Corporate governance, groupthink and bullies in the boardroom
This research study discusses corporate governance issues from a behavioural viewpoint. It makes a distinction between strict adherence to formal rules and regulations: CEO/Chair separation, independence of board members and board size and informal characteristics of board members: knowledge, values and groupthink.
This research clearly proves that formal rules and regulations are inadequate; they have little effect upon decision making by board members. Informal characteristics must be considered in unison with the formal system when nominating board members in order to restore shareholder confidence and to rebuild trust in board governance.
Similar values and groupthink can contribute positively to board members’ decision making. There is, however, a high possibility for groupthink and values to become redundant, masking board members’ knowledge.
Skills matrices that include questions related to values, knowledge and groupthink and three behavioural characteristics should be considered by boards to ensure the nomination of well-rounded members.
ascertain and embellish the knowledge base of directors;
motivate directors to share and gather information to ensure personal values are congruent with organisational values; and
ensure clear and fluent transmission channels exist to reduce the potential of having groupthink on board.
Keywordscorporate governance board of directors behavioural characteristics formal system informal system decision-making process
I thank Dr James Gillies, Professor Emeritus of Policy, and founding Dean of the Schulich School of Business York University for his invaluable comments, observations and remarks on this paper.
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