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The State of Corporate Governance Research: A Personal View

Board Leadership’s regular look at what’s happening in the world of governance research in general and research on Policy Governance in particular.

By Stuart Emslie August 31, 2011

(First published in the July-August 2011 issue of Board Leadership, available to subscribers electronically at publication.)

To help lay the foundations for future Focus on Research articles, we asked Stuart Emslie, visiting professor of health care management and governance at the School of Business and Economics of Loughborough University in the United Kingdom, to provide an overview of the current status of governance research in general.

Substantially more good research is needed in the area of corporate governance and boards. One of the issues that confounds this area of research is the definition of terms. In this article, I take the Policy Governance perspective that corporate governance is the work of the board rather than a joint board and senior management activity. However, readers should bear in mind that not all of the research to which I refer necessarily makes this distinction. Unless otherwise specified in this article, I include the governance of both for-profit and nonprofit organizations within the term corporate governance.

According to Carver (2006), “Compared with research in managerial and technical subjects, governance research continues in a primitive state despite the great increase in studies over the past couple of decades.” His unequivocal belief is that boards exist to translate informed owners’ intentions into organizational performance. Given this, he is clear that “the central and even foundational research inquiry is to find which governance practices are best able to convert a judicious summary of owners’ intentions into organizational performance.” He concedes, however, that although the question is simple, researching it is not. As Leblanc and Gillies (2005) contend, “Boards are notoriously difficult to study.”

Establishing the association between board and organizational performance has been the sine qua non of corporate governance research in recent years. Lockhart (2005) believes that after over two decades of governance research, “we are little the wiser in determining whether or not there is some relationship between governance and the organization’s performance.” He argues the difficulty of establishing causality between boards and organizational performance, citing “the entire process of management, its performance and outcomes, all of the organization’s internal processes, competencies and resources [and] . . . the external environment,” as factors that essentially get in the way. “Organizational performance,” he says,
“. . . results from some combination of board and management competencies.” Despite Lockhart’s contention, there appears to be increasing evidence of relationships, if not actual causation, between board and organizational performance.

Before we review this evidence, we need to address the other issue that confounds corporate governance research from a Policy Governance perspective: the definitions of board effectiveness and organizational performance. None of the studies referred to in this article define either of these terms as the translation of a judicious summary of owners’ intentions into reality. Instead, the definitions as currently used are based variously on the accumulation of viewpoints of current board members and CEOs, panels of experts, and commonly understood indicators of success such as financial well-being or staff continuity. What this means from a Policy Governance perspective is that the results of current research are helpful in understanding more about the status quo but not helpful in developing a governance theory that could advance the field. In using the judgment of current board members and CEOs, or panels of experts or the public, to assess board effectiveness and organizational performance, boards surely may be able to find out how to do better against these persons’ standards, but from a Policy Governance perspective, the only standards that count are those derived from owners’ standards.

Laying aside the Policy Governance perspective for a moment, let us return to the research. McDonagh (2006), in a study of sixty-four nonprofit hospitals in the United States using the Board Self-Assessment Questionnaire (BSAQ) instrument to measure board performance (Chait, Holland, & Taylor, 1993), found a positive correlation between BSAQ scores and hospital financial performance. The BSAQ scores boards on sixty-five behaviors exhibited by boards that are reputedly either very effective or very ineffective according to a U.S. panel of national experts.

McDonagh also found correlations between BSAQ scores and aspects of an independent hospital performance rating program. In separate studies in the U.K. National Health Service (NHS), again using the BSAQ instrument, Emslie (2007) and Harvey (2010) found significant correlations between BSAQ scores and various measures of the performance of NHS organizations. In a study of U.K. charities using the BSAQ, Knox (2010) found correlations between aspects of board and organizational performance. And Hawthorne, Harrod, and Schuessler (2005), writing of their findings relating governance decisions made by the board of Texas Health Resources in the United States, found a strong correlation between key actions of the board and both financial and market share performance indicators.

Green and Griesinger (1996) studied the tasks and responsibilities of nonprofit boards of directors of social service organizations and found a significant relationship between board performance and organizational effectiveness. And Brown (2005), using the BSAQ tool, found significant correlations between a number of dimensions of board performance and organizational performance. Not all researchers have found significant results. Bradshaw, Murray, and Wolpin (1992), for example, in a study of Canadian nonprofit organizations, found limited evidence of a link between board behaviors and objective indicators of organizational performance. They did, however, find a positive correlation between board members’ own perceptions of board effectiveness and a range of board process characteristics.

In the corporate world, there is a significant, and increasing, amount of research into corporate governance and its relationship to organizational performance. Aggarwal and Williamson (2006), in a study of more than 5,200 firms in the United States, looked at sixty-four governance attributes and found a positive and statistically significant relationship between governance and firm value. In Hong Kong, Cheung, Connelly, Limpaphayon, and Zhou (2005) found a statistically significant correlation between the market value of 168 listed companies and a self-developed corporate governance index. And in the United Kingdom, Hermes Pension Management (2005) undertook an extensive review of corporate governance and performance looking for evidence of a link between the two. They concluded that much of the governance-ranking research that is conducted in the private sector provides support for the proposition that good corporate governance improves company performance. Like others, however (Bradshaw et al., 1992; Lockhart, 2005), they contend, “It is notoriously difficult to prove causation” and presuppose a definition of good governance that leaves aside the matter of owners’ intentions or any comprehensive theoretical governance framework.

Increasing research interest is being shown in understanding the behaviors of individual directors and boards of directors collectively. Leblanc and Gillies (2005) asked, “Are there behavioural features of directors at board meetings that can be identified and classified that impact on their decision making capacity?” and they attempted to answer this question by conducting a systematic study between 1998 and 2003. It involved observing directors in action and conducting interviews of 194 active directors in a range of organizations about the behavioral characteristics of their colleagues in the boardroom. Their data suggest that there are basic behavioral characteristics of directors that have a major impact on the decision-making process of boards, and their research has led to a definition of classifications of functional and dysfunctional board

Thus, a range of research has been, and continues to be, conducted into corporate governance and boards. However, what appears to be missing, according to Carver (2010), and what should be the new sine qua non of corporate governance research, is a sound, integrated governance theory. “An integrated theory of governance,” contends Carver, “would raise the stature and impact of scholarly activity.” Indeed, as a governance student, teacher, and researcher myself, I believe that this, more than anything else, would enable governance research to evolve beyond its current state. The philosopher Immanuel Kant is supposed to have said, “Experience without theory is blind, but theory without experience is mere intellectual play.” In the field of nursing, McKenna (1997) refers to the idea that research without theory is analogous to a team of bricklayers throwing bricks together into a large pile without a blueprint, hoping that a house will emerge. Without theory, nursing knowledge would be a mass of data, statistics, and observations with no coherence or understanding.

Policy Governance currently seems alone in offering an integrated theory of corporate governance. It is also yet to be tested against Carver’s “central and even foundational” research question of which governance practices are best able to convert a judicious summary of owners’ intentions into organizational performance. Corporate governance and boards of directors promise to be an exciting and worthwhile field of research over the coming years.


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Green, J. C., & Griesinger, D. W. Board performance and organizational effectiveness in nonprofit social services organizations. Nonprofit Management and Leadership, 1996, 6, 381–402

Harvey, S. Factors affecting board and organizational performance in NHS trusts. Unpublished master’s thesis, Bournemouth University, England, 2010.

Hawthorne, D. D., Harrod, W. L., & Schuessler, J. P. Does excellent health care governance lead to excellent performance (or, can a great board make a difference?). Chicago: Center for Healthcare Governance, 2005.

Hermes. Corporate governance and performance. A brief review and assessment of the evidence for a link between corporate governance and performance. London: Hermes Pensions Management, 2005.

Knox, K. Governance and UK charities: An exploration of the relationship between board and organizational performance. Unpublished master’s thesis, Warwick University, England, 2010.

Leblanc, R., & Gillies, J. Inside the boardroom: How boards really work and the coming revolution in corporate governance. Hoboken, NJ: Wiley, 2005.

Lockhart, J. Why governance research has failed. Director, 2005, 3(3), 4.

McDonagh, K. J. Hospital governing boards: A study of their effectiveness in relation to organizational performance. Journal of Healthcare Management, 2006, 51(6), 377–391.

McKenna, H. Nursing theories and models. London: Routledge, 1999.

Stuart Emslie can be contacted at