TCU Neeley Research Highlights - Professor of Strategy, Ryan Krause, in collaboration with other experts study the influence governance hybrid role can have on a firm’s performance.
September 30, 2023
Ryan Krause, along with Robert Langan and Markus Menz, reveal recent innovations in board leadership, like the executive board chair role, blend oversight with strategic decision-making, challenging traditional views that these functions should remain separate. Their research argues that this hybrid role can enhance firm performance, particularly when stronger CEO monitoring is needed, though its effectiveness decreases with greater organizational complexity. (Journal of Management, 2023).
Abstract
Traditional agency theory views the proper role of the board chair exclusively as providing independent oversight to monitor and control the CEO. Recently, firms have introduced innovations in board leadership that have confounded these theoretical expectations. One notable innovation is the executive board chair, a corporate governance hybrid responsible for both oversight and strategic decision-making, challenging agency theory's prescription that the two activities remain separate. In this study, we argue that an executive board chair position can resolve the trade-off between independent oversight and involvement in strategy and therefore generate a performance advantage. We also predict that, owing to the blurring of lines between the CEO and board chair roles that the executive board chair position creates, the relationship will be stronger the greater the need to monitor and control the CEO but weaker when organizational complexity and board leadership demands are greater. Analysis of S&P 1500 firms from 2003 to 2017 provides general support for our arguments.
