Vlerick Leuven Gent Working Paper Series 2007/03 ... - Vlerick Public

APPENDIX 2
Table 2: a board of directors’ role set
Control role Service role Strategic role
Board Responsibilities • Maximizing
shareholder’s wealth
• Primarily the board
has to monitor actions
of agents (executives)
to ensure their
efficiency and to
protect principals’
(owners) interests
• Boards are a
cooptative
mechanism to extract
resources vital to
company
performance
• Boards serve a
boundary spanning
role
• Boards enhance
organizational
legitimacy
• Boards serves as
‘sounding board’ for
management
• Boards are rubber
stamps (‘passive’
school of thought)
• Boards are an
important strategic
device contributing to
the overall
stewardship of the
company (‘active’
school of thought)
Board Tasks
• Selecting, rewarding
and replacing CEO
• Monitoring/evaluating
company performance
• Articulating
shareholders’
objectives and
focusing the attention
of key executives on
company performance
• Reducing agency
costs
• Ratifying and
monitoring important
decisions
• Scanning the
environment
• Representing the
firm in the
community
• Securing valuable
resources
• Providing advice to
the organization and
CEO
• Involvement in
strategy formulation
and implementation
• Satisfying the
requirements of
company law
(‘passive view’)
‘Active’ view :
• Guiding management
to achieve corporate
mission and
objectives
• Involvement in the
strategic decision
making process
Theoretical
perspectives
Legalistic
Agency Theory
Resource Dependence
Theory
Stewardship theory
A broad range of
theories e.g. managerial
hegemony theory and
stewardship theory
Theoretical origins
Law
Economics & Finance
Organizational Theory
Sociology
Psychology
Organizational Theory
Sociology
(Source: adapted from Zahra and Pearce. 1989)
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