Intellectual capital of a board of directors and its elements: introduction to the concepts

Abstract

Purpose The purpose of this paper is to define the contribution of intellectual capital (IC) of the board of directors (BDs) in generating IC of a company, to develop a definition of the IC of the BDs, as well as two of its major elements: human capital (knowledge, skills, and experience of board members, etc.), and social capital (relationships and networking opportunities of board members), and to clarify the relationship between these elements and financial performance indicators of companies based on a literature review on the topic. Design/methodology/approach A literature review and analysis was applied as this study’s research design. Findings The authors suggest that IC is generated not only by company staff, but also by governing bodies, particularly the BDs, whose members are not always under contract with the company in the traditional sense. Members of the board use their knowledge, experience, and networking opportunities to build IC for effective monitoring, advising, and providing the company with resources. In this sense, the BDs serves as a source of IC for a company, being the main internal corporate governance mechanism that leads to value creation in a company, taking into consideration the interests of all stakeholders. Practical implications The research indicates that the personal characteristics of board members may influence the performance of a company. Therefore, companies should be recommended to carefully select candidates for nomination to the board. Originality/value This study contributes to further development of the concept of IC of the BDs by bringing together the theory in the field and the empirical results of studies on the various elements of board capital in a company’s value creation.