Intellectual Capital of a Board of Directors and its Elements: Introduction to the Concepts

Abstract

Purpose – The purpose of the study is to define the contribution of intellectual capital of the Board of Directors in generating intellectual capital of a company, to develop a definition of the intellectual capital of the Board of Directors, as well as two of its major elements: human capital (knowledge, skills, and experience of Board members, etc.), and social capital (relationships and networking opportunities of Board members), and to clarify the relationship between these elements and financial performance indicators of companies based on a literature review on the topic.

Design – A literature review and analysis was applied as this study’s research design.

Findings – The authors suggest that intellectual capital is generated not only by company staff, but also by governing bodies, particularly the Board of Directors, whose members are not always under contract with the company in the traditional sense. Members of the Board use their knowledge, experience, and networking opportunities to build intellectual capital for effective monitoring, advising, and providing the company with resources. In this sense, the Board of Directors serves as a source of intellectual capital for a company, being the main internal corporate governance mechanism that leads to value creation in a company, taking into consideration the interests of all stakeholders.

Practical implications – The research indicates that the personal characteristics of Board members may influence the performance of a company. Therefore, companies should be recommended to carefully select candidates for nomination to the Board.

Originality – This study contributes to further development of the concept of intellectual capital of the Board of Directors by bringing together the theory in the field and the empirical results of studies on the various elements of Board capital in a company’s value creation.

Keywords: intellectual capital, Board of Directors, intellectual capital of the Board of Directors, human capital, social capital

JEL Classification: G34, M21, O34