Introduction to Strategic Management and Business Policy
Highly involved boards tend to be very active. They take their tasks of moni- toring, evaluating and influencing, and initiating and determining very seriously; they provide advice when necessary and keep management alert. As depicted in Figure 2–1, their heavy involvement in the strategic management process places them in the active participation or even catalyst positions. Although 74% of public cor- porations have periodic board meetings devoted primarily to the review of overall company strategy, the boards may not have had much influence in generating the plan itself.11 The same global survey of directors by McKinsey & Company found that directors devote more time to strategy than any other area. Those boards reporting high influence typically shared a common plan for creating value and had healthy debate about what actions the company should take to create value. Together with top management, these high-influence boards considered global trends and future scenarios and developed plans. In contrast, those boards with low influence tended not to do any of these things.12 Nevertheless, studies indicate that boards are becom- ing increasingly active.
These and other studies suggest that most large publicly owned corporations have boards that operate at some point between nominal and active participation. As a board becomes less involved in the affairs of the corporation, it moves farther to the left on the continuum (see Figure 2–1). On the far left are passive phantom or rubber- stamp boards that typically never initiate or determine strategy unless a crisis occurs. In these situations, the CEO who also usually serves as Chairman of the Board (although we see the same situation in active boards), personally nominates all directors and works to keep board members under his or her control by giving them the “mushroom treatment”—throw manure on them and keep them in the dark!