Peter Crow
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Attributes vs. activities: changing the research agenda

30/1/2013

2 Comments

 
For decades now, researchers have been searching for the link between governance and performance that supposedly exists. Most of the research has investigated isolated attributes of governance—things like Board size, gender diversity, the inside/outside director balance, and CEO/Chair duality. The results have been mixed. Some researchers have suggested correlations. Others have disagreed. Despite considerable effort—over an extended period—researchers seem to have reached an impasse.

I was thinking about this while watching a motor racing programme on television yesterday, and concluded we've been looking at the wrong things.

Do cars go faster because they have a male driver or red paint, (for example)? Of course not. Rather, they go faster because of the way they are prepared and what happens on the race track. Racing drivers win because of what they do (techniques, decision-making), not who or what they are (gender, fitness levels, red car). 

We have much to learn from this analogy. If a link between governance and company performance exists (as several well-regarded scholars have postulated), it will, in all likelihood, be due to the activities of the Board as a whole—what they talk about, the decisions they make, the way they monitor performance. If progress towards exposing the elusive link between governance and performance is to be made, the research agenda needs to change—from attributes to activities. Does this sound plausible to you?
2 Comments
peter
15/2/2013 11:58:16

Peter, do you consider there to be a difference between the practice of corporate governance and the practice of directing?

Based on my reading no empirical study has found a link between governance mechanisms (inferential attributes) and firm performance.

I suspect that it is illusive because governance mechanisms are not designed with firm performance in mind. Have you looked at Macey's theory of corporate governance? He claims the monitoring (governance) and managing (directing) functions of the board are irrenconcilabe.

Reply
Peter Crow
15/2/2013 13:16:13

Peter
Thanks for engaging with the attributes/activities topic. Huse, Leblanc, Lockhart, and Yermack have all separately postulated a relationship between governance and firm performance, thus my original comment.

As regards to your question about the practice of corporate governance and the practice of directing, I'm not sure. I have not come across Macey's theory in the literature, but will search it out.

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