Elevating Board Performance: The Significance of Director Mindset, Operating Context, and Other Behavioral and Functional Considerations

Abstract

Despite considerable reforms over the past two decades, boards – particularly at financial institutions – have been criticized recently for poor stewardship.

This article argues that the lack of attention to behavioral and functional considerations – in particular, relating to director mindset, board operating context, and evolving human dynamics – has hampered the board’s effectiveness.

To reach their potential, boards and their members should: 1) think like an owner; 2) know their companies; 3) be prepared to ‘roll up their sleeves’; 4) take charge of their priorities; 5) hire a collaborative CEO; and 6) protect their authority and independence.

This article is a shortened version of the author’s Northwestern University School of Law working paper (available at http://ssrn.com/abstract=1832234).

Keywords: Board of directors, mindset and behavior, board culture, independence and authority

JEL Classification: G34, D23, D82