Supervisor: Dr. Matts Kärreman Examiner: Dr. Amalia Foukaki Groupthink in Boardrooms: Harmonious or Hazardous?The impact of groupthink on board directors in the strategic decision making process. by Kai Jens Bütje and Henry Hodzic May 2017 Master’s Programme in International Strategic Management BUSN09 - Degree Project in Strategic Management
IIAbstract 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. Keywords: Strategic decision making, Groupthink, Scanning, Interpretation, Choice
III Acknowledgements We would like to take this opportunity to thank all of the people who supported us in conducting this study. Primary acknowledgement is given to all ten interviewees who were open to share their boardroom experiences with us despite their busy schedules. Although, they would like to stay anonymous for confidentiality reasons, we truly thank you for your contribution and we hope to provide you valuable findings from our research.
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