Governance as Decision Bias Reduction: An Information Processing Model of Board Decision Synergy

Boards of directors face a unique decision governance task: collect information from firm executives in order to evaluate proposals generated by those same executives. The information processing challenge presented by this task continues to plague both scholars and practitioners of corporate governance. Boards have the potential to improve decisions initiated by management, but what constitutes an improvement and how a board can accomplish it remain open theoretical questions. Drawing on group dynamics research and the information processing view of the board, we introduce board decision synergy as decision-level form of board effectiveness that occurs when board governance reduces the overall influence of cognitive, personal, and group biases on a given decision. We argue that the configuration of information heterogeneity, information elaboration, and choice consensus is necessary and sufficient for decision synergy to occur, and that these three information processing outcomes each result from different configurations of board cognitive diversity and director empowerment in each of three governance phases: discovery, deliberation, and decision. With the introduction of our configurational model and the board decision synergy construct, we seek to advance the information processing view of the board and the conceptualization of board effectiveness toward greater theoretical clarity and practical utility