What Factors Drive Director Perceptions of Their Board's Effectiveness?

51 Pages Posted: 12 Feb 2016

See all articles by Boris Groysberg

Boris Groysberg

Harvard Business School

Paul M. Healy

Harvard Business School; National Bureau of Economic Research (NBER)

Rajesh Vijayaraghavan

University of British Columbia (UBC) - Sauder School of Business

Date Written: February 1, 2016

Abstract

We use a survey of directors to collect data on their ratings of board effectiveness as well as board internal dynamics and key processes. Controlling for many of the governance metrics examined by prior research, we find that directors’ ratings of their boards’ effectiveness are positively related to measures of board internal dynamics (such as relations with the CEO and senior management, and its ability to perform well as a team), director engagement (reflected in meeting preparedness), and the breadth of the board’s experiences. Tests for a subset of firms that are identified in the survey show that boards rated as ineffective have a higher likelihood of losses one year after the survey, consistent with effective governance enhancing the management of risk.

Keywords: board of directors, corporate governance, risk management

JEL Classification: G39

Suggested Citation

Groysberg, Boris and Healy, Paul M. and Vijayaraghavan, Rajesh, What Factors Drive Director Perceptions of Their Board's Effectiveness? (February 1, 2016). Available at SSRN: https://ssrn.com/abstract=2731512 or http://dx.doi.org/10.2139/ssrn.2731512

Boris Groysberg

Harvard Business School ( email )

Soldiers Field
Boston, MA 02163
United States
617-496-2784 (Phone)
617-496-5271 (Fax)

Paul M. Healy (Contact Author)

Harvard Business School ( email )

Soldiers Field
Boston, MA 02163
United States
617-495-1283 (Phone)
617-496-7387 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Rajesh Vijayaraghavan

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

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