Boards of Directors: Assessing Their Functioning and Validation of a Multi-Dimensional Measure

Shamiran Asahak, Simon L Albrecht, Marcele De Sanctis, Nicholas S Barnett
Frontiers in Psychology 2018, 9: 2425
Boards of Directors that function effectively have been shown to be associated with successful organizational performance. Although a number of measures of Board functioning have been proposed, very little research has been conducted to establish the validity and reliability of dimensions of Board performance. The aim of the current study was to validate the measurement properties of a widely-used model and measure of Board performance. Exploratory Factor Analysis (EFA) and Confirmatory Factor Analysis (CFA) were conducted on online survey data collected from 1,546 board members from a range of Australian organizations. The analyses yielded 11 reliable factors: (1) effective internal communication and teamworking (2) effective leadership by the Chair (3) effective committee leadership and management (4) effective meeting management and record keeping, (5) effective information management (6) effective self-assessment of board functioning (7) effective internal performance management of board members (8) clarity of board member roles and responsibilities, (9) risk and compliance management (10) oversight of strategic direction, and (11) remuneration management. These dimensions to a large extent correspond to previously suggested, but not widely tested, categories of effective Board performance. Despite self-reported data and a cross-sectional design, tests of common method variance did not suggest substantive method effects. The research makes significant contributions to the corporate governance literature through empirical validation of a measure shown to reliably assess 11 discrete dimensions of Board functioning and performance. Practical and theoretical implications, study limitations and future research considerations are presented.

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