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The making of active boards in Swedish public companies

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Abstract

Boards of directors are a vital part of corporate governance systems. In the on-going discussion about the development of national corporate governance systems, however, little interest has been given to the issue of how and why board behavior changes over time. In this article, we use an institutional approach and study the development of board behavior in Sweden between 1994 and 2004 and if it is affected by board composition and board network characteristics. In order to do so, we introduce the constructs of board activities, i.e. what the boards do, and board involvement, i.e. when in the decision process they get involved. Findings show that range of board activities and board involvement have increased drastically during this period, which indicates a change in the logic of appropriateness of Swedish board behavior. There are robust indications that new types of actors affect activities and involvement positively, as do board interlocks, whereas network centrality affects activities and involvement negatively.

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Notes

  1. Zahra and Pearce use the concepts of board role and board function as interchangeable. In later research, the concept of board role dominates (e.g. Ruigrok et al. 2006; van Ees et al. 2008), which is why we use it in this article. Generally, however the meaning of the concept is the same within the two traditions. Another concept, that of board task, is similar to board role, but in some cases it excludes the networking role (Forbes and Milliken 1999), whereas in other cases it does not (Zona and Zattoni 2007).

  2. During presentations of earlier drafts of this article, we were sometimes advised to use factor analysis to generate board activity and board involvement factors. Institutional change, however, is a long-term process and it is likely that parts of the institution, in our case parts of the board activities, are more readily changed while others remain inert to changes (see Jonnergård et al. 2004; Scott 2001). In other words, it is not certain or even likely that all board activities will change along the same path or at the same point in time. Thus, if we used factor analysis, we would not be able to follow this development. Information would be lost and the picture of the changes and their effects would only be partial. We have, therefore, opted not to make such an analysis.

  3. In an attempt to analyze impact of minority actors further, we also introduced a nationality variable, which was available for 1999 and 2004. However, there were few significant effects while the variable introduced problems of multicollinearity into the models and it was, therefore, abandoned at present time.

  4. Earlier research on board size has shown mixed or unclear results (Dalton et al. 1998; Sonnenfeld 2004), which might indicate a curvilinear relationship between board size and firm effects, but such an analysis showed no significant results.

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  1. School of Management and Economics, Växjö University, 351 95, Växjö, Sweden

    Karin Jonnergård & Anna Stafsudd

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Jonnergård, K., Stafsudd, A. The making of active boards in Swedish public companies. J Manag Gov 15, 123–155 (2011). https://doi.org/10.1007/s10997-009-9120-y

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