Corporate Governance: The international journal of business in society

Board governance and company performance: any correlations?

Nada Korac-Kakabadse Andrew K. Kakabadse Alexander Kouzmin

Article information:
To cite this document:
Nada Korac-Kakabadse Andrew K. Kakabadse Alexander Kouzmin, (2001),"Board governance and company performance: any
correlations?", Corporate Governance: The international journal of business in society, Vol. 1 Iss 1 pp. 24 - 30
Permanent link to this document:
http://dx.doi.org/10.1108/EUM0000000005457
Downloaded on: 30 January 2016, At: 12:14 (PT)
References: this document contains references to 44 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 4226 times since 2006*

Downloaded by Chinese University of Hong Kong At 12:14 30 January 2016 (PT)

Users who downloaded this article also downloaded:

Mohd Hassan Che Haat, Rashidah Abdul Rahman, Sakthi Mahenthiran, (2008),"Corporate governance, transparency and performance of
Malaysian companies", Managerial Auditing Journal, Vol. 23 Iss 8 pp. 744-778 http://dx.doi.org/10.1108/02686900810899518
M. Alix Valenti, Rebecca Luce, Clifton Mayfield, (2011),"The effects of firm performance on corporate governance", Management
Research Review, Vol. 34 Iss 3 pp. 266-283 http://dx.doi.org/10.1108/01409171111116295
Benjamin I. Ehikioya, (2009),"Corporate governance structure and firm performance in developing economies: evidence
from Nigeria", Corporate Governance: The international journal of business in society, Vol. 9 Iss 3 pp. 231-243 http://
dx.doi.org/10.1108/14720700910964307

Access to this document was granted through an Emerald subscription provided by emerald-srm:149425 []

For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service
information about how to choose which publication to write for and submission guidelines are available for all. Please visit
www.emeraldinsight.com/authors for more information.

About Emerald www.emeraldinsight.com

Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than
290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional
customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE)
and also works with Portico and the LOCKSS initiative for digital archive preservation.
*Related content and download information correct at time of download.

BOARD GOVERNANCE AND COMPANY

PERFORMANCE: ANY CORRELATIONS?
Nada Korac-Kakabadse, Andrew K. Kakabadse and Alexander Kouzmin

Downloaded by Chinese University of Hong Kong At 12:14 30 January 2016 (PT)

Cranfield School of Management, Cranfield, Bedford, UK

above average in promoting good governance practices,

such as transparency and accountability (IRB, 2000a).
A survey carried out by McKinsey and Company, in
conjunction with Institutional Investor Inc., found that
investors pursuing a growth strategy did not worry about
corporate governance, whilst investors who pursued a
value strategy and invested in under-valued or stable
companies were willing to pay for good governance
(Agrawal et al., 1996). These investors hold the belief
that a company with good governance will perform
better over time and/or that good governance can reduce
risk and attract further investment (Agrawal et al.,
1996). Good corporate governance can, apparently,
serve as a tool for attracting certain types of investors as
well as influencing what will be paid for stock; the
average premium which investors are willing to pay for
good governance being between 11 and 16 per cent
(Agrawal et al., 1996).
Although there is a growing literature linking
corporate governance to company performance there is,
equally, a growing diversity of results. The diversity of
results can be partly explained by differences in the
theoretical perspectives applied, selected research
methodologies, measurement of performance and
conflicting views on board involvement in decision
making and, in part, to the contextual nature of the
individual firm. Even studies based on the integrative
models of board involvement, incorporating different
theoretical perspectives and various board attributes,
provide inconclusive results, suggesting that corporate
governance has, at least, an indirect effect on company
performance (Zahra and Pearce, 1989; Jonnergard and
Svensson, 1995; Maassen, 1999).

Abstract There persists the belief that a firm's only responsibility to

society is to maximize profits without breaking the law, hence the
role of corporate governance is to provide appropriate corporate
control. Research suggests that there is a growing perception that
corporations are social entities overall, answerable to social
constituencies and that the role of corporate governance is to
understand and adequately address the interest of such social and
political constituents. A review of research studies in the area of
corporate governance's contribution to corporate performance reveals
that there is no conclusive evidence of contribution. Moreover, it
illuminates the need for a boarder criteria of performance and for the
adoption of a political model of corporate governance in order to
facilitate a corporation's external accountabilities.
Keywords Corporate governance, Financial performance,
Company performance, Top management

Introduction

Large scale surveys of UK (CBI, Deloitte and Touche,

1996) and US (Daily et al., 1998) corporations suggest
that a majority of respondents feel that the heightened
focus on corporate governance has had no positive
impact on financial performance. Hence, the feeling that
sound financial performance excuses poor governance
practice is widely spread (Pic, 1997). Research reveals
that institutional investors identify a key investment
criterion to be financial performance and growth
potential. Corporate governance is ranked as being
toward the bottom, with exception to the aspect of
information delivered by the company on management
remuneration (Pic, 1997). Moreover, US research
suggests that there is no systematic relationship between
the level of institutional holdings and a firm's financial
performance, nor that the most dominated by
institutional investment achieve a better investment
performance (Daily et al., 1998; Pic, 1997). As such,
corporate governance tends to attract the headlines
when a company significantly drops its expected
performance or is in financial trouble (IRB, 2000a).
There are, however, many corporate boards performing

The current issue and full text archive of this journal is available at
http://www.emerald-library.com/ft

Corporate Governance 1,1 2001, pp. 24-30, # MCB University Press, 1472-0701

2 4

regarding board attributes and corporate performance

(Zahra and Pearce, 1989; Dalton et al., 1998; Maassen,
1999). A summary of the four sets of board attributes
most commonly studied is provided in Table II.

Board roles

The corporate governance literature identifies a variety

of different roles boards of directors may assume in
decision making (Zahra and Pearce, 1989; Gopinath et
al., 1994; McNulty and Pettigrew, 1996; Hung, 1998;
Maassen, 1999). However, the three critical board roles
that have been identified and studied by a variety of
theoretical perspectives are service roles, control roles
and strategic roles (Zahra and Pearce, 1989; Gopinath et
al., 1994; Maassen, 1999). A summary of the central
treatment of each of these roles, by different theoretical
perspectives, is provided in Table I.

Contextual variables

In addition, the treatment of other contextual variables

by various theotrical perspectives adds to the complexity
of results. These variables influence board attributes and
the way corporate boards of directors conduct their
activities relies on context that can, ultimately, influence
the contribution of boards of directors and the
performance of corporations (Zahra and Pearce, 1989;
Judge, 1989; Maassen, 1999). For example,
environmental variables; type of industry; national and
international legal and financial systems; as well as
accounting practices, have influence on corporate
performance (Judge and Zeithaml, 1992; Demb and
Neubauer, 1990; 1992). There is considerable influence
of bank-based financial systems, market-based financial
systems (Sheridan and Kendell, 1992) and shareholder
activism (Prevost and Rao, 2000). Moreover, local,
social and global political pressures, lobby groups,
regulatory systems and ownership patterns have
influence on corporate governance and performance of
the firm (Demb and Neubauer, 1990; 1992; Lo, 1994).
The web of components that influence the involvement
of directors and organization is further complicated by
the actual behaviour of directors and their involvement
in decision making (Judge, 1989; Pettigrew, 1992).

Downloaded by Chinese University of Hong Kong At 12:14 30 January 2016 (PT)

Board attributes

The corporate governance literature identifies four sets

of board attributes; namely, composition,
characteristics, structure and process (Zahra and Pearce,
1989; Maassen, 1999). Board composition refers to the
size of the board and the mix of different director's
demographics (insiders/outsiders, male/female, foreign/
local) and the degree of affiliation directors have with the
corporations (Zahra and Pearce, 1989; Maassen, 1999).
Board characteristics encompass director's backgrounds,
such as director's experience; tenure; functional
background; independence; stock ownership and other
variables that influence director's interest and their
performance (Hambrick, 1987; Zahra and Pearce,
1989). Board structure covers board organization; the
role of subsidiary boards in holding companies; board
committees; the formal independence of one-tier and
two-tier boards; the leadership of boards and the flow of
information between board structures (Maassen, 1999).
Board process refers to decision-making activities; styles
of board; the frequency and the length of board
meetings; the formality of board proceedings and board
culture on evaluation of director's performance (Vence,
1983; Pettigrew, 1992).
Growing literature focused on some aspects of the
four sets of board attributes from a variety of theoretical
perspectives have produced a plethora of varying results

Corporate governance impact on firm performance:

overview of research findings

Although there is a growing focus on governance issues,

such as specific board composition configuration or
board leadership structure, the results are unclear with
respect to firm performance (Dalton et al., 1998). Many
studies that demonstrate positive relationships between
variables of interest from the four sets of board attributes
and firm's performance, when meta-analytically
reviewed, show negative relationships and no statistically

Table I Board roles that may impact on corporate performance

Role/characteristics

Service role

Control role

Strategic role

Theoretical perspective

Stewardship theory/consensus
perspective

Agency theory/conflict perspective

Financial model
Legalistic approach

Resource dependency
Stakeholder theory
Political model

Central to role

Co-option of organization
Control of corporation
Enhancing reputation of
corporation/ceremonial
Formulation and implementation
of decision making

Safeguard interest of shareholders

Select CEO
Monitor CEO/management
performance
Review CEO's analysis
Rectify executive decisions
Separation of decision control
from decision management

Guide corporate mission

Development, implementation and
monitoring of the firm's strategy
Resource allocation
Boundary spanning

Sources: Adapted from Zahra and Pearce (1989); Maassen (1999); Kakabadse and Kakabadse (2001)

Corporate Governance 1,1 2001

2 5

Table II Board attributes that may have influence on corporate performance

Attributes/dimensions

Composition

Characteristics

Structure

Process

Dimensions

Board size
Outsider's representation
Minority representations

Director's background,
beliefs and attributes
Director's orientation
(internal/external)
Insidedness
External expertise
Interest groups
Asset impact

Board leadership
Efficiency of board structure
(board leadership, activities
amongst committees, flow
of information among
directors)

Intensity and quality of

director's interaction
Interface between the CEO/
chairperson and the board
Levels of director consensus
Process of board evaluation
Comprehensiveness and
explicitness of board
proceedings and action
Internal proceedings

Downloaded by Chinese University of Hong Kong At 12:14 30 January 2016 (PT)

Sources: Adapted from Zahra and Pearce (1989); Maassen (1999); Kakabadse and Kakabadse (2001)

significant relationship at all (Dalton et al., 1998). For

example, Hunter and Schmidth (1990, p. 29) have
suggested that ``conflicting rustles in the literature may
be entirely artificial''. There is no actual population of
relationships at all. For example, a meta-anlaysis of 54
empirical studies of board composition and 31 empirical
studies of board leadership structure and their
relationship to financial performance, by Dalton et al.
(1998, p. 269), concluded that these and other analyses
``relying on firm size, the nature of financial preference
indicators and various operationalizations of board
composition, provide little evidence of a systemic
governance structure and financial performance
relationships''. Similarly, the analysis of 40 years of data
from 159 studies, carried out by Dalton and Daily
(1999), concluded that there is no clear evidence of a
substantive relationship between board composition and
financial performance, irrespective of the type of
performance indictors, the size of the firm or the manner
in which board composition is measured. For example, a
board could be completely independent and, at the same
time, fail in its expertise, counsel and resourcedependency roles (Dalton and Daily; 1999). On the
other hand, a board dominated by inside and affiliated
directors could fall short in its ability to monitor and
control (Daily and Dalton, 1994; 1999). Hence, reliance
on the independence of board members or any one
dimension of board roles and attributes will not ensure
high levels of corporate financial performance, especially
if it is at the expense of other director roles (Johnson et
al., 1993; Dalton and Daily, 1999).
A comprehensive and integrative review of the
corporate governance contribution to company
performance research suggests a tendency, amongst
scholars, to search for universal associations between
board attributes, board roles and company performance
(Zahra and Pearce, 1989; Maassen, 1999). Zahra and
Pearce (1989), reviewing 22 empirical studies in their
construction of an integrative model of a literature
review identifying variables of board attributes and
board roles in relation to firm's performance, identify a

number of shortcomings in previous research and urge

cautious interpretation of results on board roles and
attributes. Using the same constructs of board roles and
attributes for measuring impact on firm's performance,
Maassen's (1999) empirical study of the USA, UK and
The Netherlands listed companies came to similar
conclusions. Moreover, both studies concluded that
there is an over-focus on the financial dimensions of
company performance, with some attention being given
to systemic performance and very little attention being
paid to social dimensions of company performance
(Zahra and Pearce, 1989; Maassen 1999). Most
common measures of financial performance were: ROE;
ROA; EPS; stock price; return on investment; profit
margins; net income and profit margins on sales,
income/sales and income/equity.
A summary of a framework that incorporates five
theoretical perspectives' treatment of board attributes,
board role and contextual variables for analyzing
research results in relation to the corporate governance
contribution to firm's performance is provided in
Table III. The five perspectives are only representative
of corporate governance models and it is recognized that
there other models of corporate governance that provide
insights and add to the complexity of results that attempt
to link board role, attributes and contextual factors with
corporate performance; as exemplified by the
stewardship perspective. Although agency theory and
the financial model, combined together, and the
stakeholder perspective and political model have their
differences, they also share considerable similarities
hence they are addressed as a group.
Corporate governance research results have been
fraught with a variety of limitations. First, the literature
is fragmented due to the different disciplinary
backgrounds sociologist, financial/economist,
organizational theorists and strategic management
leading to different terminology and operationalization
of similar concepts (Judge, 1989; Zahra and Pearce,
1989; Turnbull, 1997; Dalton et al., 1998; Maassen,
1999). Moreover, most empirical studies are not theory

Corporate Governance 1,1 2001

2 6

Table III Framework for analysing governance contribution to company performance

Downloaded by Chinese University of Hong Kong At 12:14 30 January 2016 (PT)

Perspectives/
characteristics

Legalistic

Resource
dependency

Class hegemony

Agency theory/
financial model

Stakeholders/
political model

Board attributes

Composition
Characteristics
Structure
Process

Composition
Characteristics

Composition
Characteristics
Process

Composition
Characteristics
Process
Structure

Composition
Characteristics
Process
Structure

Board role

Control
Service

Service
Strategy
Control

Service
Control

Control
Service
Strategy

Service
Strategy
Boundary-spanning
Control

Contextual variables

Ownership
concentration
Company size

External environment
Company life cycle
Type of business

Ownership
concentration
CEO style
Ruling capitalist
values

Concentration of
ownership
External environment

External environment
Distribution of
ownership
CEO style
Operating values

Strategic outcome

Approval

Review
Approval
Initiatives

Approval

Control
Approval

Consensus
Review
Initiatives

Performance criteria

Financial (profitability)
Systemic (survival,
growth)
Social (responsiveness
to society)

Financial (profitability)
Systemic (survival,
growth in resources,
goal achievement,
relative market
position)
Social (responsiveness
to society)

Financial (profitability)
Systemic (oligopolistic
market power)

Financial (low
operating cost,
profitability)
Systemic (survival,
growth)

Financial (profitability)
Systemic (survival,
growth, goal
achievement,
market position)
Social (responsiveness
to society and
ethical behaviour)

Sources: Adapted from Zahra and Pearce (1989); Maassen (1999); Kakabadse and Kakabadse (2001)

driven and, of those that are, most are focused on

structural dimensions of the board with only speculative
inference of board behaviour (Judge, 1989; Zahra and
Pearce, 1989; Dalton et al., 1998; Maassen, 1999). In
addition the impact of contextual factors has been
considerably ignored (Judge, 1989; Zahra and Pearce,
1989; Dalton et al., 1998; Maassen, 1999).
The need for the incorporation of contextual variables
in assessing governance and firm performance has been
recognized by institutional shareholders. For example, at
the annual institutional shareholder services meeting, BP
Amoco plc and another seven corporations have been
voted as eight examples of best practice in corporate
governance in the international arena. The BP Amoco
plc award was for establishing a Chairman's Committee
and an Environmental Ethics Committees and for a lead
in corporate governance reforms in the UK (IRB,
2000a). Similarly, Apria Healthcare Group, in the USA,
facing significant performance problems, adopted rigid
governance principles and established one of the best
boards in the USA (IRB, 2000a). The Sony
Corporation, in Japan, reduced its board of directors
from 28 to ten and introduced independent directors
(IRB, 2000a). The Bank of Montreal adopted a strong
director education program and an annual performance
survey of board members having a high level of
independence, analysed by an independent consultant.

Mexico City-based TV Azteca SA de CV has been

recognized for the introduction of independent directors
and progressive reporting principles; the Polish media
company Agora SA has been recognized for having the
most transparent reporting system of any company in
Poland; Germany's DePfa-Bank has been praised for
being the first German company to adopt best practice
corporate governance principles and Indian Infosys
Technologies Limited leads disclosure in India, meeting
local reporting standards and also the London Stock
Exchange standard (IRB, 2000a).
This clearly demonstrates that contextual variables
such as societal, political and economic structures and
legal financial systems have an impact on corporate
governance and corporate performance. Moreover, the
fact that institutional investors are prepared to pay a
premium of 16 to 18 per cent for a good corporate
governance in the USA and UK (IRB, 2000b), 27 per
cent for a well-governed company in Venezuela or
Indonesia and 22 per cent for an Italian company (IRB,
2000b) suggests that the geo-political dimension of
corporate governance is largely ignored by research
scholars. The shareholder activism that swept corporate
America over the last ten years has been exported to
Europe and beyond through the ``International
Corporate Governance Program'' of 1996 and aimed at
the UK, France, Germany and Japan (SpencerStuart,

Corporate Governance 1,1 2001

2 7

1999) is an additional contextual variable, with geopolitical dimensions, that directly and/or indirectly
impacts on corporate governance and corporate
performance.

used by dissident investors to displace incumbent

management'' (Gordon and Pound, 1993, p. 701).
American public pension funds have led the way in
shareholder activism by targeting under-performing
boards of directors and demanding better performance
and higher standards of corporate governance
(SpencerStuart, 1999). For example, the CalPERS (the
Californian Public Employees' Retirement System), one
of the largest and most vociferous of US pension funds,
has launched attacks on IBM, General Motors,
American Express, Kmart and Sears, among many
others (SpencerStuart, 1999). Out of 20 analysed
CalPERS proposals, eight were voted in, suggesting
undue CalPERS influence in the market place (Prevost
and Rao, 2000). Research suggests that targeted firms
are those with high institutional and low insider
ownership (Carleton et al., 1998) and firms with low
market-to-book value, low return on sale (Karpoff et al.,
1996) and poor stock returns (Smith, 1996) being the
most targeted companies.
UK institutions have also exercised their rights over
issues such as stock market under-performance,
succession planning, power sharing at the top and
remuneration and incentive schemes for executive
directors (SpencerStuart, 1999). Marks & Spencer, The
Mirror Group, Reckitt and Colman, Diago, Reuters and
Granada have all been targeted in the past two years on
some of these issues.
Pension fund activism can be through nonconfrontational, long-term strategies such as negotiated
settlements or through confrontational strategies,
exemplified by shareholders' proposals or their
combination (Prevost and Rao, 2000). Research
suggests that non-confrontational activism is associated
with a positive impact on stock returns in the short-term
but that the long-term effect on operating performance
is negligible (Karpoff et al., 1996; Wahal, 1996; Del
Guercio and Hawkins, 1999). Furthermore, research
suggests that there is no conclusive evidence that
confrontational strategies, through shareholder
proposals, have any effect on returns or performance
(Karpoff et al., 1996; Wahal, 1996; Del Guercio and
Hawkins, 1999). The Prevost and Rao (2000) study
found that firms repeatedly targeted by shareholders'
proposals experience further deterioration in operating
performance in the long term. Corporations targeted by
CalPERS and coalitions of public funds sponsoring one
or more proposals on the same proxy experience strongly
negative effects surrounding the proxy mailing dates
(Prevost and Rao, 2000). Hence, proposal submission
by the most highly-visible pension funds signals a
breakdown in the negotiation process between funds and
management.
However, management also has a privileged position
at the level of the firm by virtue of its control over proxy
machinery. As proxy voting is generally not anonymous,

Downloaded by Chinese University of Hong Kong At 12:14 30 January 2016 (PT)

Shareholder activism and corporate performance

Shareholder activism by public pension funds has

received considerable attention in corporate law and
finance, particularly in the USA and UK (Rediker and
Seth, 1995; Smith, 1996). The emergence of public
pension funds as leaders in the institutional governance
arena is often associated with size and independence
(Prevost and Rao, 2000). For example, in 1998, in the
USA, 20 of the largest pension funds were public. Public
fund mangers are not subjected to the same security that
private fund managers face as they do not solicit
business from corporate managers; they are not
concerned whether corporate managers like how they
cast their vote (Black, 1990, p. 599). Hence public fund
managers may have greater freedom than private fund
managers to use voting powers aggressively without
concern for their position. Moreover, public pension
funds in the USA are not governed by the Employee
Retirement Income Security Act (ERISA), but by
common law of trusts, which allow them more room for
legal manoeuvring (Black, 1990).
Shareholders can exercise their influence over the
governance of individual corporations both formally,
through the proxy system where they can initiate and
vote on proposals, and informally, through negotiations
with corporate management (Davis and Thompson,
1994). However, management has a control over what
comes to a vote on the proxy ballot, including, most
importantly, who is nominated to the board of directors.
Although public corporations hold an annual meeting
open to shareholders and where votes on significant
issues of corporate governance are taken, the vast
majority of shareholders who vote do so by proxy.
However, shareholder organizations have been able to
mobilise influence outside the proxy system through
private meetings and public pressure (Davis and
Thompson, 1994).
The rise in institutional equity in the 1980s has
resulted in a proliferation of public-fund-sponsored
corporate-governance shareholder proposals, made
under the auspices of the Security and Exchange
Communion's (SEC) Rule 14a-8 but they are generally
not binding under the law, even if they attain a majority
vote (Del Guercio and Hawkins, 1999). Shareholders
can make proposals of up to 500 words in length to
change corporate governance structure and management
and must include these proposals in proxy solicitation
material and give shareholders an opportunity to
indicate their preference (Gordon and Pound, 1993).
However, the proposal mechanism ``cannot be used for
proposals pertaining to directors and hence cannot be

Corporate Governance 1,1 2001

2 8

institutional investors are open to pressure by managers

who are able to determine who voted and how. Hence,
lobbying, political negotiations and power manoeuvring
all take place, making the corporate governance a
fortress of political manoeuvring. Certain institutional
investors are particularly susceptible to this pressure
because they may be actual or potential business
associates of the firm (Davis and Thompson, 1994).
Moreover, corporations often lobby government for
particular polices that will benefit or protect them thus,
effectively, being national and, even, international power
brokers.

negotiations: evidence from TIAA-CREF'', Journal of Finance,

Vol. 53 No. 4, August, pp. 1335-62.
CBI, Deloitte and Touche, (1996), Survey of Corporate Governance in
the UK, Deloitte and Touche, London.
Conference Board (1996), The Corporate Board; A Growing Role in
Strategic Assessment: A Research Report, The Conference Board,
New York, NY.
Daily, C.M. and Dalton, D.R. (1994), ``Corporate governance and the
bankrupt firm: an empirical assessment'', Strategic Management
Journal, Vol. 15 No. 6, pp. 643-56.
Daily, C.M., Johnson, J.L., Ellstrand, A.E. and Dalton, D.R. (1998),
``Compensation committee as a determinant of CEO
compensation'', Academy of Management Journal, No. 2, April,

Downloaded by Chinese University of Hong Kong At 12:14 30 January 2016 (PT)

Conclusion

pp. 209-20.

Political opportunity, structure, stakeholders' interests,

social infrastructure and mobilization all have influence
on corporations and corporate stakeholders, hence
requiring corporate governance attention. For example,
in the past few years, in response to corporate scandals,
corporate governance and ethics have become important
issues for listed companies in meeting stakeholders'
expectations. One corporate governance requirement is
to establish and maintain policy on appropriate ethical
standards. A very common response among listed
companies is the development of ``codes of ethics'' or
``codes of conduct'' as, essentially, a statement of
company values. Companies that have developed codes
can disclose information about their existence and
operation in the annual report. Hence, stakeholders or
constituents are responsible for determining whether a
firm is properly fulfilling its responsibilities.
Corporations that fail to carry their duty to stakeholders
may have legitimacy denied and be forced out of
existence through lawsuits, regulatory changes or
boycotts (Gordy, 1993).
Hence, the political perspective implies that it is an
imperative that corporations understand and adequately
address the interests of socio-political constituents. The
impact of a firm's visibility on its public affairs activities
suggests a clear impact of corporate visibility on
activities toward stakeholders. Moreover, corporate
governance also has the role of boundary-spanning
activities that occur between corporation's members and
the external environment. Adopting a political
perspective, and including border-performance
measures of corporate governance that other
perspectives are unable to provide, is overdue. CG

Dalton, D.R. and Daily, C.M. (1999), ``What's wrong with having
friends on the board?'', Across the Board, Vol. 36 No. 3,
pp. 28-32.
Dalton, D.R., Daily, C.M., Ellstrand, A.E. and Johnson, J.L. (1998),
``Meta-analytic review of board composition, leadership
structure and financial performance'', Strategic Management
Journal, Vol. 19, pp. 269-90.
Davis, G.F. and Thompson, T.A. (1994), ``A social movement
perspective on corporate control'', Administrative Science
Quarterly, Vol. 39 No. 1, March, pp. 141-66.
Davis, K. (1975), ``Five positions for social responsibility'', Business
Horizons, Vol. 18 No. 3, pp. 19-24.
Del Guercio, D. and Hawkins, J. (1999), ``The motivation and impact
of pension fund activism'', Journal of Financial Economics, Vol. 52
No. 3, June, pp. 293-340.
Demb, A. and Neubauer, F. (1990), ``How can the board add value'',
European Management Journal, Vol. 8 No. 2, pp. 156-60.
Demb, A. and Neubauer, F. (1992), The Corporate Board: Confronting
the Paradoxes, Oxford University Press, New York, NY.
Donaldson, T. and Preston, L.E. (1993), ``The stakeholder theory of
the corporation: concepts, evidence and implication'', Academy
of Management Review, Vol. 20 No. 1, January, pp. 65-91.
Friedman, M. (1962), Capitalism and Freedom, University of Chicago
Press, Chicago, IL.
Gopinath, C., Siciliano, J.I. and Murray, R.L. (1994), ``Changing role
of the board of directors: in search of a new strategic identity'',
The Mid-Atlantic Journal of Business, Vol. 30 No. 2, pp. 175-85.
Gordon, L. and Pound, J. (1993), ``Information, ownership structure
and shareholders voting: evidence from shredder-sponsored
corporate governance proposals'', Journal of Finance, Vol. 48
No. 2, June, pp. 697-718.
Gordy, M. (1993), ``Thinking about corporate legitimacy'', in
Sutton, B. (Ed.), The Legitimate Corporation, Basil Blackwell,
Cambridge, pp. 82-101.
Hambrick, D.C. (1987), ``The top management team; key to strategic

References

Agrawal, R., Findley, S., Greene, S., Huang, K., Jeddy, A.,

success'', California Management Review, Vol. 30 No. 1,

Lewis, W.W. and Petry, M. (1996), ``Capital productivity: why

pp. 88-108.

the US leads and why it matters?'', McKinsey Quarterly, No. 3,

Hung, H. (1998), ``A typology of the theories of the roles of governing

pp. 39-48.

boards'', Corporate Governance: An International Review, Vol. 6

Black, B. (1990), ``Shareholder passivity re-examined'', Michigan Law

Review, Vol. 89 No. 2, December, pp. 520-607.

No. 1, pp. 101-11.

Carleton, W., Nelson, J. and Weisbah, M. (1998), ``The influence of

institutions on corporate governance through private

Corporate Governance 1,1 2001

2 9

Hunter, J.E. and Schmidth, F.L. (1990), Methods of Meta-analysis:

McNulty, T. and Pettigrew, A. (1996), ``The contribution, power and

Correcting Error and Bias in Research Findings, Sage, Newbury

influence of part-time board members'', Corporate Governance:

Park, CA.

An International Review, Vol. 3 No. 2, pp. 160-79.

Investors Relations Business (IRB) (2000a), ``News features: global

Pettigrew, A.M. (1992), ``On studying management elites'', Strategic

firms win awards for best corporate governance'', Staff Reports,

Management Journal, Vol. 13 No. 2, pp. 163-82.

Institutional Shareholders Services Inc., 6 March, pp. 1-2.

Pic, J.J. (1997), A Glance at Corporate Governance around the World,

Investors Relations Business (IRB) (2000b), ``Good governance pays

special issue, Point of View Series, SpencerStuart, Amsterdam.

off: institutions will pay a premium for an independent board'',

Staff Reports, Institutional Shareholders Services, 10 July,

Prevost, A.K. and Rao, R.P. (2000), ``Of what value are
shareholderproposals sponsored by public pensionfunds?'', The

pp. 1-3.

Journal of Business, Vol. 73 No. 2, pp. 177-204.

Johnson, R.A., Hockisson, R.E. and Hitt, M.A. (1993), ``Board of

Rediker, K.J. and Seth, A. (1995), ``Board of directors and substitution

directors involvement in restructuring: the effects of board versus

effects of alternative governance mechanisms'', Strategic

managerial controls and characteristics'', Strategic Management

Management Journal, Vol. 16 No. 2, pp. 85-99.

Downloaded by Chinese University of Hong Kong At 12:14 30 January 2016 (PT)

Journal, Vol. 14 (Summer Special Issue), pp. 33-50.

Sheridan, T. and Kendell, N. (1992), Corporate Governance: An Action

Jonnergard, K. and Svensson, C. (1995), ``Corporate board behaviour:

Plan for Profitability and Business Success, Financial Times and

emphasis in role fulfilment a typology'', Corporate Governance:

An International Review, Vol. 3 No. 1, pp. 36-77.

Pitman Publishing, London.

Smith, M. (1996), ``Shareholder activism by institutional investors:

Judge, W.Q. Jr (1989), ``Towards a theory of board involvement in the

evidence from CalPERS'', Journal of Finance, Vol. 51 No. 1,

strategic decision process'', Doctoral Dissertation, The

May, pp. 227-52.

University of North Carolina, Chapter Hill, NC.

SpencerStuart, (1999), European Board Index: Current Board Trends and

Judge, W.Q. Jr and Zeithaml, C.P. (1992), ``Institutional and strategic

Practices at Major European Corporations, SpencerStuart,

choice perspectives on board involvement in strategic decision

Amsterdam.

process'', Academy of Management Journal, Vol. 35 No. 4,

Turnbull, S. (1997), ``Corporate governance: its scope, concerns and

August, pp. 766-94.

Kakabadse, A. and Kakabadse, N. (2001), Geo-politics of Governance:

theories'', Corporate Governance: Scholarly Research and Theory

Papers, Vol. 5 No. 4, October, pp. 180-208.

Impact of Contrasting Philosophies, Macmillan, London.

Vence, S.C. (1983), Corporate Leadership: Boards, Directors and

Karpoff, J., Malatesta, P. and Walkling, R. (1996), ``Corporate

Strategy, McGraw-Hill, New York, NY.

governance and shareholder initiatives: empirical evidence'',

Wahal, S. (1996), ``Pension fund activism and firm performance'',

Journal of Financial Economics, Vol. 42 No. 4, November,

Journal of Quantitative and Financial Analysis, Vol. 31 No. 1,

pp. 365-95.

March, pp. 1-23.

Lo, B.T. (1994), ``Improving corporate governance: lessons from the

Zahra, S.A. and Pearce, J.A.II. (1989), ``Board of directors and

European Community'', Global Legal Studies Journal,

www.law.inidana.edu, 6 June.

corporate financial performance: a review and integrative

model'', Journal of Management, Vol. 15 No. 2, pp. 291-334.

Maassen, G.F. (1999), An International Comparison of Corporate

Governance Models, SpencerStuart, Amsterdam.

Corporate Governance 1,1 2001

3 0

Downloaded by Chinese University of Hong Kong At 12:14 30 January 2016 (PT)

This article has been cited by:

1. Stephen Korutaro Nkundabanyanga, Venancio Tauringana, Moses Muhwezi. 2015. Governing boards and perceived
performance of secondary schools. International Journal of Public Sector Management 28:3, 221-239. [Abstract] [Full Text]
[PDF]
2. Shamsul Nahar Abdullah. 2014. The causes of gender diversity in Malaysian large firms. Journal of Management & Governance
18, 1137-1159. [CrossRef]
3. M.I. Muller-Kahle, Liu Wang, Jun Wu. 2014. Board structure: an empirical study of firms in Anglo-American governance
environments. Managerial Finance 40:7, 681-699. [Abstract] [Full Text] [PDF]
4. Kristina Minnick, Leonard Rosenthal. 2014. Stealth compensation: Do CEOs increase their pay by influencing dividend
policy?. Journal of Corporate Finance 25, 435-454. [CrossRef]
5. Todd Shank, Ronald Paul Hill, John Stang. 2013. Do investors benefit from good corporate governance?. Corporate
Governance: The international journal of business in society 13:4, 384-396. [Abstract] [Full Text] [PDF]
6. Filipe Morais, Nada K. Kakabadse. 2013. Delving into the Boardroom Black Box: A Research Model of Board Learning
Capability (BLC). Open Journal of Business and Management 01, 76-90. [CrossRef]
7. Carolyn Ward, David Preece. 2012. Board member development in the public, voluntary and social housing sectors. European
Journal of Training and Development 36:6, 630-645. [Abstract] [Full Text] [PDF]
8. Sulaiman Abdullah Saif Alnasser, Joriah Muhammed. 2012. Introduction to corporate governance from Islamic perspective.
Humanomics 28:3, 220-231. [Abstract] [Full Text] [PDF]
9. Jokull Johannesson, Iryna Palona, Jose Francisco Salazar Guillen, Michael Fock. 2012. UK, Russia, Kazakhstan and Cyprus
governance compared. Corporate Governance: The international journal of business in society 12:2, 226-242. [Abstract] [Full
Text] [PDF]
10. Adrian Pryce, Nada K. Kakabadse, Tom Lloyd. 2011. Income differentials and corporate performance. Corporate Governance:
The international journal of business in society 11:5, 587-600. [Abstract] [Full Text] [PDF]
11. Humphry Hung. 2011. Directors Roles in Corporate Social Responsibility: A Stakeholder Perspective. Journal of Business
Ethics 103, 385-402. [CrossRef]
12. Carmen Barroso, Ma Mar Villegas, Leticia Prez-Calero. 2011. Board Influence on a Firm's Internationalization. Corporate
Governance: An International Review 19:10.1111/corg.2011.19.issue-4, 351-367. [CrossRef]
13. MarieJose Roy. 2011. Board information: meeting the evolving needs of corporate directors. Management Research Review
34:7, 773-789. [Abstract] [Full Text] [PDF]
14. Deryl Northcott, Janine Smith. 2011. Managing performance at the top: a balanced scorecard for boards of directors. Journal
of Accounting & Organizational Change 7:1, 33-56. [Abstract] [Full Text] [PDF]
15. Guosong Shao. 2010. The Effects of Board Structure on Media Companies Performance: A Stakeholder Perspective. Journal
of Media Business Studies 7, 1-16. [CrossRef]
16. C. Barroso Castro, M.M. Villegas Perian, L. Prez-Calero. 2010. SON EFECTIVOS LOS CONSEJOS DE
ADMINISTRACIN? LA EFICACIA DEL CONSEJO Y LOS RESULTADOS DE LA EMPRESA. Investigaciones
Europeas de Direccin y Economa de la Empresa 16, 107-126. [CrossRef]
17. Kizhekepat Sankaran, Srijayan Iyer. 2010. Governance tools for board members. Adapting strategy maps and balanced
scorecards for directorial action. Verslo ir teiss aktualijos 6, 141-158. [CrossRef]
18. Guosong Shao. 2010. Thinking About Stakeholders: Compensation Arrangements of Media Companies and Their
Performance. International Journal on Media Management 12, 5-19. [CrossRef]
19. Himu Bindu Kota, Sarika Tomar. 2010. Corporate governance practices in Indian firms. Journal of Management &
Organization 16, 266-279. [CrossRef]
20. Carmen Barroso Castro, Marta Dominguez De La Concha, Julio Vecino Gravel, Ma Mar Villegas Perian. 2009. Does the
Team Leverage the Board's Decisions?. Corporate Governance: An International Review 17, 744-761. [CrossRef]
21. Beverley Jackling, Shireenjit Johl. 2009. Board Structure and Firm Performance: Evidence from India's Top Companies.
Corporate Governance: An International Review 17:10.1111/corg.2009.17.issue-4, 492-509. [CrossRef]
22. Janet Lee. 2009. Executive performance-based remuneration, performance change and board structures. The International
Journal of Accounting 44, 138-162. [CrossRef]

Downloaded by Chinese University of Hong Kong At 12:14 30 January 2016 (PT)

23. Jelena Petrovic. 2008. Unlocking the role of a board director: a review of the literature. Management Decision 46:9, 1373-1392.
[Abstract] [Full Text] [PDF]
24. Janet Lee, Greg Shailer. 2008. The Effect of Board-Related Reforms on Investors' Confidence. Australian Accounting Review
18:10.1111/auar.2008.18.issue-2, 123-134. [CrossRef]
25. M. Victoria Lpez, Arminda Garcia, Lazaro Rodriguez. 2007. Sustainable Development and Corporate Performance: A Study
Based on the Dow Jones Sustainability Index. Journal of Business Ethics 75, 285-300. [CrossRef]
26. Gavin J. Nicholson, Geoffrey C. Kiel. 2007. Can Directors Impact Performance? A case-based test of three theories of corporate
governance. Corporate Governance: An International Review 15:10.1111/corg.2007.15.issue-4, 585-608. [CrossRef]
27. Bernard O'Meara, Stanley Petzall. 2007. How important is the role of the chancellor in the appointment of Australian vice
chancellors and university governance?. International Journal of Educational Management 21:3, 213-231. [Abstract] [Full
Text] [PDF]
28. Veysel Kula, Ekrem Tatoglu. 2006. Board process attributes and company performance of familyowned businesses in Turkey.
Corporate Governance: The international journal of business in society 6:5, 624-634. [Abstract] [Full Text] [PDF]
29. John McCormick, Kerry Barnett, Seyyed Babak Alavi, Geoffrey Newcombe. 2006. Board governance of independent schools.
Journal of Educational Administration 44:5, 429-445. [Abstract] [Full Text] [PDF]
30. Veysel Kula. 2005. The Impact of the Roles, Structure and Process of Boards on Firm Performance: evidence from Turkey.
Corporate Governance 13:10.1111/corg.2005.13.issue-2, 265-276. [CrossRef]
31. Peter Collett, Sue Hrasky. 2005. Voluntary Disclosure of Corporate Governance Practices by Listed Australian Companies.
Corporate Governance 13:10.1111/corg.2005.13.issue-2, 188-196. [CrossRef]
32. David A. Holloway, Dianne van RhynEffective Corporate Governance Reform and Organisational Pluralism: Reframing
Culture, Leadership and Followership 303-328. [Abstract] [Full Text] [PDF] [PDF]
33. Victor Dulewicz, Peter Herbert. 2004. Does the Composition and Practice of Boards of Directors Bear Any Relationship to
the Performance of their Companies?. Corporate Governance 12:10.1111/corg.2004.12.issue-3, 263-280. [CrossRef]
34. Sheila Jackson, Elaine Farndale, Andrew Kakabadse. 2003. Executive development: meeting the needs of top teams and boards.
Journal of Management Development 22:3, 185-265. [Abstract] [Full Text] [PDF]