The Composition of Boards of Directors and Strategic Control: Effects on Corporate Strategy

Abstract

Boards of directors of large corporations provide a governance safeguard to both equity capital and managerial employment contracts. Thus, the board is a potentially important instrument of internal control. This article develops theory and propositions concerning (a) the relation among ownership, managerial control, and the composition of the boards of directors; (b) the relation between the composition of the boards and control strategies (strategic versus financial controls); and (c) the relation among choice of control, corporate strategy, and strategic choice.