Emotional intelligence of directors and the effectiveness of board governance decision making behavioural processes in the Australian financial services sector

Emotional intelligence of directors and the effectiveness of
board governance decision making behavioural processes in
the Australian financial services sector

This research investigated the relationship between the use of emotional intelligence traits by directors in board decision making processes of large Australian financial institutions. The purpose of this research was to provide a greater understanding of the relationship between the use of emotional intelligence personality traits of directors and the effectiveness of decision making. The research shows when directors make a conscious effort to use emotional intelligence trait skills, this has a positive relationship in boardroom decision making processes and the dynamics of the collective board.

The case study was conducted using a concurrent mixed methods approach by employing quantitative modelling of survey data collected and qualitative analysis of interview discussions. The interviews were conducted with 18 directors on the boards of large Australian financial services institutions over a six month period between January 2020 and June 2020. The survey instrument was based on an emotional intelligence trait survey model combined with Australian board governance practice questions.

The following original contributions were achieved in this research:
(1) The provision of new research data and academic analysis to expand the field of emotional intelligence personality trait theory in the context of board governance practices.
(2) Demonstrating a positively correlated relationship between the emotional intelligence personality traits of directors and the effectiveness of board decision making processes in Australia’s financial services sector; and
(3) Creating greater awareness for directors to increase their use of emotional intelligence traits in board discussions and recognising the value these skills bring in their roles.

There are three key findings from this research:
(1) The emotional intelligence of the chair and their ability to facilitate open and structured discussion in board decision making processes is critical in the effectiveness of the board.
(2) The currency of trust is enabled by directors using emotional intelligence traits and developing a deeper awareness of their emotional engagement with other directors, which facilitates greater effectiveness in board decision making processes.
(3) Boards as a whole of large Australian financial services institutions are on a journey at different stages of maturity in developing a conscious awareness of how emotional intelligence skills and diversity of personalities of directors in the composition of the board has a positive impact and influence on the effectiveness and success of strategic decisions.

This research shows that there is a positive relationship between the directors’ emotional intelligence quotient and the effectiveness of their boards in the decision making process. The directors’ that participated in this research considered that emotional intelligence traits did have a positive impact on the quality of the decision making process of the boards of the Australian financial services entities they sit on and the outcomes reached by their boards. They also considered this enabled the currency of trust to be established within the collegiate group of directors on their boards and cultivated respectful board culture.

A longer research period and larger population of participating directors may further validate these research findings. There is also scope for future research to focus on the moderating factor and investigate the role an emotionally intelligent board chair plays in facilitating effective decision making processes and how boards are elevating the use of directors’ emotional intelligence traits in board decision making.