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

The aforementioned interview also included questions on the functions or tasks of the board and how member selection criteria might link to these tasks. For this director, the main internal task of the board consisted of advising the senior management team on long-term strategic plans, while the main external task was to help the organization secure the resources and contacts needed to facilitate the implementation of such a strategy. This former CEO said there were two questions that gave “acid test” selection criteria for a new board member. Firstly, what would the newcomer bring to the team or firm in the realm of relationships, independent thinking, or technical expertise? Secondly, how would the newcomer fit within the existing team with respect to personality, leadership, and other attributes?

This director declined to analyze the role of the board during different phases of the firm’s life cycle. Only after numerous interviews with directors of varying ages from different industries did it become apparent that their understanding of the role of the board was limited by their own individual experience. Regardless of whether their board experience spanned years or decades, most directors interviewed had experience as managers and directors of a certain type of organization within a certain industry. Few had experience with an initial public offering (IPO) and fewer with an organization in decline or in the process of bankruptcy. Consequently, most interviews in this study represent organizations in what is termed the “mature” phase of the organizational life cycle, rather than those facing the “liability of newness” during the emerging phase or those facing the “liability of creditworthiness” during the decline or exit phase. The aforementioned director had extensive experience with large financially sound multinationals, but no experience selecting board members for firms preparing IPOs and facing the liability of newness or for firms in severe financial difficulty and coping with conflicting interests among different stakeholders.

By the end of the preliminary groundwork for the study, two impressions had formed. On the one hand, the existing academic analysis had been thorough but inconclusive. On the other hand, the practitioners’ focus on the link between board composition and board performance