Veltrop, D., Bezemer, P. J., Nicholson, G., Pugliese, A. (2018)

Afraid to Monitor? How Board Climate and Shapes Outside Directors’ Monitoring of Executives. In Academy of Management Proceedings (Vol. 2018, No. 1, p. 11499). Briarcliff Manor, NY 10510: Academy of Management.

 

Abstract:

Outside directors’ monitoring of executives involves individual directors taking social risks and, we argue, is likely to be shaped by the social climate within boards. Inductive analyses of video-observations and in-depth interviews of board meeting participants in five Australian boards revealed that psychological safety climate within boards plays an important role for outside directors’ engagement in monitoring. Interestingly, beyond traditional agency- logic arguments of a dominant role of the chair, chair leadership was found to increase monitoring of executives, not by the chair taking center stage, but rather by engaging in participative leadership behaviors; stimulating fellow directors’ engagement in monitoring and creating a psychologically safe environment within the board. We corroborate these results with a second, large-scale survey study, involving data on 310 outside directors from 65 Dutch boards. All in all, these results strongly advocate the importance of board psychological safety climate for monitoring executives and in so doing provide important implications for extant thinking on chair leadership and governance effectiveness.