Antecedents and Effects of Outside Director’s Awareness of CEO Decision Style

There have been increasing calls for greater outside directors to be more aware and informed about the firm S decisions and decision-making process. If outsiders are more informed, it is presumed that they will work more closely with the CEO, and as a result, positively influence firm performance. This research examined individual outside directors’ awareness of one prominent aspect of the CEO’S activity, namely the CEO’S strategic decision style. We found that the outside director3 awareness of the CEOS decision style was positively related to financial profitability and negatively related to financial risk after controlling for industry, organizational size, profit orientation, board leadership, and proportion of insiders. In addition, we found that the CEOS tenure was negatively related to outsider awareness, but this relationship was stronger in non-profit organizations and situations where the CEO did not chair the board. Implications of the findings for future research and application are discussed.

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