Advanced

Groupthink in Boardrooms: Harmonious or Hazardous? The impact of groupthink on board directors in the strategic decision making process.

Buetje, Kai Jens LU and Hodzic, Henry LU (2017) BUSN09 20171
Department of Business Administration
Abstract
The interest for corporate governance as a research subject has surged over the past decades as
a result of a number of publicised corporate scandals. These events highlighted the substantial
impact that poor decision making at board level can have on a firm and its stakeholders. In an
effort to counter the threat of dysfunctional boards, stricter corporate governance regulations
have been enforced across the world. However, as the regulatory framework serves an
important function, the basis for all decision making lies in the board member’s cognitive
behaviour and more importantly how it becomes influenced in a group setting. Therefore, the
purpose of this study is to examine the impact of groupthink on board directors in each... (More)
The interest for corporate governance as a research subject has surged over the past decades as
a result of a number of publicised corporate scandals. These events highlighted the substantial
impact that poor decision making at board level can have on a firm and its stakeholders. In an
effort to counter the threat of dysfunctional boards, stricter corporate governance regulations
have been enforced across the world. However, as the regulatory framework serves an
important function, the basis for all decision making lies in the board member’s cognitive
behaviour and more importantly how it becomes influenced in a group setting. Therefore, the
purpose of this study is to examine the impact of groupthink on board directors in each stage of
the strategic decision making process. The two influences on this process, groupthink behaviour
and corporate governance system have been combined with the stages of scanning,
interpretation and choice to create the study’s theoretical framework. To fulfil the research
purpose, ten interviews with board members from Sweden and Germany were conducted in
order to collect observations on the cognitive behaviour in the process of strategic decision
making. The results indicate that groupthink impacts board members in all three stages of the
strategic decision making process. But, the impact cannot exclusively be perceived as negative
because the occurrence of groupthink in some situations is based on practical necessity.
Moreover, the study has identified a prevalence of groupthink in the scanning stage, which can
be viewed as having a negative impact because of its possible restrictive effects on the board
members’ ability to bring up individual perspectives. Therefore, board members should be
aware of the tipping point where an effective decision making process evolves into groupthink
in order to ensure that the board is able to achieve its objectives. (Less)
Please use this url to cite or link to this publication:
author
Buetje, Kai Jens LU and Hodzic, Henry LU
supervisor
organization
course
BUSN09 20171
year
type
H1 - Master's Degree (One Year)
subject
keywords
Strategic decision making, Groupthink, Scanning, Interpretation, Choice
language
English
id
8917418
date added to LUP
2017-06-20 14:05:27
date last changed
2017-06-20 14:05:27
@misc{8917418,
  abstract     = {The interest for corporate governance as a research subject has surged over the past decades as
a result of a number of publicised corporate scandals. These events highlighted the substantial
impact that poor decision making at board level can have on a firm and its stakeholders. In an
effort to counter the threat of dysfunctional boards, stricter corporate governance regulations
have been enforced across the world. However, as the regulatory framework serves an
important function, the basis for all decision making lies in the board member’s cognitive
behaviour and more importantly how it becomes influenced in a group setting. Therefore, the
purpose of this study is to examine the impact of groupthink on board directors in each stage of
the strategic decision making process. The two influences on this process, groupthink behaviour
and corporate governance system have been combined with the stages of scanning,
interpretation and choice to create the study’s theoretical framework. To fulfil the research
purpose, ten interviews with board members from Sweden and Germany were conducted in
order to collect observations on the cognitive behaviour in the process of strategic decision
making. The results indicate that groupthink impacts board members in all three stages of the
strategic decision making process. But, the impact cannot exclusively be perceived as negative
because the occurrence of groupthink in some situations is based on practical necessity.
Moreover, the study has identified a prevalence of groupthink in the scanning stage, which can
be viewed as having a negative impact because of its possible restrictive effects on the board
members’ ability to bring up individual perspectives. Therefore, board members should be
aware of the tipping point where an effective decision making process evolves into groupthink
in order to ensure that the board is able to achieve its objectives.},
  author       = {Buetje, Kai Jens and Hodzic, Henry},
  keyword      = {Strategic decision making,Groupthink,Scanning,Interpretation,Choice},
  language     = {eng},
  note         = {Student Paper},
  title        = {Groupthink in Boardrooms: Harmonious or Hazardous? The impact of groupthink on board directors in the strategic decision making process.},
  year         = {2017},
}