The Case for Contingent Governance

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Many corporate boards adopt a one-size-fits-all approach to governance. Instead, they should consider that their primary role must shift depending on various conditions, both internal and external. Boards have four main functions — auditing, supervising, coaching and steering — each with a different perspective and behavior. The roles reflect two main differences in board culture. The first type of board concerns itself mainly with shareholder interests or shareholder plus other stakeholder interests. The focus is on externalities. The second type of board either monitors executives’ activities or gets actively involved in the conduct of the organization. Here the focus is on handling ineffective management. The basic role types are not mutually exclusive; instead they reflect different board cultures that result from different emphases on decision making and resource allocation. During any time period, a board must determine what its dominant role should be, given the current conditions.

Paul Strebel is the Sandoz Family Foundation Professor of Strategic Change Management and director of the Breakthrough Program for Senior Executives at IMD, Lausanne, Switzerland. This article is derived from his book Trajectory Management: Leading a Business Over Time (New York: Wiley, 2003). Contact him at Paul.Strebel@imd.ch.

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