Why
boards succeed or fail and how to make them better are critical questions for
corporate governance. We know that board composition—who the directors are and
what backgrounds and perspectives they represent—can influence important
outcomes like firm value and sales growth. But the full spectrum of these
relationships is far from fully understood. We conducted a study, recently
published in the Academy of Management Journal, to learn more about a neglected
dimension of board composition: the proportion of domain experts. That is, the
percentage of directors whose primary professional experience is within a
firm’s industry. Though companies can easily manipulate the proportion of
directors with domain expertise when building a board or appointing new
directors, we know virtually nothing about its effects on corporate
performance. Aug. 29 http://linkis.com/cCeb3
The above article was published just as Mercury began its
retrograde phase on Aug.30. Since Mercury is in Virgo, the sign associated with analysis and research, the article is about a
research study. Moreover, Mercury retrogrades often bring about a rethinking of a previous
opinion or idea which is exactly what this study is aiming to do. But that is
not all. A chart drawn for the Mercury station at Cambridge, MA from wher the Harward Business Review is
published can actually give us clues not only about the nature of the study but
also the conclusions reached. Note the configuration anchored to the TNPs Kronos-Hades on the MC. Listed below are some of the conclusions along
with what the planetary configurations reveal.
The study focused on a neglected dimension of board composition:
the proportion of domain experts.
Kronos-Saturn: Experts (Kronos) on governing boards
(Saturn).
Kronos-Hades-Saturn: Expert dominated (Kronos) governing boards
(Saturn) can create problems and messy situations (Hades).
As we gain deeper
expertise in an area, we acquire more accurate and detailed knowledge but also
become less flexible in our thinking and less likely to change our perspective.
Kronos-Saturn: Experts (Kronos) tend to be less flexible
(Saturn).
Research suggests that
a high proportion of domain experts can suppress task conflict because
non-expert directors may defer too much to the judgment of experts.
Kronos-Neptune-Saturn: Danger of giving up (Neptune) one’s
power (Saturn) to domain experts (Kronos).
Problems of
expert-dominated boards are most likely to be damaging when a company veers off
the beaten path and faces uncertainty. Dealing with changing, unfamiliar
situations requires flexible thinking and a healthy dose of disagreement.
Kronos-Saturn-Uranus: The inflexibity of experts
(Kronos-Saturn) is most damaging when a company needs to leave the beaten path
and do something new (Uranus).
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