1 SOCIAL DOMINANCE OF BOARD MEMBERS - DOES IT PREDICT BOARD
EFFECTIVENESS THROUGH BOARD VOICE?
Master Thesis - MSc, Human Resource Management University of Groningen, Faculty of Economics and Business
16th of June, 2019 INGE ZIJLSTRA Student number: 2295148 Wijtze Ennemastraat 1 8801 GP Franeker i.zijlstra.2@student.rug.nl Supervisor J.B.J Prömpeler, MSc
2 SOCIAL DOMINANCE OF BOARD MEMBERS - DOES IT PREDICT BOARD
EFFECTIVENESS THROUGH BOARD VOICE?
ABSTRACT
Agency theory states that managers of organizations may act in self-interested ways. For this reason, independent boards of directors (hereafter boards) are involved in managerial decision-making processes. During these processes, boards are considered effective when they monitor, advice and, if necessary, contradict management to prevent organizational and societal harm. Previous research on antecedents of board effectiveness extensively assessed the effects of structural board characteristics and informal relations between boards and management, but mostly overlooked intrapersonal characteristics of board members. As research found intrapersonal characteristics predicting interpersonal relations, I believe intrapersonal characteristics play an important role in addressing board effectiveness. This paper focuses on board effectiveness by examining the role of social dominance of board members in predicting board effectiveness. Specifically, it assesses whether social dominance of board members increases board effectiveness (i.e. board monitoring and board advice) through increased board voice. Testing the full model with survey data of 243 participants of 49 Dutch housing associations, this research found a positive significant association between board voice and board effectiveness (i.e. board monitoring and board advice), but no main effect of social dominance of board members in predicting board effectiveness. Theoretical and practical implications are discussed.
3 INTRODUCTION
“The Board’s role is to pull management out of the trees to see the forest.” (Pearl Zhu, 2016)
The quote of Pearl Zhu (2016) highlights that executing daily management tasks can decrease top management’s ability to oversee the bigger picture of their decisions as well as consider and align share- and stakeholder interests. In order to prevent this, boards are in place and are involved in managerial decision-making processes to control and advice top management (Fama & Jensen, 1983; Hillman & Dalziel, 2003).
Corporate governance literature discusses several structural antecedents of board effectiveness (i.e. board monitoring and board advice). A prominent proposition regarding board composition factors is that outside board members might be more effective than internal board members, because of their breadth of knowledge, experience and independence from management (Dalton, Hitt, Certo, & Dalton, 2007; McDonald, Westphal, & Graebner, 2008). Other structural factors such as board size and proportion of inside – and outside board members are widely discussed, however results regarding structural factors predicting board effectiveness are mixed at best (Dalton, Daily, Ellstrand, & Johnson, 1998; Dalton, Daily, Johnson, & Ellstrand, 1999; Faleye, 2007; Van den Berghe & Levrau, 2004).
Therefore, scientific attention is shifting towards interpersonal factors, such as the relationship between CEO and board members (Shen, 2003). Even though assessing interpersonal relations and board behavior has produced promising results, there is still little understanding about antecedents of the relationships and specific desired board behaviors (Daily, Dalton, & Cannella, 2003; Hillman, Nicholson, & Shropshire, 2008; Pettigrew, 1992).
4 Specifically, from all different personality traits, I believe that social dominance of board members can be expected to be an antecedent of board effectiveness. Research showed that individuals higher in their social dominance tend to speak more (Judge, Bono, Ilies, & Gerhardt, 2002; Kalma, Visser, & Peeters, 1993; Moskowitz, 1990), and behave more forcefully, assertive and self-assured (Buss & Craik, 1980; Gough, 1987; Wiggins, 1979). Board members higher in their social dominance, therefore possibly increase board voice, in that they speak up with suggestions and concerns (Van Dyne, Ang, & Botero, 2003). Higher board voice, in turn, likely increases board effectiveness, both in terms of board advice and board monitoring, in that voicing suggestions and concerns possibly increases discussion between boards and management, which offers the opportunity for board members to spot flaws in managerial strategies. As outside directors may have experience from other organizations and possibly other sectors (McDonald et al., 2008), they possibly increase board effectiveness in that they provide more in-depth advices to management.
Therefore, in the present research I assess whether social dominance of board members increases board effectiveness (i.e. board monitoring and board advice) through increased board voice. Previous research addressed the preference of active board members over passive board members, in that active board members increase returns on investment and therefore increase share- and stakeholder alignment (Millstein & MacAvoy, 1998). However, governance research has yet understood which personal characteristics foster board effectiveness in a board setting and why this is the case. Therefore, the present research contributes to governance theory by shining light on the role of intrapersonal characteristics of board members, specifically social dominance, in predicting board effectiveness.
5 THEORETICAL FRAMEWORK
In essence, agency theory concerns separation problems between ownership and control in organizations. Management (i.e. CEO and the Top Management Team) receives investor funds to use in the firm. The investors, in turn, need the management’s specialized human capital to generate returns on their funds. However, agency theory raises the question whether investors can be assured that their funds are not expropriated by management, since management may differ in their objectives from external stakeholders, and might therefore act in their own interest (Jensen & Meckling, 1976). Agency theory indicates that management may, for example, manipulate performance measures or expropriate value if the outcomes fits their interests (Shleifer & Vishny, 1997). This does not only damage shareholders, but also possibly harms organizational viability and society (Aviolo & Locke, 2002). To prevent the occurrence of self-interested acts of management, boards are involved in the organizational decision-making process. During this process, boards are considered effective if they are ‘able to perform control and service tasks effectively’, according to Forbes and Milliken (1999: 492). This statement states the importance of the monitoring and advising role of boards in order to be effective. Therefore, the present research will focus on board effectiveness in terms of board monitoring and advising behavior.
The monitoring role of boards, also described as the ‘control’ role (Johnson, Daily, & Ellstrand, 1996; Zahra & Pearce, 1989), concerns activities such as the evaluation of strategy implementation (Rindova, 1999), in order to reduce separation conflicts between ownership and management (Hillman & Dalziel, 2003).
6 Corporate governance literature discusses several structural antecedents (e.g. outside board members, board size and proportion of inside and outside board members), as predictors of board effectiveness. However, the overall findings regarding structural factors in predicting effectiveness are mixed (Dalton et al., 1998; Dalton et al., 1999; Faleye, 2007; Van den Berghe & Levrau, 2004).
Therefore, I believe that not only structural antecedents are predictors of board effectiveness, but that intrapersonal factors of individuals play an important role too. Particularly, as intrapersonal factors are known to affect interpersonal relations (Asendorpf & Wilpers, 1998), I expect personality characteristics of board members to be an important source of predicting board effectiveness, in that personality characteristics affect board behavior and therefore interpersonal relations with management, which, in turn, affects board effectiveness.
Specifically, psychological literature states that socially dominant individuals behave more self-assured, forceful and assertive (Buss & Craik, 1980; Gough, 1987; Wiggins, 1979) than their less dominant counterparts. In addition, socially dominant individuals are assumed to gain influence over fellow-group members and outside observers by triggering competence perceptions (Anderson & Kilduff, 2009). Social dominance is also related to expressing opinions and suggestions more frequently in group settings (Judge et al., 2002; Kalma et al., 1993; Moskowitz, 1990), and to be motivated to achieve goals (Duckitt, 2001). In their attempt to achieve goals, socially dominant individuals prefer using more harsh power tactics to enforce their dominance and increase interpersonal power (Pratto, Sidanius, & Levin, 2006). Increased interpersonal power in turn leads to ‘the ability to control behaviors, attitudes, opinions, objectives, needs and values of other parties’ (Rahim, 1989: 545).
7 members to increase their interpersonal power by speaking forcefully and assertive, in order to gain interpersonal influence, in that socially dominant board members are perceived as competent by others. This increased interpersonal power, in turn, provides socially dominant board members the opportunity to control management, as they are able to control opinions of others, leading to Hypothesis 1A.
Hypothesis 1A: Social dominance of board members is associated with increased board monitoring.
In their advice role, board members are expected to share their expert opinions and provide insight during major events and ongoing activities (Forbes & Milliken, 1999). As socially dominant individuals are motivated to achieve goals (Duckitt, 2001) and are perceived as more competent (Anderson & Kilduff, 2009), I expect the advice role of board members to be facilitated by social dominance.
Specifically, I expect that socially dominant board members are motivated to maximize returns on their investment, and therefore are motivated to help management in that they advise management about decisions which are preferential for all shareholders. As socially dominant individuals achieve more influence in group-processes through competence perceptions, socially dominant board members are in a better position to advice management, in that management provides socially dominant board members the opportunity to express their advices, leading to Hypothesis 1B.
Hypothesis 1B: Social dominance of board members is associated with increased board advice.
8 concerns and opinions. Specifically, voicing is ‘an expression of constructive challenge, intended to improve how things are done’ (Van Dyne & LePine, 1998: 109).
Specifically, I expect that in group settings with management during decision-making processes, socially dominant board members behave forcefully and assertive, leading to a situation in which management offers socially dominant board members the opportunity to express themselves. As socially dominant board members express their suggestions and concerns more frequently in group settings (Judge et al., 2002; Kalma et al., 1993; Moskowitz, 1990), socially dominant board members are therefore expected to speak up with suggestions, concerns and opinions about decisions, which therefore increases board voice, leading to Hypothesis 2.
Hypothesis 2: Social dominance of board members is associated with increased board voice.
Organizational voicing has several positive impacts on organizational functioning. For example, voicing can identify new or better ways of performing operational tasks, it can direct attention to critical issues that need to be addressed, correct problems with existing work practices or procedures (Van Dyne & LePine, 1998), and it can increase visibility of different personal and organizational perspectives (Stamper & Van Dyne, 2001).
In line with these positive consequences of voicing, I expect that board members who voice their suggestions, concerns and opinions, increase discussion about organizational decisions, since share- and stakeholders differ in their perspectives about the best decision. During this discussion, several personal and organizational perspectives can be given on organizational decisions, which offers board members the opportunity to spot flaws in managerial strategies and allows board members to control and, if necessary, contradict management in their decisions, leading to Hypothesis 3A.
9 In a similar line, I argue that board voice increases board advice in that board members do also voice their concerns, suggestions and opinions, based on their in-depth knowledge. Board members specifically have knowledge about the affairs within the corporation, but they possibly also work at other organizations within the same sector or even other sectors, which increases their experience (McDonald et al., 2008). Board members working at other organizations within the same sector or other sectors, therefore may increase discussion by sharing their prior experience. Consequently, managerial decisions are discussed more thoroughly. Based on their knowledge of the organization and possible experiences in other organizations board members are therefore able to provide more specific and in-depth advices, leading to Hypothesis 3B.
Hypothesis 3B: Board voice is associated with increased board advice.
Overall, I expect board voice to mediate the positive relation between social dominance of board members and board effectiveness, which is conceptualized by board monitoring and board advice.
Specifically, in line with psychological theory, I expect socially dominant board members to be motivated to maximize share- and stakeholder alignment, in order to maximize returns on their investments. As socially dominant board members behave more forcefully and assertive, they gain interpersonal power during decision-making processes and management offers them the opportunity to express themselves. This increases discussion about organizational decisions in that boards possibly differ in their perceptions of ‘the best decision’ and both, management and board clarify their motives. This, in turn, helps board members to detect flaws in managerial decisions. Detecting possible flaws in managerial strategies in turn, increases the opportunity for board members to control, and possibly contradict management, leading to Hypothesis 4A.
10 Besides, in a similar line, I also expect socially dominant board members to voice their critical judgments on organizational decisions, based on their in-depth knowledge about the affairs of the corporation and their experience in other organizations and, or sectors. This in turn leads to more in-depth discussions about managerial strategies, which allows board members to provide management of more in-depth advices based on their knowledge, leading to Hypothesis 4B.
Hypothesis 4B: The positive association between social dominance of board members and increased board advice is mediated by board voice.
The full conceptual model is graphically presented in figure 1. FIGURE 1
Conceptual Model
METHOD Sample and Procedure
11 In this study, 306 respondents of 49 different Dutch housing associations participated. The sample included 247 board members and 63 members of the management teams whose responses are not relevant for this paper. However, four board members respond with missing values on the scales. Therefore, these four cases were deleted and further calculations were made based on the answers given by the 243 board members left (Mage = 55.54 years, SD = 8.89 years, Morganizational tenure = 3.74 years, SD = 2.13 years, 69.10% male).
Measures
Social dominance. Social dominance was self-rated by respondents and measured with eleven items, taken from Gough and Bradley (1996). Example items are: ‘In general I demand explanations from others’ and ‘In general, I put people under pressure’. The items were answered on a Likert-scale ranging from 1 (strongly disagree) to 7 (strongly agree), α = .755. Board voice. Three items, in which board members evaluated each other, were used to measure board voice. The items were taken from the paper of Van Dyne and LePine (1998). Example items are: ‘(Person) speaks up and encourages others in this board to get involved in issues that affect the board’ and ‘(Person) communicates his/her opinions to others in this board even if his/her opinion is different and others disagree with him/her.’ The items were answered on a Likert-scale ranging from 1 (strongly disagree) to 7 (strongly agree), α = .826.
Board monitoring. Four items were used to measure individually perceived board monitoring at the board level. The items were taken from papers of Carpenter and Westphal (2001) and McDonald and Westphal (2010). Example items are: ‘To what extent does the Board monitor Top Management strategic decision making?’ and ‘To what extent does the Board evaluate Top Management’s performance?’. Items were answered on a scale from 1 (minimally) to 7 (very much so), α = .780.
12 what extent does the Board provide advice in the formulation of strategy?’ and ‘To what extent does the Board act as a ‘sounding board’? The items were answered on a Likert-scale ranging from 1 (strongly disagree) to 7 (strongly agree), α = .869.
Control variables. For this research, participants’ gender, organizational tenure and educational level are considered as control variables, as theory points to their importance. First, according to several researchers, women, more than men, tend to avoid conflicts (Brewer, Mitchell, & Weber, 2002; Thomas, Thomas, & Schaubhut, 2008), in order to avoid for example (personal) risks (Bear, Weingart, & Todorova, 2014). One way in which individuals can avoid conflicts is by not expressing themselves (Bear et al., 2014). Therefore, in line with psychological literature, gender is expected to possibly affect board voice in that women voice their opinions less than men and therefore gender is considered as a control variable.
Secondly, organizational tenure is considered as a control variable. Board members acquire firm-specific expertise overtime which, according to Carpenter and Westphal (2001), influences their ability to advise, or contradict management. As the present research takes the advising and monitoring behavior of board members into account, organizational tenure is also considered as a control variable.
Thirdly, research found that higher educated individuals are better in acquiring, using and mastering knowledge, which in turn, supports thoughtful decision-making processes (Gradstein & Justman, 2000). This can possibly affect board effectiveness, in that higher educated board members are better able to recognize pitfalls in strategies and, or provide more thoughtful advices. Therefore, education is considered as a control variable.
RESULTS Preliminary analysis
13 on the sample size of 243 respondents. Primarily, a missing value analysis was conducted. As the Little’s MCAR test was significant (χ 2 = 71.520, p = .000), data on board voice (missing in
51 cases) was not missing at random. Therefore pairwise deletion was not an option and I imputed missing data points. Given that analyzing the patterns of the missing values did not show a monotone dataset, I used the multiple imputation technique.
Secondly, outliers were detected for the variables social dominance, board voice and board monitoring. Using the interquartile range rule, for social dominance, two mild outliers (1.5*IQR) were detected. Board voice showed eighteen outliers of which eight mild outliers and ten extreme outliers (3.0*IQR). Lastly, board monitoring showed six mild outliers and one extreme outlier. However, since outliers lied within the offered answer scales, outliers were kept, as deleting these cases falsifies the dataset (Field, 2009).
14 Lastly, the normality of the variables was tested. Results of the Shapiro Wilk-test showed that board voice, board advice and board monitoring were distributed significantly different from a normal distribution. Board voice was slightly negative skewed (skewness = -1.221, SE = .156; kurtosis = 2.721, SE = .311), as well as board monitoring (skewness = -.937, SE = .156; kurtosis = 1.715, SE = .311) and board advice (skewness = -.315, SE = .156; kurtosis = -.225, SE = .311). Social dominance of board members was the only variable which met the normality assumption (skewness = .134, SE = .156; kurtosis = -.066, SE = .311). To meet the normality assumption, I log-transformed the respective variables. After transformation, the variables were still significantly different from a normal distribution. However, as there are critical voices against the usefulness of normalization transformations (Glass, Peckham, & Sanders 1972; Grayson, 2004) and researchers are advised to interpret graphical representations of the distribution, rather than statistical data if the sample size exceeds 200 (Field, 2009), I did not use transformed variables as they seem normally distributed graphically.
Instead, I worked with standardized versions of the variables and used bootstrapping in the analyses (5000 bootstrap samples) to account for the imperfection in normality. All models were tested with and without bootstrapping samples and, unless reported otherwise, there was no substantive difference in outcomes.
I ran individual regressions and conducted analyses via Hayes PROCESS model 4, because this model takes all individual associations into account, allows bias-corrected bootstrapping and tests for mediation associations (Hayes, 2013).
15 variables correlate significantly different from zero, which shows in this research a value of χ2 (351) = 2805.527 (p = .000), which is also considered acceptable (Field, 2009).
Table 1 shows factor loadings and communalities after rotation. Item cross-loadings above .300 are considered problematic (Field, 2013). However, as the results showed no cross-factor loadings above .300, the existing constructs were remained.
TABLE 1
Factor loadings and communalities Social
dominance
Participative leadership
Voice Control Advice Soc dom 2 .875 Soc dom 1 .864 Soc dom 4 .730 Soc dom 9 .697 Soc dom 3 .670 Soc dom 5 .647 Soc dom 7 .614 Soc dom 10 .613 Soc dom 6 .572 Soc dom 8 .495 Soc dom 11 .461 Part lead 3 .796 Part lead 4 .763 Part lead 2 .744 Part lead 5 .677 Part lead 1 .550 Part lead 6 .450 Voice 1 .772 Voice 2 .749 Voice 3 .719 Mon 4 .707 Mon 3 .654 Mon 1 .601 Mon 2 .553 Adv 2 .819 Adv 1 .744 Adv 3 .734 Eigenvalues % of variance 1.598 4.687 .871 1.230 .547
Note: Factor loadings < .300 were suppressed, table based on a principle components analysis, Kaiser-varimax rotation, 27 items, N = 243.
16 advice and board monitor (r = .532**, p < .01) were positively significant correlated. These positive significant correlations suggests a possible main effect between the variables.
In addition, table 2 also shows that none of the variables, considered as control variables, were significantly correlated with the main variables. They are therefore omitted from further analyses to avoid biased parameter estimates (Becker, 2005).
TABLE 2
Descriptive Statistics and correlations
M SD 1 2 3 4 5 6 7 1. Social dominance 3.471 .692 1.000 (α = .755) 2. Board voice 6.060 .647 .094 1.000 (α = .826) 3. Board monitor 5.571 .680 -.005 .238** 1.000 (α = .780) 4. Board advice 5.333 .817 -.036 .141* .532** 1.000 (α =.869) 5. Gender participants .310 .463 -.028 -.016 -.093 .040 1.000 6. Educational level 4.390 1.061 .030 .046 .010 .052 .157* 1.000 7. Organizational tenure 3.743 2.138 .070 .088 .014 .016 -.145* -.146* 1.000
Note: N = 243. (Cronbach’s alpha in parentheses). For gender, 0 = male, 1 = female. Two-tailed analysis. +p <.10, *p < .05, **p <.01.
Main analysis
Hypothesis 1A. Hypothesis 1A stated that social dominance of board members is associated with increased board monitoring. This was tested within the mediation analysis (results in table 3, figure 2). The results show that social dominance of board members is negative and not significant associated with board monitoring (model 4: b = -.027, t = -.444, p = .657, R2 = .057).
Therefore, hypothesis 1A is not supported.
17 significant association between social dominance of board members and board voice (model 4: b = .098, t = 1.460, p = .146, R2 = .009). Therefore, hypothesis 2 is not supported.
Hypothesis 3A. Hypothesis 3A stated that board voice is associated with increased board monitoring. The results of the mediation analysis (table 3, figure 2) show a positive and significant association between board voice and board monitoring (model 4: b = .219, t = 3.816, p = .000, R2 = .057). This supports hypothesis 3A.
Hypothesis 4A. Hypothesis 4A stated that the positive association between social dominance of board members and increased board monitoring is mediated by board voice. Results of the mediation analysis do not show a significant indirect effect (model 4: b = -.005, CI95%[-.008,
18 TABLE 3
Regression results for the mediation effect with dependent variable board monitor Mediator variable (DV = Board voice)
R2 =.009, F(1, 241) = 2.131
Predictor b p SE t
Social dominance .098 .146 .067 1.460
Dependent variable model (DV = Board monitoring) R2 =.057, F(2,240) = 7.283
Predictor b p SE t
Board voice .219 .000** .060 3.816
Social dominance -.027 .657 .060 -.444
Total effect model (DV = Board monitoring) R2 = .000, F(1,241) = .007
Predictor b p SE t
Social dominance -.005 .932 .061 -.085
Indirect effect
Effect Boot SE BootLLCI BootULCI
IV→M→DV .021 .017 -.008 .061
R2 mediation effect size .023 .018 -.009 .062
Note: *p < .05, **p < .01, a standard regression coefficients are presented, Hayes PROCESS model 4, 5000 bootstrapping
samples.1
Hypothesis 1B. Hypothesis 1B stated that social dominance of board members is associated with increased board advice. This hypothesis was tested within the mediation analysis (table 4, figure 2). The results indicate a negative and not significant association between social dominance and board advice (model 4: b = -.050, t = -.772, p = .441, R2 = .022). Therefore, there is no support for hypothesis 1B.
1 The analysis was conducted with the standardized measures of the main variables. However, as the normality
19 Hypothesis 3B. Hypothesis 3B stated that board voice is associated with increased board advice. The results of the mediation analysis (table 4, figure 2) indeed show a positive significant association between board voice and board advice (model 4: b = .140, t = 2.268, p = .024, R2 = .022). Therefore, hypothesis 3B is supported.
Hypothesis 4B. Hypothesis 4B stated that the positive association between social dominance of board members and board advice is mediated by board voice. Table 4 and figure 2 do not show a significant indirect effect (model 4: b = -.036, CI95% [-.005, .043], t = -.557, p = .578,
R2 = .001). Therefore, hypothesis 4B must be rejected. TABLE 4
Regression results for the mediation effect with dependent variable board advice Mediator variable (DV = Board Voice)
R2 = .009, F(1,241) = 2.131
Predictor b p SE t
Social dominance .098 .146 .067 1.460
Dependent variable model (DV = Board advice) R2 = .022, F(2,240) = 2.730
Predictor b p SE t
Board voice .140 .024* .062 2.268
Social dominance -.050 .441 .065 -.772
Total effect model (DV = Board advice) R2 = .001, F(1,241) = .311
Predictor b p SE t
Social dominance -.036 .578 .065 -.557
Indirect effect
Effect Boot SE BootLLCI BootULCI
IV→M→DV .014 .012 -.005 .043
R2 mediation effect size .014 .012 -.005 .042
Note: *p < .05, **p < .01, a standard regression coefficients are presented, Hayes PROCESS model 4, 5000 bootstrapping
samples.2
2 The analysis was conducted with the standardized measures of the main variables. However, as the normality
20
FIGURE 2
Mediation model with board voice predicting A) board monitoring and B) advising behavior
Note: standardized regression coefficients are reported, *p < .05, **p < .01.
DISCUSSION Findings and Theoretical implications.
In the present study, I aimed to investigate the role of social dominance of board members in predicting board effectiveness. Specifically, I expected to find a positive association between social dominance of board members and increased board effectiveness (i.e. board monitoring and board advice), through increased board voice.
21 The results of this research do not support this proposition, which may be explained by personal interests of board members to monitor management. Different researchers mention that individual interests of board members affect their motivation to monitor management (Arthurs, Hoskisson, Busenitz, & Johnson, 2008; Deutsch, Keil, & Laamanen, 2011). Specifically Li, Krause, Qin, Zhang, Zhu, Lin and Xu (2018) argue that independent board members are differently motivated to monitor management, as board members have two potentially conflicting concerns, that are: ‘the personal and public reputation of the board member’ and ‘prospects of the board member in the director labor market’ (Li et al., 2018: 1220).
Research found that board members experienced a significant decline in finding future board seats if they served boards that experienced financial distress (Gilson, 1990) or committed fraud (Fich & Shivdasani, 2007). This may support the idea that board members are motivated to increase their controlling behavior, in order to avoid negative reputations.
However, on the other hand, research found that board members increase their chances of gaining further board appointments by engaging in a lower level of controlling management (Westphal & Stern, 2007), as board members in this way are seen as less threatening for management (Finkelstein & Hambrick, 1989; Zajac & Westphal, 1996).
Specifically, in line with corporate governance research, if personal reputation is a higher concern for board members, board members will possibly be more motivated to engage in increased monitoring behavior, while a higher concern for future career prospects decreases the motivation of board members to engage in monitoring behavior, because this possibly signals a threat to management. Therefore, social dominance does not always predict monitoring behavior, because board members vary in their motivation to monitor management and motivations to monitor management overrule personality traits.
22 boards. In their research, Westphal and Zajac (1995) showed that CEO’s influence can affect (intentionally or unintentionally) the hiring-process of board members, in that CEO’s prefer new board members, similar to the CEO, to be part of the board. Therefore, similarity between board members and CEO may arise, which affects board members’ monitoring role in that they have rather similar opinions and beliefs regarding strategic decision making to the CEO, and therefore become passive in the evaluation of managerial strategies.
In this research, no questions about individual interests of board members for future career prospects as well as procedures regarding hiring processes of new board members were asked. Therefore, this research could not control for motivational influences of board members as well as CEOs’ influence on board hiring processes, which may have contributed for the insignificant results.
Secondly, I assumed that social dominance of board members is associated with increased board advice. According to Forbes and Milliken (1999), board members are expected to share their expert opinions and provide insights during major events and ongoing activities, in order to be effective. As socially dominant individuals are motivated to achieve their goals, and one goal of board members is to be effective, I assumed socially dominant board members to be motivated to advise management in order to align share- and stakeholders’ interests. Besides, because of their positive competence perceptions in group processes, I expected socially dominant board members to be in a better position to advice management.
23 Management practices could vary largely between organizations and this may overrule the effect of social dominance on advice. As this research could not control for communication and information asymmetry, this might have contributed to insignificant results and no support for this proposition was found.
Thereafter, I proposed that social dominance of board members is associated with increased board voice. Specifically, I assumed that in group settings with management, socially dominant board members behave forcefully and assertive, which leads to a situation in which management offers socially dominant board members the opportunity to express themselves. Besides, as socially dominant individuals express their suggestions and concerns more frequently in group settings (Judge et al., 2002; Kalma et al., 1993; Moskowitz, 1990), I expected socially dominant board members to increase board voice by speaking up with suggestions, concerns and opinions.
24 factors in the board into account, I could not control for contextual factors which might have contributed to insignificant results for this proposition.
Further, I assumed that board voice is associated with increased board monitoring. According to research, voicing has positive consequences, such as directing attention to critical issues (Van Dyne & LePine, 1998) and increasing visibility of different personal – and organizational perspectives (Stamper & Van Dyne, 2001). In line with psychological literature, I expected that board members voicing their suggestions, concerns and opinions increase discussion about organizational decisions, because board members possibly differ from management in their perceptions of the best decision. This discussion, in turn, provides board members the opportunity to spot flaws in managerial strategies, for which they can control and contradict management.
Results of this research, indeed, support this hypothesis. Therefore, this finding contributes to previous corporate governance literature, by providing evidence that board voice increases board monitoring. Specifically, this support strengthens the argumentation for the hypothesis, in that board voice increases discussion between management and boards. This discussion in turn, increases insights in motives of different parties, which helps board members to spot inconsistencies in managerial strategies during the evaluation of managerial strategies, for which they can control and, if necessary, contradict management.
25 Results of the current research do, indeed, support this assumption. Therefore, this finding contributes to previous corporate governance literature by providing evidence that board voice increases board advice. Specifically, the present research found support for the argumentation that board members who voice their concerns and suggestions, based on prior experience in other organizations, and, or sectors, increase in-depth discussion with management, which in turn, increases their in-depth advices to management.
Practical implications.
The present research found a positive association between board voice and board effectiveness (i.e. board monitoring and board advice). For board members, this is an important finding as it enhances the understanding of the positive consequences of their voicing behavior. Specifically, as mentioned in the discussion, management may not hire board members high in their monitoring behavior as they are seen as more threatening for management. However, it is necessary that board members speak up more, regardless of the amount of pressure from management, in order to increase discussion and gain information, for example, about managerial motives of strategies.
One way in which board members can be supported to increase their voicing behavior is by offering board members training. Training can help board members to become resilient regarding contextual factors, which otherwise would suppress their voice.
Limitations and Future research.
26 Cooper, & Schindler, 2014). Therefore, this research contributes to theory in that it uses data of actual board members, which is derived from a natural setting and shows real-life outcomes. In addition, in their research Dalton, Daily, Certo and Roengpitya (2003) and Roberts (2005) address the importance of research on micro-board-processes, as they possibly explain underlying mechanisms of interpersonal relations. By assessing how personality characteristics of board members predict board effectiveness, this research examines a micro-process of antecedents of board members and its’ outcome. The results of this research can be used in future research in that future research can assess whether different organizational contexts or sectors vary in outcomes.
However, the present research bears some weak points as well, which will be addressed in this section. On a methodological level, a limitation of this research is that social dominance was self-rated. Board members may perceive themselves as socially dominant, but their fellow-group members may perceive this different. Also, self-ratings are prone to socially desirable responses, which may bias the results. Therefore, future research could use peer ratings, in that not only the individual board member self, but also fellow-board members rate this board member on social dominance, to overcome the possible biases.
Second, in this research responses of board members on board voice, board monitoring and board advice were taken into account, but no evaluation of management is included. As management may perceive board voice, board monitoring and board advise different from board members, future research may also take into account the perceptions of management on these measures to compare results of management and boards and see whether there is alignment in the perception of roles of boards in organizations.
27 influenced the respondents answers. Also, as in 2015 new laws and regulations were implemented for the housing sector (Rijksoverheid, n.d.), these new rules and regulations could have biased the results, in that perceptions of the boards’ monitoring and advising role altered in this period. Therefore, future research can use longitudinal studies in which specific organizational events or sector influences do not bias the results over time. Alternatively, future research can focus on these events by conducting event studies in which the specific corporate or sectoral events are used to see if they made differences in the execution of the monitoring and advising roles of boards.
Additionally, all respondents are from the housing sector of the Netherlands. This limits the present research in that no other sectors or countries were involved. For example, given that Far-Eastern countries are higher in their collectivism instead of individualism (Hofstede, 1983), I expect Far-Eastern countries to score lower on monitoring and advising behavior, as they are more likely to make decisions together. Therefore, it would be interesting if future research could compare countries and investigate whether there are some differences in board behavior between countries and or, sectors.
Moreover, data of board members are nested within different organizations. Organizations may have specific circumstances, like the organizational culture, which explain why board members in a specific organization respond more similar to each other than board members of other organizations. Therefore, a multi-level analysis of the data would have been ideal as it controls for differences between organizations. However, as a multi-level analysis required additional time and insights regarding SPSS, this was not possible within the scope of this research. Future research would be advised to conduct multi-level analyses to check whether this has biased the results of the present study.
28 and p-values of the missing values. In multiple imputation data sets, different imputations are based on a random draw from different estimated underlying distributions (Rubin, 2004; Schafer, 1997). Therefore, a multiple imputation technique is known for producing unbiased results (Donders, van der Heijden, Stijnen, & Moons, 2006). However, it has to be noted that it may not be that representative contrary to a situation in which data was completely derived from board members.
Lastly, the coefficient of determination (R2) of both significant associations between board voice and board monitoring (R2 = .057), and board voice and board advice (R2 = .022), was particularly low. Only 5.7% respectively 2.2% of the variance in board monitoring and board advice was predicted by board voice. This low variance could be explained by the fact that in this research I investigated human behavior, which is fairly unpredictable (Keller, 2012). However, future research may take into account additional predictors to account for the low variance.
As I made some suggestions for future research based on the limitations of the present research, I will address further suggestions for future research.
29 of others’. As the positive association between authenticity and voicing behavior was found, it may be interesting to see whether this intrapersonal characteristic in board members also increases their voicing behavior, as board members experience high pressure in that organizations, management and society have several (different) expectations of board members. Besides, work self-esteem, that is the extent to which employees feel competent and worthy in their work (Brockner, 1988), is also known to predict voicing behavior (Harlos, 2010). I consider it interesting to see if this holds also in a board context, given that board members are under high pressure.
CONCLUSION
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36 APPENDICES
Appendix A
Survey questions in English and Dutch on the constructs of social dominance, voice, monitoring and advice used in this research.
Social dominance
1. In general I try to surpass others’ accomplishments.
Over het algemeen probeer ik andermans prestaties voorbij te streven. 2. In general I try to outdo others.
Over het algemeen probeer ik beter te presteren dan anderen. 3. In general I am quick to correct others.
Over het algemeen ben ik snel met het corrigeren van anderen. 4. In general I impose my will on others.
Over het algemeen leg ik mijn wil op aan anderen. 5. In general I demand explanations from others.
Over het algemeen verwacht ik uitleg van anderen. 6. I general I want to control the conversation.
Over het algemeen wil ik de controle houden over een conversatie. 7. In general I am not afraid of providing criticism.
Over het algemeen ben ik niet bang om kritiek te uiten. 8. In general I challenge others’ points of view.
Over het algemeen trek ik iemand anders zijn punten in twijfel. 9. In general I lay down the law to others.
Over het algemeen schrijf ik anderen de wet voor. 10. In general I put people under pressure.
37 11. In general I hate to seem pushy.
Over het algemeen houd ik er niet van om bazig gevonden te worden. Board voice
1. [Person] speaks up and encourages others in this Board to get involved in issues that affect the Board. (1=strongly disagree/7=strongly agree).
[Naam] laat zijn/haar stem gelden en stimuleert anderen om betrokken te zijn bij Kwesties die de Raad van Commissarissen aangaan. (1=sterk mee oneens/7=sterk mee eens).
2. [Person] communicates his/her opinions to others in this Board even if his/her opinion is different and others disagree with him/her. (1=strongly disagree/7=strongly agree). [Naam] communiceert zijn/haar mening tegenover anderen binnen de RvC, ook als zijn/haar mening verschillend is en anderen het met hem/haar oneens zijn. (1=sterk mee oneens/7=sterk mee eens).
3. This particular co-worker gets involved in issues that affect the quality of work life here in this group. (1=strongly disagree/7=strongly agree).
Deze medewerker raakt betrokken bij onderwerpen welke invloed hebben op de kwaliteit van het werk in deze groep. (1=sterk mee oneens/7=sterk mee eens). Board control
1. To what extent does the Board monitor Top Management strategic decision making? (1= minimally, 7= very much so).
In welke mate houdt de Raad van Commissarissen toezicht op het Bestuur? (1= in geringe mate, 7= in hoge mate).
2. To what extent does the Board constructively criticize proposals put forth by Top Management? (1= minimally, 7= very much so).
38 het Bestuur? (1= in geringe mate, 7= in hoge mate).
3. To what extent does the Board evaluate Top Managements’ performance? (1= minimally, 7= very much so).
In welke mate evalueert de Raad van Commissarissen de prestaties van het Bestuur? (1= in geringe mate, 7= in hoge mate).
4. To what extent does the Board seek information from Top Management for the purpose of evaluating the performance of Top Management?
(1= minimally, 7= very much so).
In welke mate vraagt de Raad van Commissarissen informatie van het Bestuur ter evaluatie van de prestaties van het Bestuur? (1= in geringe mate, 7= in hoge mate). Board advice
1. To what extent does the Board provide advice in the formulation of strategy? (1= minimally, 7= very much so).
In welke mate verschaft de Raad van Commissarissen het Bestuur van advies bij het formuleren van strategie en beleid? (1= in geringe mate, 7= in hoge mate). 2. To what extent does the Board act as a ‘sounding board’? (1= minimally, 7= very
much so).
In welke mate is de Raad van Commissarissen een ‘klankbord’ voor het Bestuur? (1= in geringe mate, 7= in hoge mate).
3. To what extent does the Board provide advice on strategic issues? (1= minimally, 7= very much so).
