2013

Volume 21 Number 2 March 2013 © 2012 Blackwell Publishing Ltd

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