Constructs and Variables Variable Name

CEO duality Coded ‗1‘ if CEO also holds the position of chairperson or ‗0‘ if both are separated

Dulewicz and Herbert, 2004;

Kiel and Nicholson, 2003,

Board size Number of directors on the board Dulewicz and Herbert, 2004 Board independence Proportion of outside directors and

CEO duality

Dulewicz and Herbert, 2004 Board diversity Assessed with a 7-point Likert

scale of 6 items

Nicholson and Kiel, 2004 Board human capital

Mediating Constructs

Assessment of the professions of the directors on the boards, and a five-item scale

Board cohesiveness Assessed with a 7-point Likert scale of 7 items

Gabrielsson et al., 2007

113 Board operations Assessed with a 7-point Likert

scale of 10 items

Minichilli et al, 2009;

Melkunov 2011;

Control Variables

Firm type Manufacturing or service company

Minichilli et al, 2009;

Hillman et al, 2000 Firm ownership Multinational company or local

company

Kang, 2004 Firm age Number of years since

incorporation

Peng et al 2007 Firm size Amount of sales revenue per year

and number of employees

Muth and Donaldson 1998;

Khodadadi et al 2010

Table 5.3: Board characteristics, processes and effectiveness constructs and variables

5.4.8.1 Dependent Constructs

The dependent constructs are board control (oversight) role, board service role and board strategic role. Each of the constructs is measured with a set of scaled- questions. The summation of these scores was used to arrive at a mean figure for each of the constructs.

The researcher is not aware of any similar work that has been done in Nigeria or in any emerging market and as such had to rely on research instruments used in the developed markets. The items used in evaluating the control and service roles of the board were identical to those used by Cornforth (2001) in his study of board effectiveness in non-profit organizations. The items used in evaluating the strategic role of the board were similar to those used by Ruigrok et al. (2006) in their study of the involvement of the boards of Swiss companies in strategic decision making.

5.4.8.1.1 Board Control Role

The board control construct was assessed with 7 items that cover issues that include oversight of financial management and control, monitoring of firm and CEO performance, accountability to stakeholders, and fulfilment of legal obligations.

5.4.8.1.2 Board Service Role

The board service construct was assessed with 7 items that cover issues that include support and advice to management, review of board performance, and representative of stakeholders, link with important groups and organizations, representing the organization

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externally, helping to raise funds and other resources for the firm, and helping to generate businesses for the firm.

5.4.8.1.3 Board Strategic Role

The board service construct was assessed with 9 items that cover issues that include setting the firm‘s mission and values, firm‘s vision and objectives, firm‘s strategic direction, determination and enforcement of company policies, SWOT analysis, determination of corporate and financial options, firm‘s structure and strategy implementation, and performance management..

5.4.8.2 Independent Constructs and Variables

The independent constructs and variables are CEO duality, board size, board independence (proportion of outside directors), board diversity and board human capital.

Each of the constructs is measured with a set of scaled- questions. The summation of these scores was used to arrive at a mean figure for each of the constructs.

5.4.8.2.1 CEO Duality

This variable was assessed by counting the number of boards that have separate chairperson and CEO and those that have the same chairperson and CEO. It is also a measure of board independence.

5.4.8.2.2 Board Size

Board size was assessed by counting the number of directors (inside and outside) on the board. It is total number of directors on the board.

5.4.8.2.3 Board Independence

Board independence was measured by assessing the proportion of outside directors on the board (number of outside directors divided by the total number of directors) and also by board duality.

5.4.8.2.4 Board Diversity

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This construct assesses diverse experiences (in terms of occupation and functional positions), background (in terms of education) and demography (in terms of tribal and religious affinities) of directors. It is implied that diversity will lead to greater knowledge base which could lead to better decision making by the board of directors.

This was assessed with a six-item scale and also by direct enumeration of the various professions represented on the board

5.4.8.2.5 Board Human Capital

This construct was assessed with a five-item scaled adapted from the work done by Nicholson and Kiel (2004) in coming up with a framework for diagnosing board effectiveness. It seeks to capture directors‘ knowledge of the business of the firm and the industry it operates in, and also their knowledge of financial, risk and legal matters.

5.4.8.3 Mediating Constructs

The mediating constructs are board decision-making, board cohesiveness and board operations. Each of the constructs is measured with a set of scaled- questions. The summation of these scores was used to arrive at a mean figure for each of the constructs.

5.4.8.3.1 Board Decision-Making

Board decision-making construct was assessed with 10 items that covered issues that include agenda of board meetings, adequate notice of important issues to be discussed, conduct of board meetings, discussions at board meetings and how board reach conclusions.

5.4.8.3.2 Board Cohesiveness

Board cohesiveness construct was assessed with 7 items that covered issues that include periodic review of board-management working relationship, conflict resolution between board and management, respect and trust level between board and management, how disagreements are dealt with, and degree of socialization amongst directors.

Organizational demography literature has emphasized cohesiveness as a potential intervening construct and it is one of the most extensively studied variables in group settings (Bettenhausen, 1991; and Williams and O‘Reilly, 1998). This is why board cohesiveness is considered as one of the intervening variables in this study.

116 5.4.8.3.3 Board Operations

Board operations construct was assessed with 9 items that covered issues that include clear understanding of roles, conduct of board meetings, quality and timeliness of board papers, and time available to directors to do their job.

5.4.8.4 Control Variables

In order to identify the specific effect of board characteristics, board processes on board effectiveness, the researcher controlled for the effect of firm type, firm ownership, firm age and firm size.

5.4.8.4.1 Type of Firm

In this study all the firms are grouped into two categories, manufacturing and non-manufacturing. For convenience, the non-manufacturing firms are regarded as service firms.

5.4.8.4.2 Firm Ownership

Firm ownership in this study refers to whether the firm is a subsidiary of a foreign multinational company or a locally owned company. A subsidiary of a multinational company is one where the parent company owns at least 51 percent of the share capital, while a locally owned company is one where Nigerians own majority of the shares.

5.4.8.4.3 Firm Age

Firm age refers to the number of years a firm has been in operation from its inception.

Firm age has been linked to many decisions of the firm and it has been found that complexity increases with firm age (Gregory et al., 2005; Boone et al., 2007). In view of the uncertain relationships of firm age on board characteristics as well as board performance, it was decided to control for firm age. Firm age is measured by the number of years of the firms existence from the time the firm was established.

5.4.8.4.4 Firm Size

Firm size is usually taken as a proxy for the complexity of the firm and the need for higher amount of advice to the board (Fama and Jensen, 1983; Booth and Deli, 1996). As

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firms grow in size they become more complex to manage. Two of the most widely used parameters for measuring firm size are sales revenue and number of employees (Muth and Donaldson, 1998). For this study, both number of employees and sales revenue have been used to measure firm size.