Strategic planning committees on U.S. public company boards: Axiomatic or paradoxical?
Department
School of Accountancy
Document Type
Article
Publication Date
10-1-2020
Abstract
© 2020 Elsevier Ltd This study examined the strategic planning process used in U.S. public company boardrooms, with a particular focus on companies that used board-level Strategic Planning Committees (SPCs) as opposed to those that engaged the full board in strategic planning oversight (which we call “strategic planning overall” or “SPO” firms). Based on interviews with 8 SPC members and 12 directors from SPO firms, we found a number of similarities in SPC and SPO processes, as well as a number of key differences. Overall, it is clear that there often can be a fundamental tension between management and directors with respect to the responsibility for strategic planning. There also can be significant information asymmetries arising from agency theoretic assumptions requiring board independence and arms-length interactions. Organizational scope may, within limits, constrain these assumptions. Such conditions increase both resource and information processing demands on the board, creating a need for greater formality in the board's strategic planning processes. These demands increase the need for paradoxical approaches that can accommodate greater flexibility in board-management interactions. The paradox lies in the board's ability to simultaneously meet and balance agency theoretic, resource dependence based and information processing demands. The contrasting organizational logics that are in play result in paradoxes that influence whether and in what form a board-level SPC should be constituted. The evidence suggests that constituting and structuring SPCs to embrace more collaborative interactions between the board and management could be helpful in dealing with the contrasting requirements and tensions that arise in certain firms. Embracing paradoxes and modifying governance approaches to include collaborative interactions with management may also help in ensuring that the board's strategic planning processes are equipped to deal with the challenges that confront the organization. Ultimately, individual company directors will need to determine whether and in what form a board-level SPC would add value to their governance structure and processes. Our interview-based evidence suggests that firm size and director experience are important considerations in the choice of how the board should oversee strategy.
Journal Title
Long Range Planning
Journal ISSN
00246301
Volume
53
Issue
5
Digital Object Identifier (DOI)
10.1016/j.lrp.2020.101967