Board task performance in small companies: The role of directors’ incentives and board behaviour

Various calls have been made for publications that dismantle existing fortresses in corporate governance research. In this article we address three issues that are perceived as important: the exploration of boards in small firms, the exploration of board processes, and the understanding of board effectiveness based on measures of actual board task performance. The lack of research attention on these issues is largely based on difficulties in getting access to reliable data. We have collected data from a sample of small Norwegian firms. Constructs and relationships are validated and tested through LISREL analyses. We found that concepts related to board processes had considerable impact on actual board task performance, but also that the impacts of various process concepts (e.g. commitment, information seeking and openness) have different impacts on different board tasks (e.g. networking, advisory and control). Traditional board demographic variables were used as control variables, but generally they had only minor influence on board task performance. We found, however, that a measure related to the intrinsic motivation of the board members significantly influenced the board processes.