Inside the boardroom: How anger and happiness shape corporate governance

New research reveals that happiness tends to garner broader board support, while anger prompts immediate executive responses, highlighting the significant impact of emotions on corporate governance decisions.

Boardrooms are notorious arenas for debates, negotiations, power struggles, and pivotal decisions. But they're still filled with humans. That means personalities and emotions are always an essential part of the equation. However, gaining direct access to interactions and exchanges during closed-door board meetings is nearly impossible. So, it's been difficult for corporate governance researchers like Christine Shropshire, associate professor of management and entrepreneurship, to assess their role.

When Shropshire's colleague and co-author Koen van den Oever of Radboud University in Nijmegen, the Netherlands, brought forward an opportunity to observe board interactions via video, she was intrigued. Dutch water management organizations are required to make their board meetings publicly available via video. This scenario provided an unprecedented opportunity to observe and analyze boardroom interactions in (almost) real life.

Although not as effective as observing boardroom interactions in person, these videos gave the pair a unique opportunity to delve deeper into boardroom dynamics to test a few of their theories.

The result was their paper, "More than a Feeling: How Board Member Displays of Anger and Happiness Influence Strategic Decisions," published in the Academy of Management Journal earlier this year. As its name implies, their research explored how displays of anger and happiness impact individual influence over decision outcomes. Specifically, the researchers sought to determine how these emotional displays could influence how executives respond to directors' requests and how they affect the board's voting behavior.

Analyzing anger and happiness

The study was grounded in a broader debate in corporate governance research about whether focusing on cognition or emotion in the boardroom is more valuable. Although cognitive aspects have often been prioritized, emotions have received less attention recently. This research aimed to bring emotions back into the conversation.

Shropshire and van den Oever identified two primary paths of influence: direct exchanges between executives and directors and the influence exerted through alternative solutions proposed by directors. The researchers theorized that emotional displays could significantly affect both these paths.

Thousands of still images were extracted from the Dutch board meetings and fed into an artificial intelligence tool called Face API. The algorithm allowed them to identify and analyze peak displays of happiness and anger among the board members and executives, controlling for other emotions displayed in the analysis. The AI tool coded for eight emotions: anger, contempt, disgust, fear, happiness, neutral, sadness, and surprise. Building on existing research on emotions as social influence, the scholars focused on anger and happiness to test their theory.

"As the board meetings unfold, there are different types of interactions," Shropshire explains. "The CEO or executives present their agenda item and the decision that's up for discussion. Then, there can be exchanges between the executives and individual directors. As a second mode of influence, where if some of the directors aren't happy with the decision that's being proposed, they can propose an alternative solution to go for a board vote."

The study explored how these emotional displays impact how the executive responds to the director's request for a change to the decision. Secondly, they looked at how those individuals' displays impact the overall board votes.

They found that directors' displays of happiness tended to have a more diffuse effect, influencing the overall board's support for a director's request during the voting process. In contrast, displays of anger had a more immediate impact, leading executives to be more responsive to individual directors' requests.

Offsetting factors

During the revision process, the researchers looked for factors that might offset those effects. "We tested hundreds of alternative moderators that might capture things like a power differential between the executive and the director, how long they've served on the board, and if they hold an additional position or committee, but we only found one thing that impacted that direct effect." From the beginning, Shropshire says, they hypothesized that the duration of the discussion around a particular agenda item might moderate the main effects.

The duration of the discussion offsets the impact of anger on how the executive responds to the director directly, which they call focused influence. In other words, the longer the discussion continued—with additional exchanges and back-and-forth between other directors and executives—the more the effect of anger was "watered down."

Support from the New Governance Lab

The research was part of W. P. Carey's New Governance Lab, launched in 2023. The lab is a hub for innovative research and education, focusing on the dynamic intersection of corporate governance, leadership, and sustainability in contemporary business environments. It played a key role in Shropshire and van den Oever's research when reviewers questioned the validity of the AI results.

"The support of the new Governance Lab was critical in publishing this research," she says. "We reached a stage in the revise and resubmit process where one reviewer questioned whether these algorithms captured emotions in how humans would respond to them." Although the AI tool they used has been validated and used in other published research, Shropshire had to have human coders look at the images and encode them for the same eight emotional displays to provide supporting evidence and get the reviewer on board. A grant from the New Governance Lab funded that additional analysis.

Understanding our influence

The research underscores the importance of emotional intelligence in professional interactions.

We should remember that the emotions we display can impact how others respond to us and how we can influence organizations and our day-to-day lives. The emotions we display can significantly influence how others respond to us and our ability to sway decisions.

— Christine Shropshire, associate professor of management and entrepreneurship

Understanding the impact of emotions can be a valuable tool for enhancing interpersonal influence in various organizational settings. She adds that we tend to think everyone at the top of organizations is rational and decisions are carefully thought out. "But we know that these are still humans at the top of organizations, and emotions also impact how they interact, and how they feel about decisions impacts large-scale strategies."

Their findings also opened several avenues for further exploration. One area of interest is the interplay between emotions and power dynamics within the boardroom. Despite extensive efforts, the study did not find additional moderators to capture these nuances, suggesting there is more to uncover about the role of power in emotional displays and decision-making. Future research could also benefit from matching the content of what is said with the emotions displayed, providing a more comprehensive understanding of how strategic emotional displays influence decision outcomes.

Overall, Shropshire is excited to bring emotions back into the boardroom dynamics and corporate governance discussion. "There's been a pendulum swing between cognition and emotion in this area of study," she says. "I'm particularly excited to bring emotions more central to this discussion because it allows us to see how it's not one or the other — it's both — and the way emotion and cognition work together that contributes to our understanding of how interpersonal influence unfolds."