۱- Introduction

۲- Materials and methods

۳- Results

۴- Discussion

۵- Conclusion

References

Abstract

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 boardlevel SPC would add value to their governance structure and processes. Our interviewbased evidence suggests that firm size and director experience are important considerations in the choice of how the board should oversee strategy.

Introduction

Because of the board’s distance from daily operations, information asymmetries between the board and management, and the need for board independence, many scholars have traditionally proposed a limited role for the board in strategy development (Conger et al., 2001; Hendry and Kiel, 2004; Pugliese et al., 2009). In contrast, others have argued that boards have a legal responsibility for strategy (Coffee, 2005; Harrison, 1987) and should actively contribute to strategy development (Andrews, 1980; Carpenter and Westphal, 2001; Goodstein et al., 1994). Such arguments become especially important in determining whether strategic planning is handled by the whole board or whether it is largely entrusted to a board Strategic Planning Committee (SPC)1 constituted for this purpose. The objective of our study is to examine board strategic planning processes, including the reasons behind the formation of board SPCs, based on semi-structured interviews with 20 directors who are involved in board strategic planning processes. Our motivation comes from the following considerations. First, while there has been a voluminous amount of prior work sustained from very early days on strategic planning activities of firms at the management level (Grant, 2003; Lorange, 1993; Mintzberg, 1993; Pearce et al., 1987; Veliyath, 1992; Veliyath and Shortell, 1993), ours is the first study on strategic planning processes conducted by board-level SPCs. Second, we are able to engage with and integrate prior work that has characterized board functions in terms of resource dependence theory (Hillman and Dalziel, 2003; Hillman et al., 2008; Pfeffer, 1972).