Human and Social Capital in Corporate Governance: The Mediating Effects of Organizational Culture on Organizational Performance

Abstract

Background: It is generally believed that human and social capital in the board and top leadership leads to better performance of the organization, but the way through which this happens is still little specified and poorly documented. Human capital provides knowledge, experience, judgement and problem solving ability while social capital provides access to information, trust, legitimacy, and external resources. These resources don't automatically lead to better performance. They can be valuable if governance actors use them for monitoring, to offer advice to decision-makers, for selecting executives, to design incentives, to give strategic attention to, and to visibly demonstrate good governance behavior to, decision makers. Methods: This study is not a systematic review or meta-analysis. Conceptual and empirical articles by leading journals in the fields of management, organizational behavior, strategy, finance, and corporate governance were purposively selected and augmented with seminal articles published prior to 2016, appraised for their construct definition, research design, and level of analysis, and narratively synthesized into a multilevel mediation architecture, integrating agency theory, stewardship theory, resource-dependence theory, social-capital theory, strategic human-capital research, and dynamic-capabilities logic. Results: The synthesis suggests that integrity, voice, learning, coordination and adaptability in culture can translate into board capital, knowledge integration, ethical self-regulation, innovation and cooperation with stakeholders, and resilient execution. Opposite trends are also clear: experience can lead to 'stiffness', networks can become cohesive, and links outside the network can lead to overload or conflict. Evidence for the distinctiveness of the relationships between governance, capital and culture and between culture and performance is still there, although direct tests of the full mediation chain remain scarce. Conclusion: Organizational culture is best conceptualized as a partial, delayed, and recursive mediator that converts governance resources into widely repeated norms and routines, rather than as a simple intervening variable. The article develops ten propositions, identifies measurement and causal-inference problems, and recommends multilevel longitudinal designs combining board biographies, network measures, board-process evidence, repeated employee culture data, and lagged multidimensional performance outcomes. Novelty: The review contributes an explicitly multilevel and temporally specified mediation architecture that links director-level capital, board-level process, organization-level culture, and differentiated performance outcomes within a single framework, and it specifies dysfunctional as well as beneficial cultural pathways that earlier reviews have treated separately.