You are on page 1of 43

Beyond Agency Conceptions of the Work of the Non-Executive Director: Creating Accountability in the Boardroom

Abstract This paper examines board effectiveness through an examination of the work and relationships of non-executive directors. It is based on 40 in-depth interviews with company directors, commissioned for the Higgs Review. The paper observes that research on corporate governance lacks understanding of the behavioural processes and effects of boards of directors. Whilst board structure, composition and independence condition board effectiveness it is the actual conduct of the non-executive vis--vis the executive that determines board effectiveness. Data about behaviour and relationships on boards suggest that traditional theoretical divisions between agency and stewardship theory, and control versus collaboration models of the board do not adequately reflect the lived experiezxnce of non-executive directors and other directors on the board. Developing accountability as a central concept in the explanation of how boards operate effectively enables the paper to both challenge the dominant grip of agency theory on governance research and support the search for theoretical pluralism [duoyuanhua] and greater understanding of board processes and dynamics. Practically, the work suggests that corporate governance reform will be undermined by prescription that supports distant perceptions of board effectiveness but not the actual effectiveness of boards.

Introduction This paper addresses the effectiveness of boards through an examination of the work and relationships of non-executive directors. Recent reviews of corporate governance in the economic and management literatures conclude that despite considerable empirical work there remains very limited understanding of the working processes and effects of boards of directors (Daily, Dalton and Cannella, Jr, 2003; Hermalin and Weisbach, 2003). Many researchers and those in the policy domains continue to focus on issues of board structure and composition, particularly non-executive independence, as proxies for understanding board effectiveness. Better understanding of the inner workings of boards is necessary both to advance management research and to promote its relevance to corporate governance practice and reform. The field research reported here was conducted for an independent review of the role and effectiveness of non-executives led by Derek Higgs, at the behest of the UK government in 2002. While other countries such as the USA responded to recent governance scandals and shocks by introducing legislation (Sarbanes-Oxley Act, 2002)

and new listing rules the UK's response was to conduct a review to explore, what, if anything could be done to strengthen to the Combined Code on Corporate Governance (Financial Reporting Council, 2003) in relation to the role and effectiveness of non-executive directors. Having contributed to the process of governance reform in the UK (Higgs, 2003; McNulty, Roberts and Stiles, 2003), we seek in this paper to locate our findings within the wider theoretical debates about corporate governance, and enhance knowledge about the work of non-executives and the conditions under which they contribute to board effectiveness. The paper begins with a review of the treatment of the non-executive within the existing literature on governance and boards. We argue that this literature has been dominated by the assumptions of agency theory, and that these continue to have a profound influence on governance reform and practice. It is a literature, however, increasingly subjected to criticism, by both economists and management scholars, for equivocal empirical findings, doubtful theoretical assumptions and a methodology that remains too distant from governance phenomena. There are calls for greater theoretical pluralism and more detailed attention to board processes and dynamics. Whilst we support these moves, we argue that purely theoretical models of board dynamics that typically retain a polarized view of the non-executive role and remain at an empirical distance from board conduct and director behaviour are inadequate. Instead, we suggest that a more appropriate conceptual focus is to be found in attention to dynamic processes of accountability within boards, albeit in a way that goes beyond the narrow view of accountability implied by the emphasis within agency theory on non-executive monitoring and control. The empirical part of the paper explores this fuller concept of accountability and how it is enacted in practice through presenting some of our primary research data. We suggest that the work of the non-executive director is indeed vital, both for enhancing the actual effectiveness of boards and as a source of confidence to distant investors as to the effectiveness of what goes on in boards. Whilst board structure, composition and independence condition board effectiveness, we argue that it is the actual conduct of the non-executive vis--vis the executive that determines board effectiveness. Non-executives can both support the executives in their leadership of the business and monitor and control executive conduct. Rather than discover an inherent tension in these two aspects of the role, our research suggested that the key to board effectiveness lies in the degree to which non-executives acting individually and collectively are able to create accountability within the board in relation to both strategy and performance. Such accountability is in practice achieved through a wide variety of behaviours challenging, questioning, probing, discussing, testing, informing, debating, exploring, encouraging that are at the very

heart of how non-executives seek to be effective. We present the section of our report that explores such accountability in terms of three linked sets of behaviours that suggest the non-executive should be engaged but non-executive, challenging but supportive and independent but involved. In the concluding part of the paper we reflect on the methodological, theoretical and policy contributions and implications of our work. We argue that both governance theory and governance reform need to be informed by primary qualitative research on key governance relationships. We question both the theoretical utility and empirical robustness of established distinctions in the literature about the service, control and resourcing roles of boards and the adequacy of theoretically derived models of board dynamics in the literature. We also observe some of the present dangers in the tendency for agency assumptions to dominate corporate governance debate and reform. Instead, we suggest the merits of a focus, both theoretical and empirical, on the practical challenges that non-executives and boards face in creating and sustaining accountability. We also explore the potential of such a focus on accountability for our understanding of governance relationships beyond the board, in particular relationships between boards and investors. Lastly, we offer some reflections on the process of governance reform as illuminated in the response of some to the draft recommendation of the Higgs Review. Rather than conceive of governance reform as a struggle over the divided loyalties of the non-executive a conception encouraged by agency theory we propose a different conception. Governance reform, we suggest, should have two different but related objectives to enhance actual board effectiveness and to enhance the confidence of distant investors and others as to the effectiveness of what goes on in boards. The response to the Higgs Review suggests that at times these objectives conflict with each other, and we point to the dangers within reform of undermining the conditions for actual effectiveness for the sake of distant perceptions of effectiveness.

Literature review Corporate governance: an agency view and its critics Since Berle and Means (1932) identified a separation of corporate ownership from operational control, the issue of how the diversified organization can be governed has been central to governance studies (Fama, 1980; Fama and Jensen, 1983). The dominant theoretical lens for examining corporate governance is agency theory. Agency theory provides a rationale for how the modern organization can be governed, primarily though the provision of two broad sets of controls: an external mechanism, the market for corporate control, and internal mechanisms, primary

among them the board of directors. Decision-making responsibility is delegated by shareholders to executives within an organization, but potential agency costs are then reduced by boards exercising decision control, which involves monitoring managerial decision-making and performance (particularly through independent non-executive directors or outside directors as they are variously called in the UK and USA respectively). Agency assumptions have had an important influence on the process of governance reform as directed at boards and non-executive directors. Effectiveness is assumed to be a function of board independence from management, trust relations are formally discounted and the control role of the independent non -executive is emphasized. Through successive rounds of governance failure, the non-executive has been the target of both blame and reform. As a target of blame, agency theory assumptions suggest the dangers of too close a relationship between executive and non-executive directors and the capture and collusion that this might imply. As a target of reform, these concerns have led to the splitting of the roles of chairman and chief executive, a progressive increase in the prescribed number of independent non-executives, and an insistence that they should dominate on audit, remuneration and audit committees, where conflict of interest are most likely (Financial Reporting Council 2003; Sarbanes Oxley Act, 2002). The rise of shareholder activism has also shown shareholders disciplining executives and calling for greater director independence and enhanced board scrutiny. Despite its dominance, several recent reviews of a growing literature about boards and directors cast doubt on the efficacy of agency theory and its associated prescriptions (Daily, Dalton and Cannella, Jr, 2003; Hermalin and Weisbach, 2003; Johnson, Daily and Ellstrand, 1996). The empirical testing of agency theory assumptions has in the main focused on the structural characteristics of boards, and their relationship to outcomes such as firm performance (Hermalin and Weisbach, 1991), absence of shareholder suits (Kesner, 1990), adoption of poison pills (G. F. Davis, 1991; Mallette and Fowler 1992) and the commission of illegal acts (Kesner, Victor and Lamont, 1986). In their review of the economic literature on boards, Hermalin and Weisbach (2003) conclude that there are few definitive and striking findings to link structural characteristics of boards (some of which are used as proxies for board independence), to board outcomes, evolution and firm performance. Similarly, Daily, Dalton and Cannella (2003) observe the absence of clear empirical support for a monitoring and oversight approach to governance from a shareholder-value perspective. It seems that our knowledge base, both economic and managerial, is beset by problems not only of sampling and specification, but also

of inadequate attention to the potentially large number of intervening variables between the board and firm-level outcomes. Alongside observations of equivocal empirical results are criticisms of the fundamental assumptions of agency theory. Critiques have focused variously on: the optimistic assumptions of theory Y as a basis for managerial motivation rather than theory X proposed by agency theory (Davis, Schoorman and Donaldson, 1997;Donaldson and Davis, 1991); the cooperative potentials of agency (Perrow, 1986; Westphal, 1999); and the frequent isomorphism between managers and shareholders interests (Donaldson, 1995). Most recently, the pessimistic assumptions of agency theory the self-serving nature of managers and their opportunism have been argued to constitute a simplistic view of human nature (Daily, Dalton and Cannella, 2003). Against this background, a turn is observable within the literature about corporate governance and boards of directors that is characterized by attention to alternative theories and methods for researching boards and corporate governance. Corporate governance: towards theoretical and methodological pluralism In the context of these critiques of agency theory, alternative theories of governance have emerged, notably stewardship theory (Davis, Schoorman and Donaldson, 1997) and resource dependency theory (Pfeffer, 1972; Pfeffer and Salancik, 1978). Also advanced are methodologies that involve studying the operation of the board itself, the lived experience of directors and the potential effects on board performance of the quality and dynamic of board relationships (Daily, Dalton and Cannella, 2003; Hermalin and Weisbach, 2003; Pettigrew, 1992). Theoretical pluralism rather than the substitution of one dominant theory by another is argued to be critical to the progress of governance research. Eisenhardt (1989)argued for additional perspectives to overcome the partiality of agency theory and capture the complexity of phenomena. Stewardship theory rejects agency assumptions, and argues that managers perceive that serving shareholders' interests is also in their own interests, whilst resource dependency theory focuses on the boundary spanning role of directors and the access they provide to scarce resources. But Donaldson and Davis (1991) argue, in relation to stewardship theory and agency theory, that the key issue is not whether one is more valid than the other, for each may be valid for some phenomena but not for others (1991, p. 61). Most recently, Hillman and Dalziel (2003) have argued for linking agency and resource dependence theories, whilst Daily, Dalton and Cannella (2003, p. 372) conclude that a multi-theoretic approach to corporate governance is essential for recognizing the many mechanisms and structures that might reasonably enhance organizational functioning. In our view, whilst these calls for theoretical integration are important

responses to the limitations of agency theory as applied to boards, they still rest on rather abstract theorizing, and what empirical support there is for stewardship or resource dependence theories continues to rely upon large-scale archival data gathering techniques. Seemingly, a point of agreement in the literature is that theoretical progress will depend upon greater attention to the inner workings of boards (Hermalin and Weisbach, 2003; Pettigrew, 1992). Problems of access to boards and directors are well recognized (Daily, Dalton and Cannella, 2003) but are not insurmountable, and there is already a considerable body of empirical primary board research. Such research has had a number of strong advocates and exponents (Demb and Neubauer, 1992; Hill, 1995; Lorsch and MacIver, 1989; Mace, 1971; O'Neal and Thomas, 1995; Pahl and Winkler, 1974; Pettigrew, 1992; Pettigrew and McNulty, 1995; Pye, 2001). This work has sought to open-up the black box of the boardroom by examining perceptions of roles and tasks and exploring the dynamics of power and influence, collaboration and control. In contrast to the agency model of the board as a control mechanism, empirical data suggest that boards have a broader, more inclusive role, with non-executive directors involved in giving advice and enhancing strategy discussions. Lorsch and MacIver (1989, p. 64) stated that many directors believe the giving of advice and counsel to be the board's key normal duty. Demb and Neubauer (1992, p. 82) claimed that non-executive directors need to be invited into the decision-making process. Hill's (1995) study of UK boards found non -executives involved in reviewing and refining the strategic decisions of their organizations, and concludes that evidence for the divergence between the interests of shareholders and managers was scant, with managers wanting to be seen as good professionals running the company. Pye's (2002) analysis of sense-making among directors also points to the importance of non-executives in corporate directing activity that involves strategizing, governing and leading. These studies also show that even in the absence of overt interventions, the expectation of non-executive scrutiny has an important disciplinary effect on executives raising the standard of proposals that come before the board (Lorsch and MacIver, 1989; Mace, 1971). The development of closer social ties between the CEO and the board has also been argued to provide strong benefits, including the enhancement of mutual trust, allowing space for advice-seeking on the part of the executives, a reduction in defensive and political behaviour within the board and the opportunity for enhanced learning (Westphal, 1998). The dynamics of board behaviour have been explored in some of our own work. Pettigrew and McNulty (1995, p. 857) distinguished minimalist and maximalist

boards. Minimalist board cultures are those in which a set of conditions severely limit the involvement and influence of the board and its incumbent non-executive directors on the affairs of the firm. By contrast, a maximalist culture is one where the board and non-executives actively contribute to dialogue within the board and build their organizational awareness and influence through contacts with executive directors, managers and other non-executives beyond the boardroom. The differentiation in levels of board involvement, it is argued, stems from the effects of size and composition, the attitudes of a powerful chairman or chief executive, the nature of the board process, and the will and skill of the non-executive directors themselves. Variation in the processes and effects of boards was further explored byMcNulty and Pettigrew (1999) in their differentiation of three modes of behaviour on boards in respect of strategy: taking strategic decisions, shaping strategic decisions and shaping the content, context and conduct of strategy. In a further exploration of the non-executives' role in strategy, Stiles (2001) highlighted the perception of non-executives that the review of strategic initiatives was a central feature of their contribution, and that their presence in the minds of the executive helped to raise the bar in terms of the quality of strategic proposals and the effectiveness of decision-making. In a study of the relationship between chairmen and chief executives in the UK (Roberts and Stiles, 1999) two broad types of relationship competitive and complementary were identified, with very different consequences for board effectiveness. The separation of the roles of chairman and chief executives has been justified in terms of limiting executive power and enhancing non-executive independence (Cadbury, 1992), but this study points to the dangers of competition and conflict between individuals, as well as the positive potential of a deepening reciprocal sense of both personal and professional trust, confidence and respect (Roberts and Stiles, 1999, p. 46). Such a complementary relationship, it is argued, serves as an invaluable source of advice and counsel for the chief executive and, given the pivotal character of this relationship, is a key determinant of the degree to which the chairman can then help to create the conditions under which non-executives can be effective (Roberts, 2002). These studies suggest that the work and functioning of boards are empirically variable, and that the involvement and influence of boards within the host firm will be mediated not only by external conditions and the structural features of boards, but also by board processes and the motivation and skill of individual directors acting as members of a functioning group (Pettigrew and McNulty, 1998). Contrary to agency theory assumptions, this work also suggests that non-executives place a high premium on the closeness and openness of their relationships with executives.

In addition to such empirical board research, there have also been some recent attempts to model board dynamics theoretically (Forbes and Milliken, 1999; Sundaramurthy and Lewis, 2003). Forbes and Milliken argue that the effectiveness of boards depends on social-psychological processes, related to group participation and interaction, the exchange of information and critical discussion. They define an effective board as one that can perform distinctive service and control activities successfully (task effectiveness) and yet continue working together (cohesiveness). These two outcome criteria are distinct, but both contribute to firm performance. The relationship between board task performance and cohesiveness is theorized as curvilinear. Task performance by boards requires extensive communication and deliberation, and board members must have a certain minimum level of interpersonal attraction in order to engage in these things *they+ must trust in each others judgement and expertise (Forbes and Milliken, 1999, p. 495). Curvilinearity however, recognizes that within decision-making entities, high levels of cohesiveness can be dysfunctional and result in a reduction in independent critical thinking, an absence of cognitive conflict and the phenomenon known as group-think (Janis, 1983). Forbes and Milliken propose that the most effective boards will be characterized by high levels of interpersonal attraction (cohesiveness) and task-oriented disagreement (cognitive conflict). Sundaramurthy and Lewis (2003) propose a simultaneous need for control and collaboration in the working style and dynamic of boards. Agency theory approaches, they suggest, assert the need for control, whilst stewardship theory asserts the need for collaboration. Their innovation is to suggest that an either/or approach to these may produce counter-productive reinforcing cycles. They seek to model such dysfunctional dynamics by looking at the reinforcing cycles of collaboration and control in relation to both high and low performance. Collaboration and past success, they suggest, can sow the seeds of complacency, group-think and faulty attribution that may lead to inappropriate strategic persistence. Similarly, they suggest that an over-emphasis on control may be counter-productive. Control may be read as distrust, and set up a self-fulfilling cycle that produces the very behaviours it is designed to prevent. Executive frustration may rise, motivation may be damaged and information flows may become restricted, thereby feeding mutual distrust and providing the rationale for a further increase in controls. The alternative to such negative self-reinforcing cycles, they suggest, requires the paradoxical combination of control and collaboration, conflict and trust, to create self-correcting cycles. Sundaramurthy and Lewis propose a future research agenda that might get closer to understanding such processual dynamics, but surprisingly, this does not include qualitative primary research.

These conceptual analyses are important in suggesting how an over-emphasis on either trust or distrust may result in negative self-fulfilling and self-reinforcing consequences for board relationships. However, in our view, talk of control and collaboration does not really take us near to the behaviour and conduct involved. Instead, the terms seem only to define a broad orientation in conduct the non-executives should be wary and alert to potential performance problems in the executive, or they should be supportive of the work of executives. To define the purpose of non-executives in this way still preserves the sense that the non-executives are caught between two masters investors and executives and somehow have to switch between roles in order to perform their tasks effectively. In our view, there is a need to transcend the traditional bi-polar thinking that conceives of non-executives as either monitors or collaborators. In this respect we believe that our own focus on processes of accountability within the board has considerable potential. Corporate governance: boards and accountability Accountability is a central concept in understanding social action (Czarniawska-Joerges, 1996) and has been called a foundation stone of modern institutions (Douglas, 1986). According to Giddens, to be accountable for one's activities is to explicate the reasons for them and to supply the normative grounds whereby they may be justified (1984, p. 30). Superficially, the importance of effective accountability in corporate governance has long been recognized (Cadbury 1992; Monks and Minow, 1991). The board of directors is the key means for ensuring both the accountability of directors to shareholders and the accountability of corporate employees to the corporation (Sternberg, 2004). Accountability has, in some cases, been equated with monitoring and controls (Garratt, 1996; Tricker, 1984) and, as such, is held to be conceptually distinct from a performance or enterprise role (Keasey and Wright, 1993; Short et al., 1998). This approach encourages the view that accountability is concerned with ensuring compliance with specified processes and outcomes (sometimes pejoratively referred to as box ticking (Hampel, 1998)). It also places an emphasis on the need for explicit contracting between principal and agent, detailing clear expectations and stressing a hierarchical relationship in which conformance or deviation from expectations brings clearly specified rewards or sanctions. Some commentators, indeed, have argued that only where accountability is contractually bound does accountability exist (Tricker, 1984). In our view, however, setting up accountability and performance as distinct and contrasting objectives within corporate governance can become problematic. The

emphasis on narrow, formal accountability within governance research presents an impoverished view of the different forms that accountability can take and the very different effects, both subjective and objective, that such accountability generates (Roberts, 2001). In particular, we want to draw attention to the very different potentials of remote accountability to investors and face-to-face accountability within the board between executive and non-executive directors. Remote mechanisms of (board) accountability include the routine reporting of performance, with associated meetings with analysts and fund managers, the potential threat of takeover and the labour market for senior executives. Within the assumptions of agency theory, the presence of independent non-executives within the board can then sharpen the effectiveness of these mechanisms through direct monitoring and the appropriate manipulation of rewards (remuneration) and sanctions (executive dismissal). Such mechanisms deliberately target executive's calculation of self-interest both positive and negative. They can be seen not merely to constrain, but to actually promote and encourage the very self-interested opportunism that they are seeking to align. But the regular presence of non-executives at board-related meetings has other, very different, potentials for accountability. In her recent Reith lectures, O'Neill (2002, p. 7) observes the paradoxical effects of transparency, suggesting that it can encourage people to be less honest, increase deception and displace trust with what she calls a culture of suspicion. In contrast to transparency, which involves one-way communication, she suggests the need for what she calls intelligent or real accountability based on substantive and knowledgeable independent judgement of an institutions or professionals work. Well placed trust, she suggests, grows out of active enquiry rather than blind acceptance. In traditional relations of trust, active inquiry was usually extended over time by talking and asking questions, by listening and seeing how well claims to know and undertakings to act held up (O'Neill, 2002, p. 7). When applied specifically to corporate governance, these ideas suggest that we should be alert not only to the limitations of remote transparency and the deception it may unintentionally promote, for example, share-price management at Enron, but also to the positive potentials for non-executives to create intelligent accountability within the board. The unique potential of face-to-face board accountability is that it offers an opportunity for active inquiry extended over time, for talking and asking questions, for listening and seeing whether what is said and promised is actually delivered. The non-executive in this respect is not merely the local representative of distant investor interests (or fears) but rather has the potential capability to do something qualitatively different.

Our interview-based research pointed to both the conditions that allow non-executives to create accountability, and some of the key attitudes and skills that this involved. Appendix 1 provides a full account of the purpose and conduct of this research. Briefly, the study was commissioned by Derek Higgs as a qualitative survey of directors of FTSE 350 companies. We conducted a total of 40 interviews with chief executives, chairmen, executive and non-executive directors, with each interview lasting between one and two hours. The interviews were in-depth and taped under assurance of confidentiality and anonymity for individuals and host companies.

Creating accountability in the boardroom In framing our report to Derek Higgs, we argued that the tension between control and collaboration in the academic governance literature is analogous to a perceived tension within boards between the control role of the non -executive and their strategic role. Since governance reform has typically followed governance failure, much of the focus of reform has been on developing the control role of the non-executives. In the UK, both Cadbury (1992) and later Hampel (1998) warned against the dangers of over-emphasizing the control role of non-executive directors at the expense of their strategic role. Cadbury describes the latter as the primary and positive contribution that non-executives can make to the leadership of a company. However, investors, working at a distance, have typically emphasized the control role, treating code compliance on issues of board structure and composition, particularly non-executive independence, as appropriate and adequate proxies for board effectiveness. What was immediately evident in our research was that the work of the non-executive is almost completely invisible to all but fellow board members and as a result poorly understood. Our own qualitative research was an opportunity to explore this invisible labour, and the conditions that support its effectiveness. In our research report to Higgs we argued that, whilst board structure and composition are visible from a distance, in our view, at best these condition, rather than determine, effectiveness. Actual board effectiveness, we suggested, depends upon the behavioural dynamics of a board, and how the web of interpersonal and group relationships between executive and non-executives is developed in a particular company context. Within these relationships we argued that the role of the non-executive is to both support executives in their leadership of the business and to monitor and control their conduct. But we then suggested that both aspects of the role can only be achieved through strong and rigorous processes of accountability within the board. Drawing from our research we argued that, in practice, such accountability is realized through a wide range of behaviours

challenging, questioning, probing, discussing, testing, informing, debating and exploring that draws upon non-executive experience in support of executive performance. Through such conduct, non-executives are constantly seeking to establish and maintain their own confidence in the conduct of the company: that is the performance and behaviour of the executives; the development of strategy; the adequacy of financial reporting and risk assessment; the appropriateness of remuneration and the appointment and replacement of key personnel. Our research interviews pointed to the potential, within the UK unitary board for a positive dynamic of relationships between executives and non-executives based on executive perceptions of the relevance and value of non-executive contributions. This encourages executives into a greater openness and trust, which in turn builds non-executive knowledge and confidence. By contrast, a negative dynamic is possible, in which executives come to resent or be frustrated by non-executive contributions that they perceive to be either ill-informed or inappropriate. This in turn can contribute to a dynamic of deteriorating board relationships, characterized by withholding of information and mistrust. As one executive described it: When a non-executive director displays insight and real knowledge and undertakes a role in a very serious fashion, asks brave questions, takes an interest in issues the directors know that they are going to be kept on their toes in relation to these issues, and the respect level rises. Then that person becomes an approachable person it is actually cumulative in terms of the benefits that can come from that it can go completely the other way because it is just, well, they don't know anything about the business, they had to ask the obligatory three questions and then the respect gets lost between the parties and you do not have a relationship that is built. It gets back down to what is the ability of the person and what is driving them to become engaged When that engagement actually adds value and can be seen to add value, then very quickly you get a dynamic where you improve the situation. In what follows, we want to offer an elaborated view of how the attitudes, experience and conduct of the non-executive can contribute to such positive and negative board dynamics. We will seek to do this by presenting just one section of our report to the Higgs Review; the section that dealt directly with the work of the non-executive. In the report itself this was preceded by an exploration of the different roles within the unitary board, and in particular of the role of the chairman, and followed by sections that explored the non-executives work in relation to strategy and the audit, remuneration and nominations committees.

In looking at the vital work of the chairman, we argued that a complementary relationship with the chief executive was at the heart of effective board relationships (Pettigrew and McNulty, 1995; Roberts, 2002; Roberts and Stiles, 1999). Such a relationship not only contributes directly to the performance of the chief executive through providing informed counsel and advice, but also gives the chairman the knowledge and understanding of the company that then allows him or her to create the conditions under which the non-executives can be effective. We argued that the chairman's work in managing the board, in building non-executive knowledge through induction, strategy events and various off-board meetings, in structuring the board agenda and ensuring the quality and timeliness of board papers and in chairing the meetings themselves, was pivotal in creating the conditions for non-executives to be effective. We then went on to discuss the work of the non-executive in some detail, and it is this part of our work that we will present here. The work of the non-executive director We structured our treatment of the attitudes, behaviours and skills of non-executive directors in terms of three couplets each designed to suggest an aspect of how, in creating accountability, non-executive conduct combines elements of control and collaboration. In relation to each couplet we sought then to differentiate between effective and ineffective non-executive conduct and briefly suggest how the chairman can intervene to support such effectiveness. Engaged but non-executive Non-executive directors will always be less knowledgeable about a business than their executive colleagues, but this disparity in knowledge will be particularly strong when an individual first joins a board, and when they are likely to be preoccupied with establishing their own credibility as a new non-executive. In part a non-executive's credibility will depend on the skills and experience that they bring with them to a board, but this will then have to be demonstrated through the way that an individual seeks to operate within the board. I found it just terribly important to watch what was going on quite a bit actually and not allow myself to get too agitated that I was not instantaneously making a contribution. If you don't do that, then I don't think you can know what is going on. I think it takes several months to get to the point where you have enough understanding of the particular circumstances of that company, the markets it is working in and all the other things, to be able to make a meaningful contribution. I think there is a great danger if you try and contribute instantly because everyone will

know that you cannot really understand the thing, so why are you so opinionated on things? Many non-executives felt that such learning about the people and the company could not be done simply within the confines of the boardroom. Instead, building one's knowledge of the company requires that the non-executives get to visit the plants, go to company events, have dinner with the executives or travel with them. Such informal contact with the executives both signals a non-executive's commitment and builds their knowledge in a way that is likely to increase the perceived credibility of their boardroom contributions. I think the concept of a non-executive sitting outside, knowing nothing about the business, acting as a policeman is completely wrong. They would not even know what to police. It seems to me important that non-executives do get involved in understanding the business as much as possible. I see directors, executive or non-executive, as equal under the law they are all equal. How can non-executives be remotely equal if they are sitting out here somewhere, without knowledge, sort of critiquing what is happening. Without knowledge critique is impossible. As this non-executive perceptively points out, building a good knowledge of the business is a condition not only of their credibility with executives, but also the only possible basis upon which they can feel able to critique what executives are doing. Whilst the credibility of a non-executive depends in part on the knowledge they bring to and then acquire about a particular company, it also depends crucially on how they then use that knowledge. The value of past or current executive experience elsewhere will be almost entirely negated if, as a non-executive, an individual seeks to play an executive role. Our research offered numerous examples of non-executives failing to understand their essentially non-executive role. It is one thing to challenge; it's another thing to be a bloody nuisance. We've had a series of difficulties with people who've come from executive roles straight into being a non-executive. It actually takes time for people to realise they're not in charge of making the decisions. One of the major challenges of the non-executive role is that executives prefer non-executives with past or current executive experience, but they then need them to be able to draw upon that experience without seeking, as a non-executive, to assume an executive role. Second-guessing or over-involvement in executive decisions creates a destructive friction between executives and non-executives. Some suggested that non-executives should ideally be people who are already

satisfied with what they have done, because then they find it easier to be a contributor rather than an active player. The chairman is vital to such non-executive engagement in a variety of ways. Who is selected and, in particular, an appraisal of their attitudes and commitment to the role, is obviously vital. It is the chairman and company secretary who then facilitate a non-executive's exposure to and knowledge of the business. The chairman also establishes the expectations he or she has of non-executives. It may be that problem non-executives have to be replaced. However, it is also possible for the chairman to intervene to foreclose destructive boardroom behaviour from one of the non-executives. When I was an executive director we had a pretty powerful set of non-executives. One was terribly hands on The chairman told me that he'd taken him aside and said look, you're a non-executive. If you want to run the business, do the job, but don't sit outside and try to do it, just ask them. Challenging but supportive Whilst strong non-executive engagement in a company serves to build an individual's credibility both with executives, and in their own mind, as a non-executive your knowledge of a company will never match that of your executive colleagues. However, what a non-executive can bring to the relationship is the objectivity that their relative distance from day-to day matters allows, along with the experience and knowledge acquired elsewhere. The key non-executive skill is to draw upon this objectivity and experience as the basis for questioning and challenging the executive. Such questioning from a position of what will always be relative ignorance requires the courage to speak out or make an issue of something. Whilst you need to understand and learn the business, actually there is an awful lot of sticking to your last. It is asking the questions and feeling stupid at times asking the questions as you go into a business, you are not going to know everything, you can never learn everything, but don't sit there dumb. If you think there is something that just does not sound right, try and open it up. You have to be brave and wilful enough to do it In practice, such experienced ignorance can be a very valuable resource for a board, but only if a non-executive risks speaking out; as one non-executive put it just by asking the idiot-boy questions you can really add value. Only with such active questioning does the non-executive bring his or her experience to bear on the conduct of a company. The question then elicits a response in the executive.

The first question I asked was to challenge the executive of a particular business because I did not think it was performing very well. A simple question I asked was why aren't you being reviewed and why aren't you performing. That basically meant that he came to the board meeting and presented his company and his performance and track record. We then had site visits to inspect what he was doing and why, and he is here tomorrow afternoon to go through his next year's plan and why he thinks that this will actually achieve and rectify what I believe is a very poor performance. So he has taken the issue very seriously, he is trying to convince me, and I am very willing to listen, as to why what was a very poor performance will get better and how it will. I take that as a serious response to a couple of questions at a board. The above offers a very direct example of the effectiveness of board accountability; of asking questions and the actions that can follow directly from this. The response to a question can itself be very informative for all the non-executives. Questioning can not only address specific concerns about executive performance, and reveal much more than is perhaps intended about executive attitudes, it can also begin to set new norms and standards for executive conduct. Reflecting on the non-executive involvement in a spectacular fall in the fortunes of a company, one director lamented that: We under-estimated the severity of the problems, frankly One generic point is being much tougher in getting precise information at the board which indicated that you really knew what was going on in the business, and not merely accepting as a non-executive that this pile of paper that came every month was good enough. Without appropriate information it is impossible for non-executives to develop a confidence that management are focused on the most appropriate indicators of business conduct and performance. When compared with attempts to second -guess the executive, the skilful questioning of the executive can be seen to be both far more penetrating and demanding. Questioning accepts executive authority, but then insists upon the responsibility that goes with this by asking what is being done and why, and how performance will be measured. The response can both reassure the non-executives as to the competence and probity of the executive and stimulate both reflection and actions that contribute to more effective executive performance. What is possibly the most important aspect of the skill of such questioning is the ability to do it in a manner that is felt by the executives to be both helpful and supportive. Our research interviews suggest that it is this combination of informed challenge and support that executives most desire and value in the contribution of non-executives.

My starting point was with a chap who was a non-exec director of [company], we would put up papers, whether it was an acquisition or an investment or whatever, and he was incisive in quizzing us and picking holes in it. You had the position where you really could not be woolly with what you presented. He would go for it. Yet having answered the questions satisfactorily, he was as supportive as hell in getting to the next stage of helping you in any way. The corollary of the positive effects of this skilful combination of challenge and support is the negative impact of the ill-prepared non-executive. It is extremely frustrating when you are an executive and you are presenting something. You get asked all these questions that, if they had read the report and board papers, they would have known the answers to. Similar negative effects in the minds of the executive can be created by questions that may be informed but are posed in an unskilled manner. Likewise non-executive credibility can suffer if questions are unbalanced. I have found that the least successful people on boards are those who come with too narrow experience. The marketing expert, the people who are great experts at PR, some peculiarly narrow retailer of property, they cannot get out of their own box and therefore all their questions reveal their lack of context for the wider issues. Such ineffective questioning by non-executives can then begin to feed what we earlier described as a negative dynamic of board accountability in which executives become frustrated, and in response, seek to minimize the role of the non-executives by hiding or withholding information. It meant that inevitably the board meetings were not open; people would hold things back and be defensive. Again the chairman is vital in supporting such non-executive challenge in support of executive performance. Their own conduct does much to set the culture of the board. Beyond this, then their greater involvement and exposure to the chief executive and executive directors mean that they can play a vital role in identifying and focusing issues that require non-executive attention. This is something that, until you start being on boards, you don't really appreciate. The chairman is in a completely different position from other independent directors and it is his job to make sure that issues that are important are brought to his attention and from his attention to that of the whole board. Both the quality and timing of board papers and the organization of the agenda create the space for effective challenge. The chairman can also ensure that a non-executive challenge is followed-up by executives rather than ignored. Periodic

appraisals of board performance allow the chairman to get feedback on his or her own performance as well as provide an opportunity for the chairman to discuss the contribution of individual non-executives. Independent but involved I think there is a skill in having a relationship where you are independent of the executives and have to be, but not so detached that they see you as somebody who is there, distrustful. It would be different if something goes materially wrong. You then have to change your view, you have to be willing to wade in, and sometimes you have to wade in very quickly. But to get the right quality of information, which is not always the figures and things, but really a sense of, what is building up, you need to get people to open out, what problems do you foresee without being jumped on. That is quite good, to be able to draw people out without getting cosy to them or sacrificing your independence. Where non-executives are felt to be engaged but clear about their non-executive role, and can actively challenge, but in a way that is felt to be supportive of executive performance, then over time there is likely to be a change in the culture of the board such that the independence of non-executives is viewed not as a threat or criticism, but as a positive resource that executives can draw upon to support their performance. Whilst for distant investors, independence is seen primarily as a protection against the potential for executive capture of non-executives, within the context of processes of accountability within a board, independence has a variety of other meanings. In part, independence is about the ability, as an outside director, to see things differently. I think you do have the advantage of seeing things instantly as a non-executive. It is a little bit like the ageing process. You look at yourself every day in the mirror and you never get older but, if you only see yourself once every ten years, you have definitely changed. I think the executive who lives day by day sometimes cannot see the problem in the same way that you cannot see that your house has not been redecorated for a long time. But the non-executives quite often have that vision of being able to see something in a flash rather than be involved in bits, seeing the wood and not the trees. As a non-exec, you can discern whether there is a proper succession plan, things like that. The way people present themselves and speak, the quality of the papers that are presented to non-execs, all those things are key component parts of assessing what kind of an outfit you have joined.

The experience that a non-executive brings, born of extensive past experience elsewhere, along with their distance from the day-to-day affairs of the company, allows him or her to offer a different perspective from executives on what they are doing, or planning to do. Over time, a non-executive also begins to acquire a deeper familiarity with a company and its executives, and their ways of working, which can then be usefully compared with their experiences elsewhere. Within board processes of accountability non-executive independence is, then, typically understood in terms of retaining an independence of mind and the confidence to exercise it in boardroom discussions. Perspective, questioning, testing the usefulness of the board forum to me in terms of how I do my job is to get perspectives from these guys who have between them a very wide range of experience, to subject my thinking to test by them. Whilst from a distance independence can be imagined as requiring that a non-executive remain aloof and suspicious of the executives, in practice it can come to be seen as a valuable resource for executives, and provide them with clear incentives to make as full a use as possible of the different views and experiences that non-executive independence allows. This in turn encourages the executive into being entirely open with the non-executives in order to maximize the potential value of their input, and this openness itself builds non-executive confidence. Openness is a major league issue. Do you feel you are being offered what they think you would like to have rather than what you are looking for? You have a feeling that you ought to be asking something around a subject. The good guy will answer your question and say but actually what you need to know is and you should have asked that. The chief executive I worry about is the one who just answers the question, because he has probably managed to avoid something a little nasty. For those we interviewed, the level of openness was one of the key determinants of the quality, perceived value and indeed enjoyment of boardroom debate. Rather than a stiff and formal appraisal of executive proposals by non-executives, people described debate and dialogue motivated by a shared concern to make the best possible decisions for the company. The way we work when we reach conclusions at the board is that we don't distinguish between there is the camp of non-executives and there is the camp of executives and actually they are somehow confrontational by which one is trying to supervise or control the other. It is a real collective debate whereby you have both executive and non-executive directors expressing their opinion or asking questions

about a certain concern. I think this is where I see the biggest contribution of a non-executive director. You could not possibly get that from within the company. Part of the quality of such debate is that the interplay of different skills and perspectives amongst different members of the board can itself produce new perspectives that offer creative solutions to particular dilemmas. The best views often come out of dialogue. Maybe you have something latent within you. You talk about it and then suddenly you see a different part of it. Such collective and creative thinking on a board is perhaps rare, but is one of the potentials of the willing subjection of executive thinking to the challenging scrutiny of independent non-executives. Independence under such circumstances is not an independence from executives, but rather exercising an independence of mind in support of executive and company success. In bad times, non-executives can support executives with suggestions and advice about how to weather a storm. In good times, they can act as a guardian against executive exuberance. Non-executives should be supporting the chief executive. They are part of the team. They should feel a corporate pride in the success of the business. They should feel part of a business that is operating to the highest standards and has a good place in its industry and, if it does not, they should be helping to make sure that it does improve itself as it goes forward and is successful. Enacted in the form of suspicion, independence emphasizes the division between executive and non-executive directors, and possibly heightens this. Enacted as a resource for the success of the company, independence merely strengthens the capabilities of the unitary board in dealing with the challenges and risks that are always associated with decision-making. Through such dialogue executive thoughts, aspirations and actions are tested and refined, and more fully informed. Management can then be pursued by executives with a clearer understanding of the risks and with an increased confidence. The paradox of this close involvement and engagement of non-executives is that they can both contribute directly to the quality of executive decision-making, but can also ensure that any weakness in the executive will quickly become visible to the non-executives. Far from being an impediment to non-executive independence, involvement and engagement inform its exercise. At any point in the process, active non-executive engagement, challenge and involvement, through the response it elicits from the executives, can begin to sow the seeds of doubt in non-executive minds as to the capabilities of executives. Over time, doubts can either be satisfied or instead begin to crystallize into a conviction that something needs to be addressed. Here, informal meetings with other non-executives and the chairman and,

if appropriate, the chief executive, can be used to check out perceptions and begin to plan a course of action. When something starts to break, then you have to decide where you are going. I identified a like-minded non-executive. I think this is what you have to do. You have to develop a group, a team, a gang, whatever you call it, because you cannot raise these things out cold in the open. I think non-executives have to be prepared to devote a huge amount of time when a problem comes along. The difficulties associated with such non-executives moves will vary depending on the situation and the particular individual who has become the object of their concerns. Given the pivotal role of the chairman, forcing change in this area may require the careful construction of an alliance between the executives and non-executives. Moving against an executive director will be easier than addressing concerns about the performance of a chief executive. However, there are occasions when the concerns of a particular non-executive find no resonance in the minds of the other non-executives and the chairman. An individual can then be faced with a much more difficult decision of whether or not to resign. What we have sought to describe in the above is how engagement and the exercise of constructive independence can serve to forestall many issues that, if left unchallenged, would otherwise have led to such a point. Within the boardroom the chairman can be alert for signs of non-executive disquiet, and do much to encourage or insist that such concerns are aired. Less formal off-board meetings with non-executives also serve as a vital space where background concerns can begin to be shared and discussed amongst the non-executives, and if appropriate, the chief executive. Where the chairman seeks to dominate discussions, or allows the executive to determine the agenda, much of the potential for the exercise of non-executive independence is inevitably foreclosed.

Governance research and reform: the implications of our study Governance research Forbes and Milliken (1999, p. 502) state that understanding the nature of effective board functioning is among the most important areas of management research. In this paper, we have presented some of the interview data through which we came to understand the role and effectiveness of the non-executive director in terms of the conditions and conduct that support their ability to create accountability within a

board. In what follows, we want to reflect on some of the key theoretical, methodological and policy implications of this work. Relative to the assumptions of both agency and stewardship theory, we believe that there are a number of merits to our empirical and theoretical focus on the conditions and consequences of processes of board accountability. We believe that describing the work of the non-executive in terms of creating accountability brings us much closer to the conduct and practices questioning, probing, challenging, inter alia through which they can be effective. Rather than an awkward switching between control and collaboration, skilful accountability combines elements of both. At least in the minds of those we interviewed, it was impossible to exercise effective control without a concomitant understanding of the business and its strategy. Furthermore, this suggests that the practical challenges associated with creating and sustaining accountability within the board are not well served by conceptual distinctions between the control, service and resourcing roles of the board. Where agency theory assumes self-interested opportunism as a given of human nature, and from this reads the necessity for monitoring and control, a focus on accountability points to a more complex view of causality, in which executive motives are themselves conditioned by governance processes. From this perspective, share-options and threats to executive tenure, for example, feed the very self-interested opportunism that they assume, and an over-emphasis on the control role of non-executive directors may promote the very self-defensiveness and deceit, the consequences of which it is apparently seeking to prevent. But as Sundaramurthy and Lewis (2003) usefully suggest, such self-reinforcing processes are not to be avoided by simply reversing assumptions, by swapping agency assumptions with those of stewardship theory. Where stewardship theory predicts the benefits of CEO/chair duality for the clarity and authority of executive leadership, our research suggests that accountability within a complementary relationship between a separate chief executive and chairman can support executive leadership but only if the chairman has the discipline to remain non-executive, and the knowledge to be of value to the chief executive. Separating the roles can also mean that the chairman has both the time and inclination to create the conditions for other non-executives to be effective. Our research suggests that executive openness was a source of confidence and trust for non-executives, and that these were in turn encouraged by executive perceptions of non-executive engagement and involvement in support of executive and company performance. But such a collaborative climate does not imply a passive or automatic trust. Rather, it is the product of a certain style of informed intelligent

accountability created by the non-executive. Given the powerful incentives that promote executive self-interest, non-executive involvement their identification with the success of the company and the accountability that flows from this, can be seen to be an essential support to the pro-organizational motivation of directors. In our view, distrust or trust in executives is not to be assumed ex ante, but is rather to be understood as the condition and consequence of continuous processes of accountability. At any moment in time there is likely to be both trust and distrust in different aspects of executive functioning, which is precisely what then focuses the attention and action of non-executives. We support the view that the concepts of trust and distrust are not bipolar constructs (Lewicki, McAllister and Bies, 1998); in other words, the opposite of trust is not distrust, and vice versa. The implication of this separation is that the possibility exists for the coexistence of trust and distrust: social structures appear most stable where there is a healthy dose of both trust and distrust, a productive tension of confidences exists (Lewicki, McAllister and Bies, 1998, p. 450). Framing the non-executive director's work in terms of accountability respects the complexity of relationships within groups and the multifaceted nature and demands of board work, which are often characterized by uncertainty, incomplete information and interdependency, and where patterns of trust and distrust are often shifting. Our research also extends discussion of accountability per se within governance research. Accountability within this tradition has normally been used synonymously with monitoring or, in some cases, compliance. This narrow approach suggests a hierarchical view of relationships, with executives scrutinized by the non-executives who determine and decide appropriate categories of conformance. Our use of the term accountability has a wider scope, and is intended to signal the potential for lateral processes of learning (Roberts, 1996), whereby instead of the defensive routines frequently provoked by traditional approaches to being called to account, open dialogue can promote reciprocal understanding and creative thought. Accountability here is not concerned solely with logics of appropriateness (MacIntyre, 1980) or justification (Rorty, 1980) but also with creating the conditions for dialogue through which the often tacit assumptions that inform plans and proposals are challenged, developed and refined (Bohm and Peat, 1989; Senge 1990). Our work responds to recent calls for a better understanding of the inner workings of boards and the potential value of opening up the black-box of board relationships and dynamics (Daily, Dalton and Cannella, 2003; Hermalin and Weisbach, 2003). Pettigrew and McNulty (1995, 1998) previously argued that non-executives need to mobilize power and influence in order to realize intended

effects. In line with this, we have argued that independence is only significant within a board in the form of a willingness to exercise independence of mind in relation to executive strategy and performance. Mere numbers of independent non-executives achieves nothing; the non-executives must be active in order to be effective (Keasey and Hudson, 2002; Millstein and MacAvoy, 1998). A strong normative implication of this is that the advocacy by institutional investors, policy advisors and the business media of greater non-executive independence may be too crude or even counter-productive. Our findings suggest that it is a non-executive's skill in exercising independence of mind that is the key to effective board behaviour. Where Forbes and Milliken (1999) model board dynamics in terms of the relation between task effectiveness and cohesiveness, and Sundaramurthy and Lewis (2003) model the self-reinforcing and self-correcting tensions in control and collaboration, our research points to more mundane drivers of positive and negative board dynamics. Both executive perceptions of the relevance and value of non-executive interventions, and indeed the non-executives' confidence in intervening, depend upon their perceived knowledge and understanding of a company. In other words, the exercise of power and influence that comes with the position of non-executive is critically conditioned by their knowledge of the company. Effectiveness also depends upon how such power is mobilized. Here we have suggested that, except in circumstances where confidence in the executive has been lost, challenge and questioning getting the executive to account for their conduct is the most effective means of intervention and influence. Such challenges acknowledge executive authority and responsibility whilst subjecting executive thinking and performance to test and scrutiny. Here, a culture of openness ensures that the fullest possible use is made of the non-executive in support of executive performance. It also ensures that, should trust in the executive be lost in the course of such active inquiry, the non-executive is sufficiently engaged and involved to be willing to confront this. Our focus on processes of accountability also has the potential to offer a different understanding of the dynamics of other governance-related relationships. The challenge that agency theory sets for governance mechanisms is to find ways to align executive self-interest with those of owner principals. Within this theorization, the large institutional investors are treated as the principals. But, of course, in practice they are themselves agents of the ultimate beneficiaries in the case of Enron this included the employees' pension scheme. Seeking to align executive self-interest with investor interests through stock options risks too close an alignment between the interests of executives and fund managers as agents in share-price management (Kennedy, 2000; Useem, 1996). This coincidence of executive and fund manager

self-interest was arguably an important part of the Enron collapse (Bratton, 2002). Such potentials suggest that the interests of the principal in long-run wealth generation may be much more dependent upon the role of the non-executive than we imagine. The involved non-executive who identifies with the long-term success of the company may be vital as a check and balance to the self-interest of both executives and fund managers and indeed in our research interviews some chairmen and non-executives seemed to conceive of the value and importance of their work in this way. Understanding the proper relationship between board and investor accountability is an obvious and vital focus for future qualitative research. Whilst our research is clearly focused on the UK governance context, given the almost universal use of board structures as a central mechanism of governance our research potentially has a much wider relevance. Predictably, there was strong support from those we interviewed for the UK model of the unitary board, when compared to boards in the USA or Europe. The separation of the chairman's role from that of the CEO and the importance of the separate non-executive chairman in creating the conditions for non-executive effectiveness were seen as particular strengths of the UK relative to the USA. That UK boards have an equal balance of executive and non-executive directors was also seen positively, since this was held to give the non-executives greater exposure to the executives and the business strategy, and to make it less possible for executives to hide or withhold information from the board. The dominance and number of non-executives on USA boards, and the separation of management and supervisory functions in German two-tier boards were both seen as potential obstacles to what we have argued is an essential need for non-executives to have a strong involvement in strategy, if they are to be sufficiently knowledgeable about a business to be able to fulfil their control role. Methodologically, the key implication of our research concerns the value and indeed necessity for qualitative primary research on the dynamics of governance relationships. Whilst researchers remain wedded to the testing of theoretical models and assumptions against large quantitative data sets, they remain at a considerable distance from the object of their inquiry and, as a result, are inevitably obliged, as Pettigrew (1992) asserts, to make huge inferential leaps. In our view, for theory to go behind the backs of practitioners (Giddens, 1984) is to risk irrelevance or worse. This is particularly the case in relation to corporate governance, where agency theory has been highly influential in guiding governance reform, most notably in relation to the role of the independent non-executive. That their work within boards is completely invisible makes it all too easy for theory to impose its own assumptions in a way that is practically counter-productive or indeed destructive. Notwithstanding the partial and interested nature of the rationalizations offered by

directors of their experiences and conduct within boards, it seems foolish for theory to refuse to be informed by their experience and understanding. Governance reform We want now to look at how our research came to be embedded in the final Higgs Review, and on the basis of this, offer some reflections on the nature of governance reform. As might be expected, having submitted our report to Derek Higgs we were then very interested to see how our research would influence his final report. Judging by initial press reports of the key recommendations, our research appeared to have had little impact. What the press picked up on were the key structural recommendations; the proposed increase in the number of independent non-executives to 50% excluding the chairman, an absolute separation of the role of chairman and chief executive, the enhanced role for the senior independent director both within the board and in relation to shareholders and the specification of a normal term of six years for non-executive directors. Superficially at least, these could all be read in terms of a further strengthening of the traditional control role of the board. However, a close reading of the text of the report something that Derek Higgs recommended to his critics on a number of subsequent occasions suggested that the implications of our own process-oriented view of board effectiveness had indeed been recognized in the report, and were evidenced by its innovative focus on board relationships and behaviours. Numerous new proposed provisions in the code seek to maximize the potential for the sort of positive dynamic of accountability that we have described above. Evaluating the balance of skills, knowledge and experience on the board, in advance of making new appointments, is an obvious but frequently neglected part of ensuring that the right people are appointed as non-executives. Similarly, provisions that encourage clarity about the nature of likely time commitments, and an individual's ability to meet these, get at one of the key conditions under which a chairman, or non-executive is, in practice, able to contribute to a board. Lastly, recommendations about induction and professional development are directed at ensuring that non-executives are, and remain, sufficiently knowledgeable about the company on whose board they serve. However, even with careful selection, induction and development, relative to the executive, the non-executive will always be at a disadvantage. Here the Higgs Review emphasizes the pivotal role of the chairman in creating the conditions for non-executive effectiveness. The chairman's much greater degree of involvement

with the chief executive and executive team, and the knowledge and understanding that comes with this, is precisely what allows them to focus the efforts, energies and attention of the non-executive. The proposed role for the chairman in arranging a regular board evaluation, and acting upon it, ensures that there is an opportunity for board members constantly to seek to refine the effectiveness of both their individual behaviour and their reciprocal relationships. In seeking to more closely define the work of the non-executive, the Higgs Report followed our research in emphasizing their role in questioning and challenging the executive; that the non-executive should inquire and probe and can only do so on the basis of an adequate knowledge of the company and its markets. Again following our report, it suggests the dangers of over-emphasizing either their control role or their role in strategy. However, what Higgs did not do was to follow our singular definition of the role of the non-executive in terms of creating accountability in the board; informal discussions suggested that the word accountability was felt to have too many associations with the control role. Instead, Higgs followed his predecessors, Cadbury (1992) and Hampel (1998), in suggesting only that the role of the non-executive is both to support executives in their leadership of the business and to monitor and supervise their conduct. The response of directors and investors to the draft review of the Higgs Report (Higgs, 2003) was decidedly mixed. Debate about boards was, and remains, prone to a polarized definition of the role of the non-executive in terms of, on the one hand, control and monitoring on behalf of investors, and, on the other hand, of support for the executives in the strategy process. Framed in these terms, governance reform will almost inevitably produce a clash between the perceived interests of executives and investors, and the clash itself is then taken as evidence of the reality of the assumed conflict. But, as we have sought to describe above, non-executive effectiveness depends upon the ability to create strong and rigorous accountability in relation to both board performance and strategy. Close involvement in strategy is precisely what gives non-executives the knowledge upon which they can then critique executive performance. Rather than frame governance reform in terms of an assumed fight over the (divided) loyalties of the non-executive, we believe that it is better understood in terms of two distinct but related objectives. First, reform must seek to enhance the effectiveness of the direction and control of companies. Second, it must seek to create confidence, particularly in investors who operate at a distance from the boardroom, as to the effectiveness of what goes on in boards. Much of the controversy around the Higgs Review, and indeed earlier reforms, we suggest, arises not from an inherent conflict of interest between investors and executives, but rather from a tension between

what serves actual effectiveness and what supports distant perceptions of effectiveness. Distant investors draw confidence from changes to the structure and composition of boards that are visible from a distance and can be treated as proxies for board effectiveness, for example, increased numbers of formally independent non-executives. However, actual effectiveness, as Higgs suggests (2003, p. 33), requires a culture of openness and constructive dialogue in an environment of trust and mutual respect as a prerequisite for an effective board. This research for us has highlighted a generic tension and danger with governance reform. Since reform typically follows failure, the knee-jerk reaction is often calls for a yet further strengthening of the independence and control exercised by the non-executives over the executives. More non-executive and more independent non-executives here are grasped as visible sources of confidence to distant investors (and governments concerned with reforming national systems of corporate governance). But the danger is that such visible reassurance is pursued at the expense of actual effectiveness where, as Drucker (1974) long ago noted, controls can paradoxically weaken control. Governance reform must seek both to enhance actual effectiveness and distant perceptions of effectiveness, but actual effectiveness should not be sacrificed for the sake of distant perceptions. Our hope is that our own research has at least begun to identify some of the keys conditions and behaviours that promote effective and intelligent accountability within boards.

Appendix Appendix 1: The research study The Higgs Review was an independent review of the role and effectiveness of non-executives led by Derek Higgs, on behalf of the UK government. It commenced in June 2002 (Higgs, 2002), thereafter, a draft report, informed by the research reported here (McNulty, Roberts and Stiles, 2003), was produced in January 2003 (Higgs, 2003) which culminated in revisions to the UK combined Code on Corporate Governance in July 2003 (Financial Reporting Council, 2003). UK-listed plcs are now expected to comply or explain their corporate governance in relation to the revised principles in the Combined Code. What follows is an account that describes the conduct of our research for the Higgs Review. The terms of reference for the Higgs Review were to lead a debate and make recommendations related to the role and effectiveness of non-executive directors. An initial consultation paper was issued by Higgs posing questions about the role of non-executive directors, their knowledge, skills and attributes, processes of selection, training and performance assessment (Higgs, 2002). Approximately 250 responses

were received from interested individuals and constituents. In addition, three background pieces of research were commissioned to inform the review. Hemscott Group supplied data profiling the population of non -executive directors according to information on the size, composition, and membership of boards (and their associated committees) of the 2200 listed UK plcs. MORI Social Research Institute surveyed 605 chairmen, non-executives and executive directors of UK-listed companies about the role of the non-executive director, including data about recruitment and induction processes and performance appraisal processes at board level. The study reported in this paper was commissioned as a qualitative survey of FTSE-350 directors. Following a successful tender, we were asked to undertake in -depth interviews with executive and non-executive directors, to throw light on the role and effectiveness of non-executive directors. During August to October 2002, we conducted 40 interviews with chief executives, chairmen, executive and non-executive directors, each lasting between one and two hours. The interviews were in-depth and tape-recorded under assurance of confidentiality and anonymity for individuals and host companies. Respondents were selected after identifying all board members in the FTSE 350. Random selection of respondents occurred within the role categories of non-executive director, chairman, chief/other executives. Tables 1 and 2 below provide further details about the respondents, their roles, board positions at the time of interview and industry associations. Director type Non-executive directors Chairmen Chief executives Chairman and CEO combined Executives Total Of whom: Male Female Table 1. Respondents by role Industries Number 37 3 Number Interviewed 16 14 4 1 5 40 No of NED positions held 54 23 4 4 85

Director type Financial services Retailing Electronics/engineering Consultancy Leisure/entertainment Transportation/logistics Oil/energy Pharmaceuticals Food manufacturing Chemicals Extraction/mining Publishing Table 2. Respondents by industry

Number Interviewed 9 8 4 3 3 3 3 2 2 1 1 1

No of NED positions held

The nature of management research is an enduring debate in the academic community, and addressing the relevance gap between research and practice is a central concern (Aram and Salipante, Jr, 2003; Hambrick 1994; Hodgkinson, 2001; Pettigrew, 1997; Tranfield and Starkey, 1998). Our participation in the Higgs Review was an opportunity both to research a phenomenon largely invisible and inaccessible to many (Daily, Roberts and Stiles, 2003) and contribute academic research to the practice of corporate governance reform (Higgs, 2003). Furthermore, the research took us beyond the academic community to work on the co-production of management research with Derek Higgs and a small team of civil servants drawn from Her Majesty's Treasury and the UK Government's Department of Trade and Industry. The purpose and focus of our work was informed by the problem (as set by Higgs and his team), our own research ambitions and our contact with the civil servants. In keeping with scholarship that seeks to bridge relevance and rigour, our conceptual predispositions (Aram and Salipante Jr, 2003) meant that we approached the research with a view that academic and policy debate was limited in its understanding of the intervening processes that link board characteristics to board outcomes. We also observed our colleagues in the Civil Service seeking to generate generic prescription whilst being distant from the phenomena in question.

Expectations that this research would inform imminent policymaking further fuelled our desire to look beyond board structure and demography to understand why and how non-executives perform their work. Our theoretical and empirical challenge involved making sense of the work of non-executives for the wider audience by crafting an image of organizing (Weick, 1999) (or in this case governing) that captured something of the lived experience of boards and directors and the conditions under which they make an effective contribution to corporate governance. Our data gathering thus covered behaviours, relationships and meanings associated with the work of non-executives in the contexts of boards and host companies. Within the remit, tight timescale and reporting obligations associated with the Higgs Review, we had considerable discretion to conduct the research in accordance with our methodological inclinations, namely an inductive, qualitative research approach examining the work processes and relationships of company directors. We shared the fieldwork evenly amongst us as a research team of three using interview schedules that we developed amongst ourselves with input from civil servants. Specifically, the schedules were designed to enable conversations with directors about the contribution of non-executive directors to strategy development and implementation, their work on remuneration, audit, nominations board sub-committees, and their role as a source of confidence to both investors and other stakeholders. We also sought to understand the various factors that influence their ability to work effectively as non-executive directors. Using public data about respondents and their host companies and boards, we were prepared to ask about critical decisions and events that involved the board. All interviews were transcribed and content analysed to examine themes and patterns across the data. The compressed timescale meant that we did not have the luxury of moving back and forth between data collection and data analysis over a lengthy period. Rather, in these circumstances we relied on our regular conversations and other exchanges, and meetings with the civil servants to consider the progress of fieldwork and share perspectives on the fieldwork and the nature of the data being collected. Over time, our data collection and analysis evolved towards making the interplay of roles and relationships on boards a central focus. At the end of the interview programme, we shared all interview transcripts and coded data using an agreed framework. Amongst the 14 major coding categories was one about roles on boards, with sub-categories for chairman, chief executive, executive director and non-executive director. Other categories were: context; chair/chief executive relationship; non-executive/executive relationships; non-executive effectiveness; contributions of non-executives to strategy; audit; remuneration and nominations; independence; conditions for effectiveness and ineffectiveness; selection and board

sub-committees. Using this coding structure we collectively managed to build up a picture of the work and conditions of boards, and the behavioural dynamics, exchanges and relations (inside and outside the board and host firm) that lent themselves to what we subsequently conceptualized as creating accountability. On reflection, the tension between rigour and relevance in this research has been mediated by the conditions, conduct and organization of the study. As a research trio working to produce a single report, we engaged in a process akin to triangulation as we subjected our data collection, analysis and initial drafting to the scrutiny of each other. In addition, we reported verbally and in draft report form to the review team which led to some re-drafting of our initial report. Our transcripts were available to respondents to follow up and comment upon. Requests for copies of transcripts were received and responded to, but no additional comments or amendments were requested by our respondents. After submission, but before publication of the report, we presented and discussed our findings with approximately 20 directors who had not been involved in the study. Thereafter, our draft report became a public work subject to commentary by others including respondents and other interested individuals and groups. Reactions of these various interested parties, including our collaborators (Higgs, 2003) and media commentators (Dickson, 2003) suggest that our representation of the work and experience of non-executives on boards was seen to be relevant and helpful to their endeavours to debate and act in relation to boards and corporate governance reform.

References

o o o o

Aram, J. D. and P. F. Salipente, Jr (2003). Bridging Scholarship in Management: Epistemological Reflections, British Journal of Management, 14 (3), pp.189205. Direct Link: Abstract PDF(165K) References

Web of Science Times Cited: 13 o Access Full Text Berle, A. and C. G. Means (1932). The Modern Corporation and Private Property. Macmillan, New York. o Access Full Text

Bohm, D. and F. Peat (1989). Science, Order and Creativity. Routledge, London. Access Full Text Bratton, R. (2002). Enron and the Dark Side of Shareholder Value, Tulane Law Review, 76 (5 & 6), pp. 12751362. Access Full Text Cadbury, A. (1992). The Financial Aspects of Corporate Governance, Report of the Committee on the Financial Aspects of Corporate Governance. Gee & Co, London. Access Full Text Czarniawska-Joerges, B. (1996). Changing Times and Accounts: Tales from an

Organizational Field. In R.Munro and J.Mouritsen (eds), Accountability: Power, Ethos and the Technologies of Managing, pp. 307327. International Thompson Business Press, Oxford. o Access Full Text Daily, C., D. R. Dalton and A. A. Cannella (2003). Corporate Governance: Decades of Dialogue and Data, Academy of Management Review, 28 (3), pp.371383. o Web of Science Times Cited: 92 Access Full Text Davis, G. F. (1991). Agents Without Principals? The Spread of the Poison Pill Through the Intercorporate Network, Administrative Science Quarterly, 36, pp.583613. o CrossRef, o Web of Science Times Cited: 267 Access Full Text Davis, J. H., F. D. Schoorman and L. Donaldson (1997). Towards a Stewardship Theory of Management, Academy of Management Review, 22, pp. 2047. o CrossRef, o Web of Science Times Cited: 140 Access Full Text Demb, A. and F. F. Neubauer (1992). The Corporate Board. Oxford University
o

Press, New York. Access Full Text Dickson, M. (2003). The Forces Pushing Sir Ken and Sir Peter Closer Together: Higgs Report, Financial Times, January 25/26, p. 13. Access Full Text

Donaldson, L. (1995). Anti-Managerial Theories of the Firm, Cambridge,

Cambridge University Press. o Access Full Text Donaldson, L. and J. H. Davis (1991). Stewardship Theory and Agency Theory: CEO Governance and Shareholder Returns, Australian Journal of Management,16, pp. 4964. o CrossRef Access Full Text Donaldson, L. and J. H. Davis (1994). Boards and Company Performance: Research Challenges the Conventional Wisdom, Corporate Governance - An International Review, 2, pp. 151160.

Direct Link: o Abstract o PDF(1066K) o References o Access Full Text Douglas, M. (1986). The Social Preconditions of Radical Skepticism. In J.Law (ed.), Power, Action and Belief: A New Sociology of Knowledge?, pp. 6887. Routledge & Kegan Paul, London. o Web of Science o Access Full Text Drucker, P. (1974). Management: Tasks, Responsibilities, Practices. Butterworth-Heinemann, Oxford. o Access Full Text Eisenhardt, K. L. (1989). Agency Theory: A Review and Assessment, Academy of Management Review, 14, pp. 5774. o CrossRef, o Web of Science Times Cited: 829 Access Full Text Fama, E. F. (1980). Agency Problems and the Theory of the Firm, Journal of Political Economy, 88, pp. 288307. o CrossRef, Web of Science Times Cited: 1293 Access Full Text Fama, E. F. and M. C. Jensen (1983). Separation of Ownership and Control, Journal of Law and Economics, 26, pp. 301325. o CrossRef, o Web of Science Times Cited: 1422
o

Access Full Text Financial Reporting Council (2003). Combined Code on Corporate Governance. Department of Trade and Industry, London. o Access Full Text Forbes, D. P. and F. J. Milliken (1999). Cognition and Corporate Governance: Understanding Boards of Directors as Strategic Decision-Making Groups,Academy of Management Review, 24, pp. 489505. o CrossRef, o Web of Science Times Cited: 108 Access Full Text Garratt, B. (1996). The Fish Rots from the Head. Harper Collins, London. Access Full Text Giddens, A. (1984). The Constitution of Society. Polity, Cambridge. o Access Full Text Greenbury, R. (1995). Directors Remuneration, Report of a Study Group Chaired by Sir Richard Greenbury. Gee & Co, London. o Web of Science Access Full Text Hambrick, D. A. (1994). 1993 Presidential Address: What if the Academy Actually Mattered?, Academy of Management Review, 19, pp. 1116. o CrossRef,
o

Web of Science Times Cited: 99 Access Full Text Hampel, R. (1998). Committee on Corporate Governance: Final Report. Gee & Co, London. o Access Full Text Hermalin, B. E. and M. S. Weisbach (1991). The Effects of Board Composition and Direct Incentives on Firm Performance, Financial Management, 20, pp.101112. o CrossRef, o Web of Science Times Cited: 188 Access Full Text
o

Hermalin, B. E. and M. S. Weisbach (2003). Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature, Economic Policy Review Federal Reserve Bank of New York, April, 9 (1), pp. 726. Access Full Text

Higgs, D. (2002). Review of the Role and Effectiveness of Non-Executive Directors: Consultation Paper. Department of Trade and Industry/HMSO, London. Access Full Text Higgs, D. (2003). Review of the Role and Effectiveness of Non-Executive Directors. Department of Trade and Industry/HMSO, London. Access Full Text Hill, S. (1995). The Social Organisation of Boards of Directors, British Journal of Sociology, 46, pp. 245278. CrossRef, Web of Science Times Cited: 19

o o o

Access Full Text Hillman, A. J. and T. Dalziel (2003). Boards of Directors and Firm Performance: Integrating Agency and Resource Dependence Perspectives, Academy of Management Review, 28 (3), pp. 383396. o Web of Science Times Cited: 91 Access Full Text Hodgkinson, G. P. (ed.) (2001). Facing the Future: the Nature and Purpose of Management Research Re-assessed, British Journal of Management, 12 , Special Issue, pp. S1S80. Direct Link:
o o o o

o o

Abstract PDF(41K) Web of Science Times Cited: 21 Access Full Text Janis, I. (1983). Groupthink: Psychological Studies of Policy Decisions and Fiascos. (2nd edition). Houghton Mifflin, Boston. Access Full Text Jensen, M. and W. Meckling (1976). Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure, Journal of Financial Economics, 3, pp.305360. CrossRef,

Web of Science Times Cited: 4988 Access Full Text Johnson, J. L., C. M. Daily and A. E. Ellstrand (1996). Boards of Directors: A Review and Research Agenda, Journal of Management, 22, pp. 409438. o CrossRef, o Web of Science Times Cited: 154

Access Full Text Keasey, K. and R. Hudson (2002). Non-Executive Directors and the Higgs Consultation Paper, Review of the Role and Effectiveness of Non-Executive Directors, Journal of Financial Regulation & Compliance, 10 (4), pp. 361372. o CrossRef Access Full Text Keasey, K. and M. Wright (1993). Issues in Corporate Accountability and Governance: An Editorial, Accounting and Business Research, 23 (91A), pp. 291304. o Access Full Text Kennedy, A. (2000). The End of Shareholder Value: the Real Effects of the Shareholder Value Phenomenon and the Crisis it is Bringing to Business. Orion, London. o Access Full Text Kesner, I. F. and R. B. Johnson (1990). An Investigation of the Relationship between Board Composition and Stockholder Suits, Strategic Management Journal, 11, pp. 327336. Direct Link: o Abstract o PDF(899K) o References
o

Web of Science Times Cited: 64 o Access Full Text Kesner, L. F., B. Victor and B. T. Lamont (1986). Board Composition and the Commission of Illegal Acts: An Investigation of Fortune 500 Companies, Academy of Management Journal, 29, pp. 789799. o CrossRef, o Web of Science Times Cited: 58 Access Full Text Kosnik, R. (1987). Greenmail: A Study of Board Performance in Corporate Governance, Administrative Science Quarterly, 32, pp. 163185. o CrossRef, Web of Science Times Cited: 162 Access Full Text Lewicki, R. I., D. J. McAllister and R. J. Bies (1998). Trust and Distrust: New Relationships and Realities, Academy of Management Review, 23, pp. 438458. o CrossRef,
o

o o

Web of Science Times Cited: 270

Access Full Text Lorsch, J. W. and E. MacIver (1989). Pawns or Potentates: The Reality of Americas's Corporate Boards. Harvard University Graduate School of Business Administration, Boston, MA. o Web of Science Times Cited: 1 Access Full Text Lynall, M. D., B. R. Golden and A. J. Hillman (2003). Board Composition from Adolescence to Maturity: A Multi-Theoretic View, Academy of Management Review,28 (3), pp. 416431. o Web of Science Times Cited: 45 Access Full Text MacIntyre, A. (1980). After Virtue. Duckworth, London. o Access Full Text Mace, M. L. (1971). Directors: Myth and Reality. Harvard University Graduate School of Business Administration, Boston, MA. o Access Full Text Mallette, P. and K. L. Fowler (1992). Effects of Board Composition and Stock Ownership on the Adoption of Poison Pills, Academy of Management Journal, 35, pp. 10101035. o CrossRef, Web of Science Times Cited: 87 Access Full Text McNulty, T. and A. M. Pettigrew (1999). Strategists on the Board, Organization Studies, 20, pp. 4774. o CrossRef, o Web of Science Times Cited: 67 Access Full Text McNulty, T., J. Roberts and P. Stiles (2003). Creating Accountability Within the Board: The Work of the Effective Non-executive Director. Department of Trade and Industry, London. Available at: http://www.dti.gov.uk/cld/non_exec_review.
o o

o o

Access Full Text Millstein, I. and D. MacAvoy (1998). The Active Board of Directors and Improved Performance of the Large Publicly Traded Corporation, Columbia Law Review,98 (5), pp. 12831321. CrossRef, Web of Science Times Cited: 50

Access Full Text Monks, R. and N. Minow (1991). Power and Accountability in the Boardroom. Harper Collins, New York. o Access Full Text O'Neal, D. and H. Thomas (1995). Director Networks/Director Selection: The Board's Strategic Role, European Management Journal, 13, pp. 7990. o CrossRef Access Full Text O'Neill, O. (2002). A Question of Trust: Lecture Four, Trust and Transparency. Reith Lectures, British Broadcasting Corporation, Radio 4, London. o Access Full Text

Pahl, R. E. and J. T. Winkler (1974). The Economic Elite; Theory and Practice. In P. J.Stanworth and A.Giddens (eds), Elites and Power in British Society, Cambridge University Press, Cambridge. Access Full Text Perrow, C. (1986). Complex Organisations: A Critical Essay. McGraw-Hill, New York. Access Full Text Pettigrew, A. M. (1992). On Studying Managerial Elites, Strategic Management Journal, 13, pp. 163182. Direct Link: Abstract PDF(1974K) References Web of Science Times Cited: 159 Access Full Text Pettigrew, A. M. (1997). The Double Hurdles for Management Research. In T.Clarke (ed.), Advancement in Organizational Behaviour: Essays in Honour of D.S. Pugh, pp. 277296. Dartmouth Press, London. Access Full Text Pettigrew, A. M. and T. McNulty (1998). Sources and Uses of Power In and Around the Boardroom, European Journal of Work and Organisational Psychology, 7(2), pp. 197214. Access Full Text Pettigrew, A. M. and T. McNulty (1995). Power and Influence in and around the Boardroom, Human Relations, 48, pp. 845873. CrossRef, Web of Science Times Cited: 62

o o o o o

o o

Access Full Text Pfeffer, J. (1972). Size and Composition of Corporate Boards of Directors: The Organization and its Environment, Administrative Science Quarterly, 17, pp.218228. o CrossRef, o Web of Science Times Cited: 277 Access Full Text Pfeffer, J. and G. Salancik (1978). The External Control of Organisations: A Resource-Dependence Perspective. Harper & Row, New York. o Access Full Text Pye, A. (2001). A Study in Studying Corporate Boards over Time: Looking Backwards to Move Forwards, British Journal of Management, 12, pp. 3346. Direct Link: o Abstract o Full Article (HTML) o PDF(138K) o Web of Science Times Cited: 8 o Access Full Text Pye, A. (2002). Corporate Directing: Governing, Strategising and Leading in Action, Corporate Governance: An International Review, 10 (3), pp. 153163. Direct Link:
o o o o

Abstract PDF(197K) Web of Science Times Cited: 5 Access Full Text Roberts, J. (1996). From Discipline to Dialogue: Individualising and socialising Forms of Accountability. In R.Munro and J.Mouritsen (eds), Accountability, Power and Ethos. Chapman Hall, London. Access Full Text Roberts, J. (2001). Trust and Control in Anglo-American Systems of Corporate Governance: The Individualising and Socialising Effects of Processes of Accountability, Human Relations, 54 (12), pp. 15471572.

CrossRef Access Full Text Roberts, J. (2002). Building the Complementary Board: the Work of the Plc Chairman, Long Range Planning, 35, pp. 493520. o CrossRef, o Web of Science Times Cited: 8
o

Access Full Text Roberts, J. and P. Stiles (1999). The Relationship between Chairmen and Chief Executives: Competitive or Complementary Roles?, Long Range Planning, 32(1), pp. 3648. o CrossRef, o Web of Science Times Cited: 11 Access Full Text Rorty, R. (1980). Philosophy and the Mirror of Nature. Blackwell, Oxford. o Access Full Text Sarbanes-Oxley Act (2002). US Legislature H.R.3763. Senge, P. (1990). The Fifth Discipline: the Art and Practice of the Learning
o

o o o

Organization. Century Books, London. Access Full Text Short, H., K. Keasey, A. Hull and M. Wright (1998). Corporate Governance, Accountability and Enterprise, Corporate Governance: An International Review, 6, pp.151166. Direct Link: Abstract PDF(203K) Access Full Text Sternberg, E. (2004). Corporate Governance: Accountability in the Market

Place. (2nd edition). Institute of Economic Affairs, Hobbs, London. o Access Full Text Stiles, P. (2001). The Impact of Boards on Strategy: An Empirical Examination, Journal of Management Studies, 38 (5), pp. 2750. o Access Full Text Sundaramurthy, C. and M. Lewis (2003). Control and Collaboration: Paradoxes of Governance, Academy of Management Review, 28 (3), pp. 397415. o Web of Science Times Cited: 59 Access Full Text Tranfield, D. and K. Starkey (1998). The Nature, Social Organization and Promotion of Management Research: Towards Policy, British Journal of Management,9, pp. 341353. Direct Link: Abstract Full Article (HTML) PDF(158K)

o o o

Access Full Text

Tricker, R. I. (1984). Corporate Governance. Gower, Aldershot. o Access Full Text Useem, M. (1996). Investor Capitalism: How Money Managers are Changing the Face of Corporate America. Harper Collins, New York. o Access Full Text Walsh, J. P. and J. K. Seward (1990). On the Efficiency of Internal and External Control Mechanisms, Academy of Management Review, 15, pp. 421458. o CrossRef, o Web of Science Times Cited: 216 Access Full Text Weick, K. E. (1999). Theory Construction as Disciplined Reflexivity: Trade-Offs in the 90's, Academy of Management Review, 24 (4), pp. 797806. o CrossRef, o Web of Science Times Cited: 56 Access Full Text Westphal, J. D. (1998). Board Games: How CEOs adapt to Increases in Structural Board Independence from Management, Administrative Science Quarterly,43 (3), pp. 511537. o CrossRef, o Web of Science Times Cited: 71 Access Full Text Westphal, J. D. (1999). Collaboration in the Boardroom: Behavioural and Performance Consequences of CEO-board Social Ties, Academy of Management Journal, 42, pp. 724. o CrossRef, o Web of Science Times Cited: 124 Access Full Text Zahra, S. A. and J. A. Pearce (1989). Boards of Directors and Corporate Financial Performance: A Review and Integrative Model, Journal of Management, 15(2), pp. 291334. o CrossRef,
o

Web of Science Times Cited: 192 o Access Full Text John Roberts is a senior lecturer at the Judge Institute of Management, University of Cambridge. Prior to joining the Judge Institute in 1990 he held senior research fellowships at the Department of Accounting and Finance, University of Manchester, the Centre for Business Strategy at the London Business School, and St. Catharine's

College Cambridge. His current work is focused on corporate governance and processes of accountability, with qualitative empirical research on the dynamics of board roles and relationships, and on corporate/fund manager relationships. Terry McNulty (PhD, BA Hons) is Professor of Management and Governance at Leeds University Business School. His research addresses corporate governance, strategic change and organizational design in both public service and private, industrial, commercial organizations. Research funding has been attained from bodies such as the Economic and Social Research Council, Department of Trade and Industry, and the Department of Health. His published works include a research monograph and numerous articles in leading scholarly and practitioner journals. Philip Stiles works at the Judge Institute of Management, University of Cambridge. He is author of Boards at Work (Oxford University Press). His current research interests involve chief executive succession and the governance of partnership-based organizations.