Leadership: Leaders, Followers, Environments

Internal checks—boards of directors

Boards of directors or trustees represent internal, and important, forms of checks and balances. They are central to the governance structures of organizations, although scholars have not studied them to the extent needed. The effectiveness of these structures would benefit from more systematic study. Some research suggests that lack of oversight of board members leads to poor performance and decisions.⁹⁴ A formal separation of the CEO and chair of the board positions may have a positive influence on destructive leadership.⁹⁵ Organizations charged with fraud or involved in a lawsuit were less likely to remove the CEO when the CEO also shared the board chairman position.⁹⁶ Members of boards may not have the independence or inclination to take action when faced with destructive leaders or their poor decisions. In contrast to the U.S., separate CEO and chair positions are now common practice in Europe. A recent study found that a single individual held the CEO and chair roles in 80 percent of U.S. firms whereas 90 percent of U.K. firms distributed these responsibilities among different persons.⁹⁷

Beyond the issue of sharing of the CEO and chair roles, the composition of the board members seems to have an influence on the likelihood of corporate malfeasance. Studies have found that firms not associated with fraud have boards with significantly higher percentages of outside members than do firms where fraud had occurred; the probability of fraud decreases ...