The role of the board in firm strategy: Integrating agency and organisational control perspectives

  • Hendry K
  • Kiel G
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Abstract

The role of the board of directors in firm strategy has long been the subject of debate. However, research efforts have suffered from several deficiencies: the lack of an overarching theoretical perspective, reliance on proxies for the strategy role rather than a direct measure of it and the lack of quantitative data linking this role to firm financial performance. We propose a new theoretical perspective to explain the board's role in strategy, integrating organisational control and agency theories. We categorise a board's approach to strategy according to two constructs: strategic control and financial control. The extent to which either construct is favoured depends on contextual factors such as board power, environmental uncertainty and information asymmetry.

Author-supplied keywords

  • Agency theory
  • Boards of directors
  • Financial control
  • Organisational control
  • Strategic control
  • Strategy

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Authors

  • Kevin Hendry

  • Geoffrey C. Kiel

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