What Really Happens inside the Boardroom and how it may Shed Light on Corporate Success and Failure

Abstract

For the last two decades or more, agency theory has provided the dominant guiding framework for the research of governance. Despite the results of this effort being described as “remarkably inconsistent not only with the theory but with each other” (Daily, Dalton and Rajagopalan, 2003, p. 152) there have been few attempts to offer alternate paradigms for research. The result of this limitation is that several academics and commentators have had cause to publicly acknowledge that we actually know little about governance.

Our understanding of the relationship between governance and subsequent organisational performance is at best haphazard, at worst, little more than an assumption. One attempt at breaking this stalemate concerns venturing into the ‘black box’ (LeBlanc and Schwartz, 2004), an activity that requires a different battery of research skills including a range of qualitative research methods, direct observation of practice, oral histories, case studies, interventions, action research and the analysis of decision-making. Few of these practices sit comfortably within the normal science (Kuhn, 1970) practices of much governance research conducted to date. The aim of this paper is to discuss the attributes of such black box research, identify various approaches to its conduct and to present a brief summary of interim results from a range of research activities in progress in New Zealand.

The primary aim of the research ‘agenda’ informing these activities is firstly, to determine how a relationship between governance and subsequent organisational performance may operate given the complexities of such an approach and to identify whether specific attributes (either governance architecture or board capabilities) actually influence organisational outcomes. Results to date offer a tentative glimpse at what may be effective governance. In time, they may seriously challenge the relevance of much current research and what is increasingly being promoted by various agencies and accepted by practitioners as best practice.