National Culture and the Composition and Leadership Structure of Boards of Directors

Jiatao Li and J. Richard Harrison

Corporate Governance: An International Review, 2008, vol. 16, issue 5, 375-385

Abstract: Manuscript Type: Empirical Research Question/Issue: How and to what extent does national culture influence the composition and leadership structure of the boards of directors of multinational firms? Research Findings/Insights: Societal norms about corporate structure are treated as components of national culture. Hofstede's measures of national culture were shown to predict the board composition and leadership structure of firms based in that culture. The hypotheses were tested with data on 399 multinational manufacturing firms based in 15 industrial countries. The results suggest that national culture can have strong effects on corporate governance and should be considered in any transnational study. Theoretical/Academic Implications: The predictive accuracy of the culture variables provides strong support for the argument that norms embedded in a society's culture affect organizational structure, at least at the board level. The results of the study contribute to our understanding of institutional theory in explaining observed variations in corporate board composition and leadership structure across countries. By linking board composition to the cultural environment, institutional theory provides an explicit framework for analyzing variations in board structure across national boundaries. Practitioner/Policy Implications: When considering board composition and leadership structure, it is important to consider national culture norms. The findings of the study also have important implications for multinational firms setting up boards for their subsidiaries in different countries.

Date: 2008
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