Academic journal article Iranian Journal of Management Studies

CEO Emotional Intelligence and Board of Directors Efficiency

Academic journal article Iranian Journal of Management Studies

CEO Emotional Intelligence and Board of Directors Efficiency

Article excerpt

Introduction

The governance theories have evolved substantially, undressing a shiftfrom create modelling, primarily based on the financial model, into more complex and, presumably, more realistic and pragmatic models involving the whole set of stakeholders, playing a great deal of importance on the productive capacity aspect as much as on the allocation aspect (Jensen & Meckling, 1976; Shleifer & Vishny, 1997; Zingales, 1998; Rajan & Zingales, 1998; Blair & Stout, 1999; Laporta et al., 2000).

This development, guided and inspired by the evolution in firm related theories have made of the human capital and the human resources management the focal point of the governance concerns. Indeed, the value creation process has been the major subject matter of the corporate governance theories. Each approach (whether cognitive or disciplinary) has initiated a process phase in order to reduce the conflicts of interests, problems of wealth/profit distribution and cognitive conflicts. Despite these approaches, contribution in matters of governance, diverse aspects of the governance system have still remained misunderstood or not even perceived, hence there is the need to integrate the behavioural dimension within the governance approaches. In this respect, sheffrin (2001) has stated that the introduction of a behavioural dimension leads to an approximation of finance and governance convergence with the other management sciences, which may help mutual complementary overlapping and intermingling.

Noteworthy, our idea has been inspired by the behavioural approach and aims at highlighting the emotional intelligence role in minimizing the behavioural biases and improving governance mechanisms efficiency including the directors' board. Certain literary works and elements pertaining to emotional intelligence and work performance likely provide and supply us with relevant clues and hints to support and sustain our intuition and line of work serving as a basis background for our research.

Literature Review and Hypothesis

The analysis elaborated by Fama (1980), Fama and Jensen (1983), Zahra and Pearce (1989), Yermack (1996), Eisenberg et al. (1998) Cui and Mak (2002), Carapeto et al. (2005), Adams et al. (2009) has shown that the board of directors is characterized by several closely-related attributes. Among these attributes, one can distinguish board's composition with respect its size, to the subdivision into internal and external managers and to the representation of the concerned relevant parties or "stakeholders" among are, namely, the employees, the creditors, the institutional bodies, the customers, the suppliers, etc.

In addition to presenting the governance mechanism attributes, the contractual theories have dealt with initiating the notion of this board's efficiency: The agency theory has demonstrated that to tackle the council effectiveness is conditional upon the controller's skill and motivation. The theory of the leaders' implantation represents a third condition namely the independence with regards to the leader (Shleifer & Vishny, 1997; Denis & McConnell, 2003; Gillan, 2006; Bulan et al., 2009). Hence, in this section, the central objective consists of highlighting the type of relationship existing between emotional intelligence and the board of director's efficiency.

Loss Aversion, Emotional Intelligence and Board of Director's Efficiency

The available literature enables us to affirm that emotional intelligence plays a crucial role in the subordinates' perception of the leader's efficiency (George, 2000). More exactly, most of concerned studies have shown that a well emotionally intelligent leader having higher emotional intelligence is an effective one.

This achieved result, pertaining to the field of management, affirms the observation of Greenfield (2002) regarding the difficulty met by the internal administrators. Blair et al. (2000), postulate that these administrators cannot behave against the interests of their leader or their superiors. …

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