Director Notes

the conference board governance center

The Impact of Board Dynamics on

Shareholder Value Creation
by Solange Charas

Boards have traditionally been viewed as a collection of talented individuals, working for
the good of shareholders. Despite the painstaking process used by most boards to select
outstanding and highly qualied directors, what really accounts for the wide range of board
performance quality? This report presents a summary of quantitative research that measures
and compares the material effect of collective board performance to individual director
performance. Our research demonstrates that teams have a signicantly greater impact on
corporate nancial performance than any individual director alone.*
Board performance has been at the center of modern corporate governance research for more than two decades, with
the majority of inquiries relying exclusively on economic
theories. Disappointingly, these studies have generated
inconsistent and inadequate results for explaining and predicting the measurable impact that boards have on corporate
performance. Most research has centered on the individual
director instead of the board as a team, despite calls since
the early 2000s for a focus on collective board processes and
behaviors to understand and predict board governance quality and the resulting impact on financial outcomes.
* This Director Notes is adapted from Solange Charas, Improving Corporate
Performance by Enhancing Team Dynamics at the Board Level, International
Journal of Disclosure and Governance, January 2014.

No. DN-V6N3
FEBRUARY 2014

Subscribe for free at www.conference-board.org/directornotes

The contrast between individual and team performance

was made strikingly clear in a 2010 board survey that
reported that 90 percent of board members consider
themselves to be very effective in addressing their most
important and strategic initiatives, but only 30 percent of
these same directors rate their overall board performance
as such.1 This is a particularly disturbing revelation as we
expect boards to be very effective in representing the
interests of the shareholder and positively impacting corporate performance; we now have evidence that more than
half the time, boards themselves are assessing their collective performance as wanting.

Much of the recent academic literature on boards has suggested that directors should work as teams to be able to
produce better board outcomes,2 but few research inquiries
have focused on this topic to determine if, in fact, boards
are working as effective teams.
In theoretical works, scholars have emphasized the importance of boards working together as a team, rather than
as individuals, citing that the benefits of a coordinated
board come from leveraging the collective knowledge base
of directors to generate effective approaches to complex
issues.3 However, scant quantitative or qualitative studies
have addressed this difference between evaluation boards
as teams versus evaluating individual directors and their
respective contributions to enhanced firm performance.
Prior research has suggested that there is a direct and
causal relationship between board performance and resulting corporate financial performance4 and that companies
with active boards produce higher levels of investor returns
and economic value creation than those with passive
boards, but this has not been proven through empirical
research.5 The challenge is that we have not yet identified
the specific factor contributing to passive versus active
boards, and this factor was the focus of our research.
Figure 1 provides a visual representation of the relationships tested in my research. The direct impact of director
qualifications on firm outcomes (represented by the dotted
line) was measured and served as the departure point since
this relationship reflects the traditional focus of prior
research as well as the prevalent thinking in the practitioners world. Since our research focused on the impact of
boards as teams, we employed a new measure developed
by Dr. Tony Lingham, associate professor at Case Western
Reserve University. This measure was used to assess team
dynamic quality (Board Dynamics in the model) to
determine whether this factor would explain the quality

Figure 1

Conceptual framework for research

Qualifications
of individual
directors

Board
dynamics

Collective
board
outcomes

Source: Solange Charas

Firm outcomes:
Relative
profitability
performance

of board outcomes, and ultimately firm performance. We

then compared the total impact of individual contributions
to firm performance to the total impact of team contributions to firm performance to see if there was a difference.
We examined four elements in the board performance/
financial outcomes relationship: (1) the qualifications of
individual directors, (2) board team dynamics, (3) collective
board outcomes, and (4) measurable firm performance.6
By exploring each of these aspects, we hoped to reveal and
confirm two relationships: boards that function as a highly
dynamic team generate more economic value for their
organizations than those that do not and that the impact of
the collective board is greater than that of any individual
director on financial performance.

1. Qualifications of Individual Directors

In the screening and selection of potential directors for
board services, the perceived professional and social capital
directors can bring to the board is critical. Typically, nominating and governance committees establish criteria that
include deep functional, industry, and executive managerial experience as well as prior board service (professional
capital), and the breadth and depth of the candidates social
network for tapping external expertise (social capital), both
of which can contribute to the quality of deliberations on
specific board issues.
Absent from the typical selection criteria are behavioral
attributesan indication of whether the candidate would
fit into the current board culture. For teams to be effective,
individual members must be sensitive to the culture of the
team and effectively adapt to the social norm or tacit rules
on how things are done around here. Our prior research
with boards showed that a directors sensitivity to culture
was strongly correlated with the governance quality ratings
of the organization as determined by Governance Metrics
International (GMI). Boards with directors demonstrating a
keen awareness to social norms corresponded to high GMI
ratings, and boards with directors not observing the social
norms established by the board corresponded to low GMI
ratings.7 Therefore, directors who are predisposed to effective
team work, or demonstrate greater behavioral capital, are
more likely to contribute to high governance-rated boards.
In real life, most selection processes include a gut or
visceral sense of how the candidate would fit on the board
determined by other directors, but the majority of the time,
no formal assessment is made of the candidates predisposition to certain behaviors, sometimes resulting in disappointing or disruptive new directors. Our study specifically

Director Notes The Impact of Board Dynamics on Shareholder Value Creation

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addressed the relevance of behavioral capital to working

well on teams by assessing the cultural intelligence (CQ) of
individual directors.
CQ is an assessment of an individuals ability to make
sense of unfamiliar contexts and then blend in.8 This is
the first time this specific behavioral attribute has been
included in research at the board level. In our study, we collected information on each directors comprehensive boardready characteristicsprofessional capital, social capital,
and behavioral capital.
Professional capital: Table 1 presents the algorithm used
to calculate professional capital for each director. We were
informed about the importance of each attribute by our
prior qualitative research with boards.9 In calculating the
value, each attribute was standardized and an average created by weighing each attribute as indicated.
Social capital: This score reflects the individual directors
number of connections to other professionals in a relationship capital management (RCM) database provided
by BoardEX.10 This raw score represents the number of
connections each director has in a database of over 500,000
directors of both public and private organizations. This
score was converted to a standardized value.
Behavioral capital (CQ): This score reflects a combination of three factors (as defined by Ang and Van Dyne)
and assesses the individuals CQ on each dimension as
described below:

Metacognitive: the mental processes that individuals use

to acquire and understand cultural knowledge, including
knowledge of and control over individual thought processes
Table 1

Calculation of professional capital

Aspect
Years of industry experience

Percent
weighted
30%

Number of boards served

30

Current executive management role (CEO, direct

report to CEO, other corporate level, outside advisor)

20

Cumulative number of years on boards

10

Highest level of education achieved

10

Source: Solange Charas, Improving Corporate Performance by Enhancing

Team Dynamics at the Board Level, International Journal of Disclosure and
Governance, January 2014.

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Motivational: the capacity to direct attention and energy

toward learning about and functioning in situations
characterized by cultural differences

Behavioral: capability to exhibit appropriate verbal and

nonverbal actions when interacting with people from
different cultures11

All three types of capital together reflect the qualification

of individual directors.

2. Team Dynamics
A watershed event in board research occurred in 1999
when Forbes and Milliken shifted attention from demographic-based to behavioral-based approaches in understanding and predicting board outcomes.12 They identified
that there is, in fact, a behavioral aspect or intervening
process that transpires among and between individual
board directors to generate governance and determined
that this intervening process was a combination of group
dynamics and work-group effectiveness. Other researchers
have defined Forbes and Millikens intervening processes
as team dynamics or behavioral integrationessentially the ability of team members to efficiently deal with
differences; generate a trusting environment; create a
meaningful context for their discussions, deliberations,
and decision-making; handle conflict and tension effectively; and enact effective leadership and non-leadership
roles within the team.13
Prior research identified that team dynamics are more
than a summation of individual contributions14 and that
directors perception of trust and emotion, competence,
capacity, timing, integrity, good intentions, and reliability play an important part in board success.15 However,
a critical limitation in assessing team dynamics has been
the absence of a specific team dynamics assessment tool.
Instead, past research has inferred the quality of team
dynamics by proxy or by substituting other observable
attributes as an indication of dynamics. Observable measures such as demographic characteristics, team composition, educational diversity, board size, leadership style,
communication frequency, and top management team size
are a few of these proxy measures used to infer the quality
of team dynamics,16 but ultimately, these proxies are not
a direct measure of the behavioral aspects so critical to
generating high quality board outcomes and by extension,
firm performance.

Director Notes The Impact of Board Dynamics on Shareholder Value Creation

Measuring Team Dynamics

To address this inherent limitation, we employed a
relatively new assessment tool developed by Lingham that
enabled us to capture the socio-psychological aspects of
board teams and directly measure the quality of team
dynamics.17 Linghams assessment tool is an online
30-question survey that focuses on the crux of team
interaction by identifying the extent to which the board
members are creating a safe and supportive environment,
embracing and respecting differences, developing strong
trusting relationships, generating learning, and getting
tasks done effectively.18 The tool captures the quality
of interactions among team members by evaluating ten
behavioral attributes (definitions are provided in the
box below): engagement, active listening, individuality,
relationality, solidarity, understanding, action, planning,
power and influence, and openness.
When individuals are unable to exchange critical informa
tion because of dysfunctional team dynamics, the result
is information asymmetry.19 According to Nobel-prize

winning economist Joseph Stiglitz, information asymmetry

has a measurable economic cost; therefore it is incumbent
upon the board to minimize information asymmetry to
generate economic value for shareholders.20 The team
dynamic assessment tool reveals whether an appropriate
environment exists in the boardroom that is conducive to
openly sharing information, constructively deliberating
issues, engaging in high-quality decision making and
generating valuable collective board outcomes.
The team dynamic assessment tool produces a compelling
picture of healthy versus dysfunctional team dynamics.
Directors were asked to score their board according to
Linghams 10 team dynamic attributes (below). They were
asked to assess actual team dynamics and desired team
dynamics. The sets of actual and desired dynamics were
analyzed, mapped, and presented visually in a spider
graph. (Figures A and B on p. 5.) The blue line represents
actual levels of team interaction; the red, desired levels.

TEAM DYNAMICS ATTRIBUTES

Attribute

Definition

Benefits

Engagement

Being emotionally involved, open and receptive to

new experiences

Generating ideas, working through conflict, managing

diversity, achieving commitment and trust

Active listening

Listen and look at all sides of an issue before acting

Generating trust and bonding, achieving interpersonal

sensitivity, enhancing engagement

Individuality

Freedom to be unique and share your own unique

life experiences

Enhancing communication of perspectives, views,

and opinions

Relationality

Being connected to one another through acting and

agreeing on issues

Exhibiting care and concern for others, achieving

agreement or consensus

Solidarity

Being equals or peers and collective minded;

leadership is shared

Enhancing teamwork to create high point experiences

for all members

Understanding

Effectively creating a context to rationalize and

evaluate ideas and issues

Developing clearly shared goals and vision, defining

board roles, enhancing self-belief, resolving conflict

Action

Getting things done; experimenting versus

contemplating ideas

Completing tasks both efficiently and effectively,

enhancing self-belief

Planning

Functioning effectively based on agendas and

time constraints

Exhibiting systems thinking to determine critical paths,

roles, and processes

Power and influence

Equally sharing opportunity to influence and contribute to purpose, goals and tasks

Sharing leadership, exceeding expectations and

requirements of the collective board

Openness

Focusing on issues or ideas of concern to individual

directors or the Board as a whole

Sharing views without being judged or evaluated,

enhancing satisfaction and psychological safety

Source: Tony Lingham, 2005.

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A Picture is Worth a Thousand Words

Figure A

Firms with poor board team dynamics

financially underperform competitors
Engagement
4.5

Openness

Active listening

4.0
4.5

4.2
2.9

Power and
influence

2.8

Individuality
3.5

3.8

2.6

4.0

0.0
2.5

Planning

4.5

3. Collective Board Outcomes

2.5
2.5 2.5

4.3

Relationality

2.8

4.5

4.8
4.5

Action

Solidarity
Understanding

Actual interaction

Desired interaction

Source: Interaction Science

board was adequately qualified and competent to do the

work required of them. In addition, we captured whether
the collective board demonstrated flexibility in the use and
application of the diverse skills represented by individual
directors.

Firms with good board team dynamics

financially outperform competitors

Innovation measured the collective boards efforts to

Engagement
4.6

4.9

4.5

Power and
influence

identify and adopt improvements in their processes within

the boardroom and with the C-suite team and their ability to
reflect new thinking in generating cognitive outcomes.

Active listening

4.5

3.9

Quality measured the level of awareness the board had of

3.8

Individuality
3.2

3.1

4.5

4.7

4.5

4.6

0.0

Planning
4.9

Relationality
4.5

4.6

4.7

4.8

4.9

4.8

Action

Solidarity

5.0

Understanding
Actual interaction

According to Forbes and Milliken, boardroom outcomes

are directly related to firm performance, as defined by the
boards ability to perform its control and service tasks
effectively.21 We employed a questionnaire developed by
Bateman to capture information about the boards skills,
innovation, and quality.22 Informed by our prior research
on board values, these three attributes were selected and
defined to reflect the critical components of board control
and service tasks as reported by board directors:

Skills measured whether directors believed the collective

Figure B

Openness

Small or no gaps in the spider graph between actual and

desired interactions indicate healthy team dynamics.
Healthy team dynamics are critical to the economic value
creation process; they indicate whether teams can achieve
quality exchange of information and reduce information asymmetry. Not surprisingly, of the organizations in
our research, those with boards having Figure A profiles
consistently underperformed their competitors; those with
boards having Figure B profiles consistently outperformed
their competitors.

Desired interaction

their constituents as they engaged in the deliberation and

decision-making processes. In addition, we captured the
collective boards ability to meet governance accountabilities in their efforts to comply with regulatory requirements
(such as Securities and Exchange Commission rules and the
Sarbanes-Oxley and Dodd-Frank Acts).

In addition to measuring what boards do, this study also

measured the degree to which boards believed they could
achieve their goals, their self-efficacy. Team self-efficacy
is the collective perceived capability of working together
to achieve tasks23 and has been shown to be perhaps the
most critical aspect of team success. Teams with high levels
of self-efficacy set higher goals, develop strategies to
achieve their goals, and persist in the face of setbacks.24

Source: Interaction Science

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Director Notes The Impact of Board Dynamics on Shareholder Value Creation

4. Firm-level Outcomes
Our research measured a firms profitability relative to
the average of a size-adjusted, comparable industry profit
margin index. The size adjustment was based on three
revenue categories: less than $5 million, $5 million to
$50 million, and more than $50 million. Public domain
information and rating agency databases (Hoovers,
Standard & Poors, and Mergent) were sourced to collect
information on participants organizations and to establish
an index of profitability of all organizations in a given
industry and revenue size. This relative measure allowed us
to determine whether the profitability of the participants
company over- or underperformed the industry average
and by how much.

Participant Details
More than 420 directors from public and private forprofit organizations completed the survey. From this, we
selected 182 respondents for which a full complement of
information was available and included in our analysis.
Tables 2 and 3 summarize the demographic information of
the directors and the organizations they represent.

Table 3

Organization profile
Area

Profile

Total number of participants

182 directors

Total number of companies

166 unique organizations (due to

multiple same-company respondents)

Percentage of public
companies

70 percent

Average revenue size $

$2.2 billion, ranging from $0.2 to

$95 billion

Average number of directors

8, ranging from 2 to 20

Average number of inside

directors

1, ranging from 0 to 10. (70 percent

of boards had at least 20 percent nonindependent directors)

Industries represented

Professional services, 25 percent;

Transportation/extraction/construction,
21 percent; Manufacturing, 13percent;
Wholesale/retail 13, percent; Software
/technology, 11percent; Healthcare/
pharmaceuticals, 9 percent; Financial
services/insurance/real estate
investment trust (REIT) 8 percent.

Source: Solange Charas

Table 2

Participating director profile

Area

Profile

Average age

62, ranging from 40 to 86

Gender

Women, 14 percent

Average number of
boards served

4.9 boards, ranging from 1 to 25

Average board tenure

12.6 years, ranging from less than

1 year to 45 years

Profile of current position

CEO, 64 percent; Direct report to CEO,

30 percent; Retired/advisors, 6 percent.

Highest level of education

Masters Degree, 52 percent; Bachelors

Degree, 37 percent; Doctorate, 10
percent; No degree, 1 percent.

Current board role

Independent director, 72 percent;

Independent chairman, 13 percent;
CEO/Chairman, 8 percent;
CEO only, 7 percent.

Source: Solange Charas

Validity and Reliability of

QuantitativeResearch
Each factor in the model was independently tested for
validity and reliability employing tests generally used in
quantitative research, including exploratory factor and
confirmatory factor analyses, Cronbachs alpha tests, and
common method bias tests. The model as a whole was
tested using structural equation modeling (SEM) techniques employing IBM SPSS and AMOS software version
20. We had excellent Model Fit, indicating the predictive
quality of the model.25 Overall, we had a stronger than typical predictive model of corporate profitability (R2=0.20)
exceeding the most recent prevalent R2 (ranging from .07
to .16) of other academic works using profitability as the
predicted variable.26

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 External competitiveness: Organizations in our study

Research Findings and

ImplicationsforBoards
Our research demonstrates that there is a direct and statistically significant relationship between director characteristics (their professional and social capital) and corporate
profitability, but this impact is de minimus in nature
(contributing only 0.5 percent of a firms profitability). Our
research clearly shows that collective board behavior has
an 800 percent greater impact on firm performance (contributing 4.0 percent of a firms profitability). Aristotles
maxim that the whole is greater than the sum of its parts is
alive and well in the boardroom.
Healthy team dynamics that encourage the successful
exchange of information, mutual trust, a shared mindset,
and a collective belief in the boards ability to accomplish
goals are associated with firms that outperform their competitors. We show that team dynamicsheretofore never
measuredis an antecedent to economic value creation.
Our research shows that high performing teams (as defined
by team dynamics and board outcomes) have a greater
impact on firm profitability than either low-performing
teams or the sum of individual director contributions. We
believe this is the case because boards with high quality
team dynamics are more effective at sharing critical information, thereby reducing economically detrimental information asymmetry.
The key to effective teams include director professional
capital, social capital, and behavioral capital as well as the
teams ability to generate an effective dynamic. These attributes enhance the boards ability to make use of directors
skills, innovate, and generate quality strategies and solutions that contribute to higher profitability performance.
In summary, we found:

Internal performance: The quality of team dynamics is

directly related to firm performance. Healthy dynamics can
contribute up to 4 percent of firm performance, whereas
dysfunctional dynamics can detract up to 4 percent from
firm performance. We recommend that boards assess the
quality of their boardroom dynamics and focus their energy
on enhancing this dynamic. Despite having a relatively small
impact, consider a company with a dysfunctional board
with 12 percent profitability, improving the boards dynamic
quality could add close to 50 basis points to profitability
performance or from 12.0 percent to 12.5 percent. Investing
a small amount of time and minimal fees to enhance profitability by .5 percent without changing the business model or
organizational processes would, by most people, be considered a wise investment.

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with boards that have healthy dynamics consistently

outperformed organizations with boards that are
dysfunctional (see Figures A and B, p. 5). Prior research
and the results of this study confirm that teams with
healthy dynamics generate higher quality collective team
outcomes and team confidence. Such teams tend to be more
successful in achieving their goals and generate higher levels
of personal satisfaction. Underperforming organizations
should look at the impact board dynamics have on their
financial results.

Director qualifications: A directors cultural intelligence (CQ)

contributes directly to team dynamics. As this behavioral
attribute has never been measured at the board level and is
seldom screened for in director searches, we recommend
that board nominating and governance committees
adjust their screening criteria to include an indication of
a candidates CQ level and select directors based on a
combination of their professional qualifications, social
network, and behavioral capital.

Next Steps
According to a 2012 survey of board directors conducted
by PwC,27 97.8 percent of boards engage in an evaluation
process; however, the focus of the evaluation is on individual directors, not the board as a team. Our research
demonstrates that boards that work effectively as a team
have a significantly greater positive impact on financial
performance than any individual director, and that boards
with healthy dynamics consistently outperform their competitors. Accordingly, we recommend that boards either
replace or augment the individual, director-based evaluation approach with a team-based assessment to measure
the effectiveness of the boards team dynamics, team
effectiveness, and team self-efficacy. Once the health of the
dynamic among board members is determined, appropriate
interventions might be introduced, if needed, to improve
team dynamics, and therefore improve the boards positive
impact on profitability performance.

Director Notes The Impact of Board Dynamics on Shareholder Value Creation

Endnotes
Management Review, 9, no. 2, April 1984, pp. 193-206; Keith M.
Hmieleski and Michael D. Ensley, A Contextual Examination of
New Venture Performance: Entrepreneur Leadership Behavior, Top
Management Team Heterogeneity, and Environmental Dynamism,
Journal of Organizational Behavior, 28, 7, September 2007, pp. 865889; Alan I. Murray, Top Management Group Heterogeneity and
Firm Performance, Strategic Management Journal, 10, issue S1,
Summer 1989, pp. 125-141; Tony Simons, Lisa Hope Pelled, and Ken
A. Smith, Making Use of Difference: Diversity, Debate, and Decision
Comprehensiveness in Top Management Teams, Academy of
Management Journal, 42, no. 6, December 1999, pp.662-673; Allen C.
Amason and Harry J. Sapienza, The Effects of Top Management Team
Size and Interaction Norms on Cognitive and Affective Conflict,
Journal of Management, 23, no. 4, August 1997, p. 495-516.

1 Keith B. Myer and Robert S. Rollo, Achieving the Perfect CEOBoard Dynamic, Heidrick & Struggles and the Center for Effective
Organizations at the University of Southern Californias Marshall
School of Business, 2010.
2 Jay W. Lorsch, ed., The Future of Boards: Meeting the Governance
Challenges of the Twenty-First Century (Harvard Business Press
Books, 2012).
3 Jonas Gabrielsson, Morton Huse, and Alessandro Minichilli,
Understanding the Leadership Role of the Board Chairperson
Through a Team Production Approach, International Journal of
Leadership Studies, 3, issue 1, 2007, pp. 21-39.
4 Davit Adut, Augustine Duru, and Wendy Liu Galpin, The Role of
Corporate Governance in Meeting or Beating Analysts Forecast,
Journal of Accounting and Public Policy, 30, no. 2, 2011, pp. 188-198;
G. Kevin Spellman and Robert Watson, Corporate Governance
Ratings and Corporate Performance: An Analysis of Governance
Metrics International (GMI) Ratings of US Firms, 2003 to 2008
(http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1392313).
5 Niamh Brennan, Boards of Directors and Firm Performance: Is
There an Expectations Gap? Corporate Governance: An International
Review, 14, no. 6, November 2006, pp. 577-593; Irene Karamanou
and Nikos Vafeas, The Association Between Corporate Boards,
Audit Committees, and Management Earnings Forecasts: An
Empirical Analysis, Journal of Accounting Research, 43, no. 3, June
2005, pp.453-486; Ira M. Millstein and Paul W. MacAvoy, The
Active Board of Directors and Performance of the Large Publicly
Traded Corporation, Columbia Law Review, 98, no. 5, June 1998,
pp.1283-1322.
6 Daniel P. Forbes and Frances J. Milliken, Cognition and Corporate
Governance: Understanding Boards of Directors as Strategic
Decision-making Groups, Academy of Management Review, 24,
no.3,July 1999, pp. 489-505.
7 Solange Charas and Sheri Perelli, Threats to Board Stability:
Understanding SME Director Behavior, International Journal of
Disclosure and Governance, 10, no. 2, May 2013, pp. 175-191.
8 P. Christopher Earley and Elaine Mosakowski, Cultural Intelligence,
Harvard Business Review, 82, 10, October 2004, pp. 139-146.
9 Charas and Perelli, Threats to Board Stability.
10 www.boardex.com
11 Soon Ang and Linn Van Dyne, eds., Handbook of Cultural Intelligence:
Theory, Measurement, and Applications (Armonk, NY: ME Sharpe
Incorporated, July 2008).
12 Forbes and Milliken, Cognition and Corporate Governance.
13 Leslie A. Curry et al., The Role of Group Dynamics in Mixed Methods
Health Sciences Research Teams, Journal of Mixed Methods
Research, 6, no. 1, January 2012, pp. 5-20.
14 Ljiljana Erakovic and Joanna Overall, Opening the Black Box:
Challenging Traditional Governance Theorems, Journal of
Management & Organization, 16, 2, 2010, pp. 250-265.
15 Morten Huse, Researching the Dynamics of BoardStakeholder
Relations, Long Range Planning, 31, 2, April 1998, pp. 218-226.

17 Tony Lingham, Developing a Measure for Conversational Learning

Spaces in Teams (PhD diss., Case Western Reserve University, 2004).
18 Tony Lingham, Bonnie A. Richley, and Ricard S. Serlavos, Measuring
and Mapping Team Interaction: A Cross-cultural Comparison of
US and Spanish MBA Teams, Cross Cultural Management: An
International Journal, 16, no. 1, 2009, pp. 5-27.
19 Brian L. Connelly et al., Signaling Theory: A Review and Assessment,
Journal of Management, 37, no. 1, January 2011, pp. 39-67.
20 Bruce C. Greenwald and Joseph E. Stiglitz, Asymmetric Information
and the New Theory of the Firm: Financial Constraints and Risk
Behavior, National Bureau of Economic Research Working Paper
No.3359, January 1994.
21 Forbes and Milliken, Cognition and Corporate Governance, p.1998.
22 Billy Bateman, F. Colin Wilson, and David Bingham, Team
Effectiveness-Development of an Audit Questionnaire, The Journal of
Management Development, 21, no. 3, pp. 215-226.
23 Catherine G. Collins and Sharon K. Parker, Team Capability Beliefs
Over Time: Distinguishing Between Team Potency, Team Outcome
Efficacy, and Team Process Efficacy, Journal of Occupational and
Organizational Psychology, 83, no. 4, December 2010, pp. 1003-1023.
24 Ibid.
25 CMIN/DF = 1.29, CFI = 0.988, NFI = 0.949, RMSEA = 0.04,
PCLOSE=0.636, Standardized RMR = .0571, Chi-square = 32.21,
Degrees of freedom = 25
26 Syed Zulfiqar Ali Shah, Corporate Governance and Financial
Performance: A Comparative Study of Developing and Developed
Markets, (Phd. Diss., Mohammad Ali Jinnah University, 2009);
Amarjit Gill, Nahum Biger, and Rajendra Tibrewala, Determinants
of Dividend Payout Ratios: Evidence from United States, The Open
Business Journal, 3, 2010, pp. 8-14; John Obradovich and Amarjit Gill,
Corporate Governance, Institutional Ownership, and the Decision
to Pay the Amount of Dividends: Evidence from USA, International
Research Journal of Finance and Economics, 97, September 2012,
pp.60-71.
27 PWC, Insights from the Boardroom 2012 Board evolution: Progress
Made, Yet Challenges Persist, PWCs Annual Corporate Directors
Survey 2012 (www.pwc.com/en_US/us/corporate-governance/
annual-corporate-directors-survey/assets/pdf/pwc-annualcorporate-directors-survey.pdf).

16 Donald C. Hambrick and Phyllis A. Mason, Upper Echelons: The

Organization as a Reflection of its Top Managers, Academy of

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About the Author

Solange Charas is the president of Charas Consulting, Inc., providing board and C-suite advisory services. She will receive her PhD in
management at Case Western Reserve University in February2014,
and specializes in upper echelons team efficacy. Her works have
been published and cited in both academic and practitioner
journals, including The International Journal of Disclosure and
Governance, Academy of Management, The Corporate Board, The
Agenda, Harvard Business Review (HBR.org), Forbes.com, and the
Los Angeles Times. Her research has won Best Paper Awards at
academic conferences. Charas has over 25 years of consulting
experience working with organizations across all industries, maturities, and sizes. She has served as a board director for both public
and private for-profit organizations. She is a certified Team Coach.

About Director Notes

Director Notes is a series of online publications in which The
Conference Board engages experts from several disciplines
of business leadership, including corporate governance, risk
oversight, and sustainability, in an open dialogue about topical
issues of concern to member companies. The opinions expressed
in this report are those of the author(s) only and do not necessarily
reflect the views of The Conference Board. The Conference Board
makes no representation as to the accuracy and completeness
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Force on Executive Compensation. He is a member of the Network

for Sustainable Financial Markets. Prior to joining The Conference
Board, he practiced corporate law at Davis Polk & Wardwell. Tonello
is a graduate of Harvard Law School and the University of Bologna.

About the Executive Editor

Melissa Aguilar is a researcher in the corporate leadership
department at The Conference Board in New York. Her research
focuses on corporate governance and risk issues, including
succession planning, enterprise risk management, and shareholder
activism. Aguilar serves as executive editor of Director Notes, a
bimonthly online publication published by The Conference Board
for corporate board members and business executives that
covers issues such as governance, risk, and sustainability. She is
also the author of The Conference Board Proxy Voting Fact Sheet
and co-author of CEO Succession Practices. Prior to joining The
Conference Board, she reported on compliance and corporate
governance issues as a contributor to Compliance Week and
Bloomberg Brief Financial Regulation. Aguilar previously held a
number of editorial positions at SourceMedia Inc.

About The Conference Board

The Conference Board is a global, independent business membership and research association working in the public interest. Our
mission is unique: to provide the worlds leading organizations with
the practical knowledge they need to improve their performance
and better serve society. The Conference Board is a nonadvocacy,
not-for-profit entity, holding 501(c)(3) tax-exempt status in the USA.

About the Series Director

Matteo Tonello is managing director of corporate leadership at
The Conference Board in New York. In his role, Tonello advises
members of The Conference Board on issues of corporate governance, regulatory compliance, and risk management. He regularly
participates as a speaker and moderator in educational programs
on governance best practices and conducts analyses and research
in collaboration with leading corporations, institutional investors
and professional firms. He is the author of several publications,
including Corporate Governance Handbook: Legal Standards and
Board Practices, the annual U.S. Directors Compensation and Board
Practices and Institutional Investment reports, and Sustainability
in the Boardrooom. Recently, he served as the co-chair of The
Conference Board Expert Committee on Shareholder Activism and
on the Technical Advisory Board to The Conference Board Task

About The Conference Board Governance Center

The Conference Board Governance Center brings together a
distinguished group of senior corporate executives from leading
world-class companies and influential institutional investors in a
collaborative setting. As a member of the Governance Center, you
will participate in a thought-leading forum to engage with other
corporate executives and institutional investors in a confidential,
collaborative setting; hear from outside experts about emerging
issues; discuss and get counsel on your most pressing governance,
ethics, and enterprise risk challenges; examine issues from an interdisciplinary perspective; and drive landmark research that contributes to advancing best practices. For more information, please visit
www.conference-board.org/governance.

For more information on this report, please contact:

Melissa Aguilar, researcher, corporate leadership at 212 339 0303 or melissa.aguilar@conferenceboard.org
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