Corporate Governance & Organization Life Cycle: The Changing Role ...

shareholders. Eisenhardt’s contribution was to provide insights that are relevant for wider management issues, including the monitoring role of the board, with the caveat that the role of the board, as presented, is narrowly focused on monitoring top management behavior. This will become more apparent in the next section where the analysis of the board’s functions will be placed in its governance context.

1.2. Placing the Board Within the Governance Context

1.2.1. Overview of Key Areas of Research

In corporate governance, researchers have explored three sets of issues. The first is related to the senior management team, in terms of its selection, compensation, severance packages, and CEO succession plans (Finkelstein & Hambrick, 1989; Zajac, 1990). The second set of issues relates to shareholders, proxy fights²(Tkac, 2006), and shareholders’ activism (Becht, Franks, Mayer, & Rossi, 2007; Romano, 2001), as well as ownership structures and their impact on corporate strategy and organization performance (D. J. Denis, D. K. Denis, & Sarin, 1999; Thomsen & Pedersen, 2000). The third set of issues, and the focus of this study, concerns the composition and role of the board of directors, with respect to the three main board functions: monitoring, advising, and interfacing.

The three main functions of boards have been studied by researchers from various perspectives. First, researchers’ attention focused on the corporate governance function of monitoring, and particularly on the impact that board members from outside of the organization have on the board’s decisions to protect shareholders’ interests. In one study, it was found that corporate boards with a higher proportion of members from the outside are more likely to resist the payment of greenmail, the premium paid to an investor to terminate a takeover attempt (Kosnik, 1978), although higher equity ownership provided to these directors do not seem to make the payment less likely (Kosnik, 1990). Later, Davis (1991) analyzed the spread of the poison pill³tactics used to fend off hostile takeovers in the intercorporate network. He found the adoption