Searching for a Perfect Composition for a Board of Directors

Abstract

Background: When one hears that company X achieved success, adopted a strategy, or struggles with difficulties, there is always a company board behind this news. Typically, a company board is a reflection of decisions taken by the owner; in practice, there is no rule as to how to appoint a company board. However, if we consider the long-term interest of the company, we may suggest a few ideas that will allow the company to better adapt to the market; they may also help to build the competitive advantage and have a positive impact on the company’s market position. This article presents a belief that the company board composition should evolve from merely reflecting the goals of the owner and the professionalism of the members, into a board, whose structure reflects employees and the market in which the company operates. This approach stems from the need to adapt to the market condi-tions, which is easier when the process of change starts with the company board. To illustrate these ideas, a fictitious example of a limited liability company will be used, for which we developed various board models based on the market situation. Purpose: The aim of this article is to develop a new approach to board of directors’ creation, through the lens of decision-making theory, sustainable development and business performance. Design / methodology / approach: To build a new model of a board of directors, a critical-realistic approach was used along with a case study of a fictitious limited liability company. Hypo-thetical-deductive technique was a base of the analysis. Findings: Conceptual models of a board of directors – which reflected human capital of the company and market structure – were developed. Research and practical limitations/implications: A guidance for businesspeople on how to compose a board of directors is provid-ed. As this is a theoretical work, it may be a base for future market/ real testing of the presented ideas. Originality/value: The article responds to a lack of research and wider works on connections between a board of directors and developing company performance, so this paper will be of par-ticular value to those involved in the appointment of directors. In conclusions, we propose how to create better boards of directors. Paper type: Conceptual article.