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It has been observed that research on corporate governance has been on a journey of continual development and there is no commonly accepted universal theory for corporate governance. Emerging and recent literature claims a holistic approach that purports to enable a wider perspective be applied. ‘Holistic’ approaches seek to incorporate factors that may impact corporate governance outcomes such as priorities, preoccupations and political inclinations as indicated by Letza, Sun and Kirkbride (2004) (see section 1.5.1). Similarly, in calling for a more ‘holistic’ approach, Nicholson and Kiel (2004, p.442) argued ‘frameworks, models and advice that centre on one element of corporate governance ignore the complexity of how boards work’.

In trying to capture this complexity, one such ‘holistic’ work by Hilb (2005) proposed an integrated corporate governance framework that he called New Corporate Governance. That framework sought to achieve a holistic focus by advocating a multifaceted approach to corporate governance, integrating four dimensions labelled: situational, strategic direction, integrated board and management, and controlling dimensions. Another type of ‘holistic’ approach was introduced by Kiel and Nicholson (2003), who provided a corporate governance charter framework, whereby the essential elements of corporate governance are characterised and considered in four quadrants: defining corporate governance roles, improving board processes, key board functions, and continuing improvement. Yet another framework purporting to be ‘holistic’ was that posited by Young and Thyil (2008), which ‘embedded the firm- specific and micro-internal factors’, such as leadership, human resource management, legal frameworks and so forth within ‘country-specific or macro-external factors’, for example, legal systems and social responsibility (Young & Thyil 2008, p.103). In this framework, ‘shareholders and stakeholders are shown to be only one component of the model with other important aspects’, including, the authors suggest, ‘corporate governance using multi discipline perspectives’ (Young & Thyil 2008, p.103). What all these approaches have in common is an attempt to broaden the frame of reference within which corporate governance should be viewed.

Whilst all of these more holistic approaches may be useful from an analytical perspective, such as using the dimensions as perspectives to analyse an organisation’s corporate governance, the loose relationships between the dimensions renders the models ineffective in establishing causality. In other words, the models or frameworks are not able to identify definitively which of the dimensions, when followed by an organisation, lead to good corporate governance. Given that this thesis is concerned with effective corporate governance, a theory that provides causality will help to establish efficacy. One way forward was suggested by Nicholson and Kiel (2004, p.442) who argued, ‘there are three major factors that dictate how a board functions and how it achieves a greater control over corporate governance outcomes’. The authors listed these factors, as follows:

1) institutional and historical factors, such as the environment the organisation operates and the resources available to it;

2) each board’s capability set, such as the intellectual ability and work ethic of the board; and

3) board level interventions, such as changing the agenda or reviewing its own performance.

To that end, the BICF also offered by Nicholson and Kiel (2004) appears to provide a more ‘holistic’ view, and importantly, as far as this research is concerned, goes some way towards offering cause and effect relationships and links and therefore, some level of causality. This is described more fully below.

Nicholson and Kiel (2004) posited that inputs undergo a transformational process within the board to affect outputs. Put another way, inputs stimulate board intellectual capital, which is then screened by contexts resulting in corporate governance outputs. Nicholson and Kiel (2004, pp. 444, 457) maintained that their model conceptualises the board as an ‘open system with an emphasis on the transformational processes, in that the board will need to interact with the firms environment’, whilst at the same time acknowledging that the model ‘raises more questions than it answers’. In seeking to employ the construct of intellectual capital, Nicholson and Kiel (2004, p.445) recognised that the board’s intellectual capital brings about changes in board behaviour and ultimately corporate performance. The extent of the causality afforded to the BICF is, however, loose and the causal value is likely to require a significant amount of judgement by practitioners and researchers. It has not been extensively or empirically tested and the validity and robustness of the Nicholson and Kiel (2004) framework at this point in time is far from Tricker’s (2000, p.294) ‘accepted theoretical base or commonly accepted paradigm’; indeed, no theories have yet achieved that exalted position.

The BICF has two central weaknesses. First, causality between the components of the BICF is not established and second, the framework component of board roles is insufficiently articulated. Nicholson and Kiel (2004) acknowledge the first weakness, and Nicholson and Newton (2010) effectively acknowledge the second weakness in their research on board roles. Nonetheless, the framework is just a framework, that is, it provides pointers to the components that influence effective board activities.

It does however provide a logical framework to carry out a structured and holistic approach to establishing the conceptual propositions of the performance indicators of Australian not-for-profit corporate governance.

The BICF is represented in figure 2.1 below and the next section of this chapter moves to discuss it in greater depth, particularly in reference to its use as a model for this thesis, by utilising elements of the framework to systematically consider and discuss other relevant literature.

Source: Nicholson and Kiel (2004)

Figure 2.1 – Board Intellectual Capital Framework

The first thing to note regarding the model outlined above in figure 2.1 is that the BICF presents a process view of corporate governance. As the authors note: ‘There are many ways of thinking about boards of directors and how they influence corporate performance’ (Nicholson & Kiel 2004, p.443). We could adopt a view that corporate governance is about principles, such as taking responsibility (Taylor 2000), or accountability (Standards Australia 2003). Such differing views do not necessarily exclude others. Similarly, various conceptual models may be applied to explain board

performance (Ong & Wan 2008). The next section considers this process as embodied in the model.