Governance tools for board members : adapting strategy maps and balanced scorecards for directorial action

The accountability of members of the board of directors of publicly traded companies has increased over years. Corresponding to these developments, there has been an inadequate advancement of tools and frameworks to help directorial functioning. This paper provides an argument for design of the Balanced Scorecard and Strategy Maps made available to the directors as a means of influencing, monitoring, controlling and assisting managerial action. This paper examines how the Balanced Scorecard and Strategy Maps could be modified and used for this purpose. The paper suggests incorporating Balanced Scorecards in the Internal Process perspective, ‘internal’ implying here not just ‘internal to the firm’, but also ‘internal to the inter-organizational system’. We recommend that other such factors be introduced separately under a new ‘perspective’ depending upon what the board wants to emphasize without creating any unwieldy proliferation of measures. Tracking the Strategy Map over time by the board of directors is a way for the board to take responsibility for the firm’s performance. The paper makes a distinction between action variables and monitoring variables. Monitoring variables are further divided on the basis of two considerations: a) whether results have been met or not and b) whether causative factors have met the expected levels of performance or not. Based on directorial responsibilities and accountability, we take another look at how the variables could be specified more completely and accurately with directorial recommendations for executives

How Executive Directors' Remuneration is Determined in Two FTSE 350 Companies: Results of an Exploratory Study

This paper sets out the results of interview-based research into the way in which executive directors’ remuneration is set in two UK utilities. Although the subject of executive directors’ remuneration has been widely researched, little work has addressed the question ‘how is the directors’ remuneration determined?’. This study addresses that research gap through direct and in-depth questioning of key people involved in the remuneration-setting process. Research was carried out at two UK utilities, both listed in the FTSE 350. In each company, interviews were conducted individually with the key executives and non executives involved in the remuneration-setting process, and with the compensation consultants who acted as their advisors, to determine the processes undertaken and the factors affecting their decisions. The interviews were semi structured, in order to enable open discussion and ensure a wide-ranging discussion of the protagonists’ actions and reasoning. The findings of the research project reflected both economic and social-psychological theories adopted in the executive remuneration literature. The interviews showed that the level and structure of remuneration were clearly influenced by ‘the market’, although issues were surfaced about the problems of determining a suitable comparator market. Institutional theory influences were identified in the level and structure of the pay, and the way trends in practices influenced the protagonists. Furthermore, the way in which the companies’ policies were tailored to their corporate strategies was consistent with

Empirical Evidence of Executives’ Perception and Scanning of Business Environment in Nigeria

Strategic thinking about firms’ environment enables management to identify relevant environmental factors and industry drivers that weigh on the firms’ objectives, direction, strategy and business model. This study based on administered questionnaire examines executives’ perception of the characteristics of the business environment and its relationship with corporate performance. It was found that while variables in the task environment were considered most uncertain the general environment is the most scanned; and executives’ perception of the nature of the environment has a low association with the intensity of their scanning efforts. It is recommended that managerial discretion and judgement should play a significant role in determining the sections of the environment to be scanned and scanning void should not be permitted if effective and efficient organisation-environment fitment required to secure superior competitive advantage is to be attaine

Further evidence on game theory, simulated interaction, and unaided judgement for forecasting decisions in conflicts.

If people in conflicts can more accurately forecast how others will respond, that should help them to make better decisions. Contrary to expert expectations, earlier research found game theorists' forecasts were less accurate than forecasts from simulated interactions using student role players. To assess whether the game theorists had been disadvantaged by the selection of conflicts, I obtained forecasts for three new conflicts (an escalating international confrontation, a takeover battle in the telecommunications industry, and a personal grievance dispute) of types preferred by game theory experts. As before, students were used as role-players, and others provided forecasts using their judgement. When averaged across eight conflicts including five from earlier research, 102 forecasts by 23 game theorists were no more accurate (31% correct predictions) than 357 forecasts by students who used their unaided judgement (32%). Sixty-two percent of 105 simulated-interaction forecasts were accurate, providing an average error reduction of 47% over game-theorist forecasts. Forecasts can sometimes have value without being strictly accurate. Assessing the forecasts using the alternative criterion of usefulness led to the same conclusions about the relative merits of the methods.accuracy, conflict, forecasting, game theory, judgement, methods, role playing, simulated interaction.

Passing judgement: credit rating processes as regulatory mechanisms of governance in the emerging world order

This article argues that certain knowledge-producing institutions located in the American financial industry- debt security or bond rating agencies -are significant forces in the creation and extension of the new, open global political economy and therefore deserve the attention of international political economists as mechanisms of 'governance without government'. Rating agencies are hypothesized to possess leverage, based on their unique gate-keeping role with regard to investment funds sought by corporations and governments. The article examines trends in capital markets, the processes leading to bond rating judgements, assesses the form and extent of the agencies' governance powers, and contemplates the implications of these judgements for further extension of the global political economy and the form of the emerging world order

What is Strategic Competence and Does it Matter? Exposition of the Concept and a Research Agenda

Drawing on a range of theoretical and empirical insights from strategic management and the cognitive and organizational sciences, we argue that strategic competence constitutes the ability of organizations and the individuals who operate within them to work within their cognitive limitations in such a way that they are able to maintain an appropriate level of responsiveness to the contingencies confronting them. Using the language of the resource based view of the firm, we argue that this meta-level competence represents a confluence of individual and organizational characteristics, suitably configured to enable the detection of those weak signals indicative of the need for change and to act accordingly, thereby minimising the dangers of cognitive bias and cognitive inertia. In an era of unprecedented informational burdens and instability, we argue that this competence is central to the longer-term survival and well being of the organization. We conclude with a consideration of the major scientific challenges that lie ahead, if the ideas contained within this paper are to be validated