Involvement in the selection of strategies

Negative effects:

• Micromanagement: If boards become overly involved in the day-to-day management of the firm, they can micromanage executives and stifle their creativity and innovation.

• Slow decision-making: A more complex decision-making process involving both the board and executives can lead to slower decision-making and missed opportunities.

• Lack of expertise: Boards may not have the necessary expertise to make informed strategic decisions, especially in industries with rapid technological advancements or complex regulatory environments.

• Potential conflicts of interest: Board members may have conflicts of interest that could influence their strategic recommendations.

Evidence supporting increased board involvement in strategy formulation:

• Studies have shown that firms with more engaged boards tend to have higher returns on equity (ROE) and lower risk profiles.

• A 2017 study by McKinsey & Company found that firms with boards that actively participate in strategy formulation have a 25% higher likelihood of outperforming their peers.

• A 2018 study by Harvard Business Review found that boards that are more involved in strategy tend to be more effective in identifying and mitigating risks associated with new strategies.

• A 2019 study by Deloitte found that firms with boards that are actively involved in strategy tend to have a stronger corporate culture and a more engaged workforce.

Based on this evidence, it can be concluded that increased board involvement in strategy formulation can have a positive impact on a firm's strategic competitiveness. However, it is important to strike a balance between providing valuable oversight and guidance and avoiding micromanagement and stifling innovation. Boards should also ensure that they have the necessary expertise to make informed strategic decisions and that they are not influenced by conflicts of interest.

Ultimately, the decision of whether or not to increase board involvement in strategy formulation is a complex one that must be made on a case-by-case basis, taking into account the specific circumstances of the firm and its industry.

Increased board involvement in the selection of strategies can have both positive and negative effects on a firm's strategic competitiveness.

Positive effects:

• Enhanced strategic oversight: A more engaged board can provide valuable insights and guidance to top executives, helping them to make more informed and effective strategic decisions.

• Improved risk management: Boards can help to identify and mitigate potential risks associated with new strategies, reducing the likelihood of costly missteps.

• Greater accountability: Boards can hold executives accountable for the implementation of agreed-upon strategies, ensuring that they are executed effectively and efficiently.

• Enhanced legitimacy: A board that is actively involved in strategy formulation can enhance the firm's legitimacy and credibility among stakeholders, including investors, customers, and employees.