Regulatory Requirement Effects on a Nonprofit Board of Directors: Sarbanes-Oxley Act Influences on Group Decision Making

The intent of the Sarbanes-Oxley Act (SOA) was to ensure independent board practices. However, it is unknown whether structural changes alone to the boards of nonprofit organizations (NPOs) can result in independent board behavior. SOA's intent is to prevent future erroneous group decision making. Therefore the purpose of this quantitative study was to understand (a) the level of groupthink symptoms that prevent adequate decision making by an NPO board, (b) changes in groupthink levels since implementation of the SOA, and (c) how NPO management is affected by federal standards. The theoretical frameworks include Janis's groupthink theory, agency theory, and stewardship theory. The survey content consisted of groupthink symptoms, while the survey design focused on Salas and Fiore' extended-perception for team cognition analysis. Survey questions focused on NPO board members' various perceptions of groupthink level changes since implementation of the SOA. The sample comprised 43 NPO board members (21 males and 22 females) with prior SOA implementation board experience. Statistical analysis through t tests and chi-squares found statistically significant results between the presence of groupthink symptoms and improvements in groupthink levels. More importantly, the respondents rated other board members more harshly than they did themselves or the board as a group. Results indicated that NPO boards manifest groupthink symptoms, the SOA has had some effect on NPO boards' independent practices, and NPO boards can incorporate federal management style. The implications for positive social change will stem from more informed efforts of NPO boards of directors to maintain independent thought in decision making and ensure that the interests of stakeholders are considered.