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Board Cultural Dynamics - Coggle Diagram
Board Cultural Dynamics
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Power Culture
Another similar framework that provides some insight into how the assumptions of the board can influence its culture is the typology of the relative powers of the CEO and the board of directors created by Pearce and Zahra (1991)
Using two axes to create four types, this model pitches low or high CEO power against low or high board power
Caretaker board: also known as the 'third party' or 'review and approve' board type. This kind of weak board exists simply out of legal necessity and a leadership vacuum, due to power being shared by the CEO and other key executives is the root of the board's weakness. Decision-making is largely ceremonial and outsider reputation may be limited.
Statutory board: characterised by high CEO power and low board power. This board is the prototypical image of an ineffective board that is there, again, out of legal necessity, only to rubber-stamp executive decisions. This may be because the board of directors does not have enough expertise or interest but equally could be because there has been little attention in defining roles and responsibilities
Proactive board: characterised by low CEO power and high board power. These boards will usually be comprised primarily of outside directors and represent all key stakeholder constituencies.
Participative board: which is characterised by high CEO power and high board power. It is characterised by discussion, debate and disagreement and distinguished from the proactive board due to the emphasis placed on building and reaching consensus in decision-making.
David Nadler simply proposes a continuum around the question: 'How engaged should a board be?' He suggests five board models which fall along a continuum of engagement
Passive board
Functions at the discretion of of the chief executive officer and has limited participation and accountability, only existing to ratify management preferences
Certifying board
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This board type emphasises the need for independent directors who meet without the CEO and who stay informed about current performance
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Engaged board
Establishes a partnership between the executives and the non-executives, similar to the participative board in the power framework
This board engages in dialogue and decision-making and is comprised of directors who have sufficient competence to add value
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Intervening board
Becomes intensely involved in decision-making during the crisis whereby it convenes frequent and intense meetings often at short notice
Operating board
Which makes all the key decisions that executives then implement, and which fills in the gaps in management experince
Ethical culture
As corporate scandals have piled up over the years, so too has the interest in better business ethics grown
There has a been fundamental recognition that ethics is a governance issue and therefore something the board must fundamentally consider
This has been reflected in more training in corporate ethics, increased calls for corporate citizenship and social responsibility and of course even further regulation
This board responsibility is reflected in the majority of company codes. For example, the South African King IV Code of corporate governance states that
The governing body should lead ethically and effectively and should govern the ethics of the organisation in a way that supports the establishment of an ethical culture
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Performance culture
Learning culture
Dulewicz and Herbert (2004) define 16 tasks of the board which cluster into four areas. Building on the external versus internal and short-term versus long-term dilemmas that a board continually faces, Garrett (1995) visualised these four functions while adding a fifth, learning function
A 'learning board' will certainly place significant emphasis and value on their yearly board evaluation. A board that values learning as a key pillar of their performance will understand that learning is more than just a once a year event and will therefore build reflection, evaluation and feedback into its meeting process.
A McKinsey (2014) report on high-performing boards found that boards that were functioning at the highest levels were those who were able to look inward and deliberate on their own processes.
One of the shared mindsets of a learning board will be that of a 'growth mindset' as opposed to a 'fixed mindset' in relation to both individual contributions and the board's joint capacity to improve
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