Articles Overview

Effective Governance’s team has written many articles in peer reviewed journals, industry periodicals, and the popular press.

Our Papers

 

Board evaluations — we’re doing them, so why do we still have non-effective directors?

James Beck and Erick Fibich
Keeping Good Companies; November 2013; p592-597

Abstract

A major trend in corporate governance over the past 20 years has been the shift from boards being seen as just a legal necessity to being seen to have responsibility for areas such as strategy and adding value to the organisations they govern. One outcome of this shift in thinking is the increased use of board evaluations as a method of performance improvement and pressure is now on to make evaluations more formalised and rigorous. However, the results are mixed for boards that undertake regular reviews due to a variety of factors. This article discusses how effective evaluations are carefully structured and planned, with defined objectives, and outcomes implemented on an ongoing basis. Further, board evaluations are not standalone processes, but rather form part of an integrated, evolving cycle of governance accountability and improvement. Download Link

Transforming Board Evaluations – The Board Maturity Model

James Beck and Mark Watson
Keeping Good Companies; November 2011; p586-592

Abstract

Boards are increasingly using board evaluations to provide them with an objective assessment of how to enhance the performance of the board, chair and individual directors. There are many different ways of conducting such evaluations and it can be quite challenging for the board to determine which method or methods it should adopt. Download Link

Seven Steps to Effective Board and Director Evaluations

Geoffrey Kiel and James Beck
Keeping good companies; November 2006, p588-592

Abstract

The challenge for boards today is to take action before there is a crisis in the organisations they govern, whether through corporate failure, questionable ethics or conflicts within the boardroom. Performance evaluation is a major means by which boards can recognise and correct such corporate governance problems and add real value to their organisations. Our paper provides a practical introduction to board and director evaluations. In this article we introduce our framework for a successful board and/or individual director evaluation whatever the company type. We suggest there are seven key questions to consider when planning a board evaluation and discuss each of the seven decision areas for the board evaluation process. Download Link

The Boardroom Equation

Stephen Howelll
ASFA – The Voice of Super; August 2012, p16-17

Abstract

We are all aware the reform of the superannuation industry will have a major impact on the management of superannuation funds in Australia. With the Stronger Super reforms, the development of SuperStream and the introduction of MySuper on 1 July 2013, together with the harmonisation of prudential standards across all APRA-regulated institutions, the boards of superannuation funds will find themselves in uncharted territory. Using poetic licence, I recommend we strive for ‘GapfreeSuper’ boards – ensuring superannuation fund boards and directors are gap-free and have the right skills and competencies. Download Link

Board Composition and Corporate Performance: How the Australian Experience Informs Contrasting Theories of Corporate Governance

Geoffrey Kiel and Gavin Nicholson
Corporate Governance: An International Review; 11(3), 2003, pp. 189-205

Abstract

In many respects, Australian boards more closely approach normative “best practice” guidelines for corporate governance than boards in other Western countries. Do Australian firms then demonstrate a board demographic-organisational performance link that has not been found in other economies? We examine the relationships between board demographics and corporate performance in 348 of Australia’s largest publicly listed companies and describe the attributes of these firms and their boards. We find that, after controlling for firm size, board size is positively correlated with firm value. We also find a positive relationship between the proportion of inside directors and the market-based measure of firm performance. We discuss the implications of these findings and compare our findings to prevailing research in the US and the UK. Download Link

The Role of the Board in Firm Strategy: Integrating Agency and Organisational Control Perspectives

Kevin Hendry and Geoffrey Kiel
Corporate Governance: An International Review; 12(4), 2004, p500-520

Abstract

The role of the board of directors in firm strategy has long been the subject of debate. However, research efforts have suffered from several deficiencies: the lack of an overarching theoretical perspective, reliance on proxies for the strategy role rather than a direct measure of it and the lack of quantitative data linking this role to firm financial performance. We propose a new theoretical perspective to explain the board’s role in strategy, integrating organizational control and agency theories. We categorize a board’s approach to strategy according to two constructs: strategic control and financial control. The extent to which either construct is favoured depends on contextual factors such as board power, environmental uncertainty and information asymmetry. Download Link

Towards an Integrative Theory of Boards of Directors: the Intellectual Capital of the Board

Gavin Nicholson and Geoffrey Kiel
Presented at the Annual Meeting of the Academy of Management: Democracy in a knowledge Economy; August 1-6 (Seattle, Washington)

Abstract

While recent process-based research into boards of directors has begun to outline how attributes of boards impact on their behavior and corporate performance, there is no unifying framework to assist academics and practitioners in understanding these important relationships. We propose a contingency model of corporate governance to address this concern. We argue that the intellectual capital (i.e. a combination of the board’s human, social and structural capitals) determines how well it can carry out a set of roles that determine board effectiveness. We also argue that a corporation’s board role set will be contingent on internal and external factors and discuss implications for practitioners and academics. Download Link

Real World Governance: Driving Business Success Through Effective Corporate Governance

Geoffrey Kiel and Gavin Nicholson
Mt Eliza Business Review, 5, 2002, pp. 17-28

Abstract

Corporate Governance has become a major topic for shareholders, regulators, society at large and, of course, for directors. There has been a rapid increase in the number of government reports, stock exchange regulations, books and articles about contemporary board roles and how boards can become more effective. At the same time, academic research has failed to demonstrate a strong link between this normative advice and organisational performance. Boards and directors, therefore, face three important challenges. First, they need to identify changes that will enhance their governance. Second, they need to ensure that these governance changes will enhance the performance of their organisation. Third, the board needs to identify the specific practical techniques required to bring about these changes. Drawing on extensive consulting experience and academic research into Australia’s leading companies, the authors outline a Corporate Governance Charter model to provide a practical framework for implementing best practice governance. Rather than offer prescriptive, universal advice, the model guides a board through four important topics as it develops best practice governance techniques appropriate for the mission and size of the organisation. These topics, defining governance roles, improving board processes, key board functions and continuing improvement, contain some twenty-four headings that boards must consider. The article concludes by providing a checklist for directors to determine the extent to which they have considered and implemented best practice. Download Link

Breakthrough Board Performance: How to Harness Your Board’s Intellectual Capital

Gavin Nicholson and Geoffrey Kiel
Corporate Governance: The International Journal of Business in Society; 4(1), 2004, p5-23

Abstract

To date, corporate governance research agendas have tended to concentrate on one particular role that a board performs. For instance, agency theory concentrates on the monitoring role, resource dependence theory concentrates on the board providing access to resources and stewardship theory concentrates on the board’s advice-giving or strategic role. While these approaches provide practitioners with useful guidelines regarding issues such as board independence, we contend that practitioners need to take care not to act on the recommendations from a single theory in isolation from the others. To address this concern, we provide a model of board effectiveness that uses the construct of board intellectual capital to integrate the predominant theories of corporate governance and illustrate how the board can drive corporate performance. We further contend that boards that wish to improve their performance need to review their intellectual capital. We conclude by linking the model to a practitioner-focused framework that identifies four key areas on which a board must concentrate to develop its intellectual capital. Download Link

A Framework for Diagnosing Board Effectiveness

Gavin Nicholson and Geoffrey Kiel
Corporate Governance: An International Review; 12(4), pp. 442-460

Abstract

As pressure mounts on boards to ensure improved corporate performance and monitoring of management, government and business groups have responded with a series of inquiries and reports advocating governance reform. These reports largely reflect the agency view of governance and endeavour to articulate how a board can ensure greater independence from and control of management. While the issue of board independence is an important aspect of good governance, we contend that frameworks and models that concentrate on a single element of governance ignore the complexity of how boards work. To address this concern, we develop a holistic framework of how boards work, based upon the concept of board intellectual capital. The framework sets out how a series of inputs (company history, company constitution, legal environment) leads to a particular mix of board intellectual capital. Board intellectual capital itself comprises five elements: (1) directors’ knowledge, skills and abilities (human capital), (2) directors’ links to the external environment (individual social capital), (3) directors’ ethics and norms (cultural capital), (4) intra-board and board-management relationships (board social capital) and (5) the company’s governance policy, processes and procedures (structural capital). We contend that the balance of these elements will lead to a series of board behaviours. Further, the board needs to mobilise its intellectual capital to carry out a series of roles. The exact nature of these roles will depend on the company’s requirements. Thus, the governance outputs of organisational performance, board effectiveness and director effectiveness will depend on the match between the board’s intellectual capital and the roles required of it. We conclude by demonstrating the benefits of this framework as a diagnostic tool. We outline how boards wishing to improve their governance systems can diagnose common governance problems by evaluating their own board’s capabilities in relation to the different components of the framework. Download Link

Succession Planning: A blueprint for the future

James Beck and Andrew Rodgers
INTHEBLACK (Magazine of the Australian CPA); February 2008; p62-65

Abstract

SME succession planning: Well conceived and executed succession planning provides owners with a means of controlling their own future – as well as that of the business. Download Link

Evaluating the Board and Individual Directors: a Framework for Effectiveness

James Beck and Denise Hamblin (Morton)
Connexus Magazine; Spring 2007, p22-23

Abstract

In accordance with APRA’s Prudential Standard 510 Governance, a regulated board must establish procedures for the annual assessment of its own performance. Download Link

Director Tenure Discussion Paper

James Beck and Jennifer Tunny

Abstract

A topic of increasing focus for boards is the impact director tenure has on performance. Many
governance authorities recommend a limitation on the length of service of a director for two reasons: Download Link