Top Executives And Members Of A Corporation's Board O 253429
Top Executives And Members Of A Corporations Board Of Directors Have
Top executives and members of a corporation's board of directors have different roles and responsibilities. Traditionally, executives have been responsible for determining the firm's strategic direction and implementing strategies to achieve it, whereas the board of directors has been responsible for monitoring and controlling managerial decisions and actions. Some argue that boards should become more involved with the formulation of a firm's strategies. How would the board's increased involvement in the selection of strategies affect a firm's strategic competitiveness? What evidence would you offer to support their position?
Paper For Above instruction
The relationship between a corporation's board of directors and its top executives is fundamental to its strategic success. Traditionally, boards play a governance role, overseeing the initiatives of executives, while strategic decision-making is predominantly the responsibility of top management. However, the evolving business environment has prompted many to argue for a greater involvement of the board in strategic formulation. This essay examines how enhanced board participation in strategy choices could influence a firm's strategic competitiveness and presents supporting evidence to endorse this perspective.
Increased involvement of the board of directors in strategy formulation can significantly impact a firm's competitive positioning. First, it can lead to more comprehensive and well-informed strategic decisions. Since board members often possess diverse expertise, industry insights, and broader perspectives, their active engagement can enrich the strategic dialogue. For instance, research by Finkelstein and Mooney (2003) suggests that board participation in strategy can improve decision quality by incorporating varied viewpoints that may not be present within executive teams alone. Through collaborative deliberation, firms might develop innovative strategies that better adapt to dynamic market conditions, thus strengthening their competitiveness.
Furthermore, active board involvement can enhance strategic oversight and accountability. When directors are engaged in strategy formulation, they are more likely to monitor implementation closely and challenge assumptions, reducing the risk of strategically myopic decisions. As noted by Zajac and Westphal (1996), effective oversight fosters strategic agility—allowing firms to quickly respond to environmental changes—by aligning the board's understanding with managerial initiatives. This alignment can prevent strategic drift and ensure that the firm remains resilient and proactive in competitive landscapes.
Evidence from empirical studies supports the positive impact of board strategic engagement. For example, Zahra, Pearce, and Davis (2007) found that boards with strategic oversight responsibilities tend to promote transformational strategies, such as diversification and innovation, which are crucial in highly competitive industries. Such strategic orientations enable firms to differentiate themselves, capture new market opportunities, and sustain competitive advantages over rivals.
However, increased board involvement does not come without potential drawbacks. Excessive influence from a potentially disengaged or uninformed board could lead to strategic rigidity or conflicts with management. Nonetheless, when properly structured, the benefits tend to outweigh the risks. Leverage of external expertise, combined with clear governance protocols, can facilitate constructive oversight without stifling managerial initiative (Hillman and Dalziel, 2003).
In conclusion, enhancing the board's role in the strategic decision-making process can considerably boost a firm's strategic competitiveness. It fosters richer, more informed strategies, promotes accountability, and aligns oversight with market realities. Empirical evidence suggests that well-involved boards contribute positively to organizational agility and innovative capacity. Therefore, progressive organizations should consider integrating their boards more actively into strategy formulation, provided appropriate governance mechanisms are in place to balance oversight and managerial autonomy.
References
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- Hillman, A. J., & Dalziel, T. (2003). Boards of directors and firm performance: Integrating agency and resource dependence perspectives. Academy of Management Review, 28(3), 383-396.
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- Zajac, E. J., & Westphal, J. D. (1996). Director reputation, CEO–director relations, and after-hours governance decisions. Academy of Management Journal, 39(1), 138-158.
- Zahra, S. A., Pearce, J. A., & Davis, P. S. (2007). Awareness of the strategic role of boards of directors: How boards of directors influence firm performance and strategy. Journal of Business Venturing, 22(3), 588-614.
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- Westphal, J. D., & Zajac, E. J. (1995). Who performs leadership in top management teams? The Leadership Quarterly, 6(2), 139-159.