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    Is the term 'executive director' an unhelpful misnomer?

    Accountability Governance Performance Research
    I've been pondering a seemingly straightforward term of late, in an attempt to resolve what appears to be an anomaly in our understanding of directors and how they work. The term is 'executive director'. It refers to a company director who is also a company executive. While seemingly helpful as a qualifier, I wonder whether  the widespread usage of the term has led many, unknowingly, to a point of confusion and of unrealistic expectation.
    The very act of qualifying the term director introduces—subconsciously at least—the possibility that certain directors should, could or do act differently from other directors. Independent director; executive director; non-executive director; inside director; outside director; and, lead director, amongst others are all part of the lexicon. Yet in most countries the statute is quite clear: there is only one category of director. Consequently, all directors are expected to act in the same manner as they fulfil certain duties, in the eyes of the law at least. But do they, and importantly, can they?
    The role of 'executive director' seems to be quite troublesome. 'Executive' and 'director' are two distinct roles, yet the term conflates the distinct contributions into a new, third, role: someone who is a director and an executive concurrently. Is it possible to perform both roles concurrently and fulfil them dutifully?
    Directorial appointments are full-time commitments: one can't be a director some of the time. Responsibility is not absolved just because a director is on holiday or working in another context. An executive who is also a director is required to fulfil their directorial duties at all times. They don't 'stop' being a director when they leave the boardroom and return to their executive role. Similarly, in the boardroom, how might a director who is also an executive make a critical and objective assessment of management performance? I've seen this problem many times in the boardroom. Executive directors are blatantly conflicted, yet many expect to make decisions on their own proposals!
    I've concluded that the term executive director is an unhelpful misnomer.
    If boards are genuinely committed to acting in the best interests of the company, a resolution is required. One option might be to exclude executive directors from every formal decision made by the board. Another perhaps more tenable option might be to ensure that non-executive directors make up the majority of directors, so that self-interested executive directors cannot capture the decision-making processes. A third option might be to adopt a policy at the shareholder level that executives will not be appointed as directors.
    Do you have a view on this? I'd love to hear from experienced directors, chairmen and researchers, to learn about the ramifications of which of these options, and to hear whether any of them (or any other options not mentioned) might lead to higher quality decisions in the boardroom and better business performance.
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    Actions have consequences ... always

    Governance Performance
    If you ever needed proof that what goes around comes around, you need look no further than the Parole Board's decision to deny Rob Roest, former director of failed finance company Bridgecorp, parole. Roest received a six year sentence in 2012, after being found guilty on several charges relating to the failure of Bridgecorp. Despite being described as a model prisoner, Roest's "rather intransigent attitude to his offending" seems to have swayed the Board towards its decision to keep Roest behind bars.
    In addition to giving Messrs Roest and Petricevic (who was also denied parole last year) more time to think about their actions and their attitudes, the decision provides a salutary reminder to all directors—that duties owed by directors to the company and to shareholders cannot be taken lightly. Directors who are unclear of their duties and responsibilities would be well-advised to read and apply the relevant sections of the statute, and to enrol for a professional development course with their local director's institute.
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    Women on boards: more rhetoric

    Governance Leadership Performance Research
    The board and business performance discourse has been maturing over the twelve months or so: beyond various "blunt stick" theses that link certain structural and composition attributes of boards with improved business performance (women, board size, independent directors, CEO duality, et al), towards more general (and more subtle and far more complex) notions of diversity, behaviour and interactions in the boardroom. The maturing that has started to occur is welcome. Most of the time, when we don't understand something, we start by investigating the obvious (what we can see). Then, if answers are not forthcoming, we dig deeper. The maturing that I referred to in the opening sentence is the start of the digging deeper phase.
    The discourse has evolved in recent months, as people have begun to realise that answers to social problems rarely involve inanimate constructs like percentages. However, the conversation took an unexpected turn this week, with the publication of this well-written article in the Washington Post. It picked up one of the blunt sticks that I thought had been put down. The rhetoric is laudable, and it may well sell newspapers, but the argument is somewhat misguided.
    McGregor and Schulte's article starts by commenting on the percentage of US board seats occupied by women: 19.2 percent. So far so good. It's only when you read the article for a second or third time that the underlying (and unstated) thesis—that more women on corporate boards is good—becomes apparent. It may be, but I doubt that the presence of women in boardrooms per se is the answer to the question of how boards can or should influence business performance. Rather, women are far more likely to be a proxy for another underlying quality or social mechanism that cannot be spontaneously observed. A diversity of opinion and life experience, to enhance boardroom debates, is one likely possibility. However, we don't know that yet.
    More research is needed, including longitudinal studies of what actually occurs in boardrooms (silent observation), to identify the underlying qualities of directors, social mechanisms and tasks completed by boards that, importantly, actually make a difference to business performance in certain circumstances. Then, and probably only then, will the rhetoric start to gain substance amongst directors and the wider community. In the meantime, articles like those written by McGregor and Schulte need to be consigned to the cutting room floor, so that there is plenty of space available for articles that dig deeper.
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    UK and Europe speaking and advisory tour in March: updated schedule

    Governance Research Strategy
    My next trip to England and Europe, for meetings and to speak on corporate governance and related matters, is just around the corner. Thank you to everyone who has contacted me recently to discuss meeting options. Since posting the preliminary schedule back in December, several more commitments have been confirmed, including some meetings in Zurich. The updated schedule is as follows:
    Mon 9 March
    Tue 10 March
    Wed 11 March
    Thu 12 March
    Fri 13 March
    Mon 16 March
    Tue 17 March
    Wed 18 March
    Thu 19 March
    * available
    speaking at a symposium in Leeds
    * available
    governance workshop in Winchester
    meetings in London
    meetings in Zurich
    * available in Zurich or any other European city
    * available
    meetings in London, then depart for New Zealand
    As you can see, the schedule is starting to fill up. If you would like to organise a meeting, or have me speak (anywhere in England or Europe is fine), please contact me. 
  • Published on

    Boards and accountability: honoured to have article published

    Accountability Governance Leadership Management Research
    Several of the articles from the winter edition of Ethical Boardroom are now available online, including the one that the editorial board asked me to write, on accountability in the boardroom. Here's a snippet:
    The role of the director bears a weighty responsibility, so directors need to take their appointments, and the accountability that goes with such appointments, seriously. Most do, but some, clearly, flout the boundaries of moral, ethical, and in some cases, legal acceptability. Directors need to be beyond reproach. Clear demarcations of what is acceptable – and what is not – need to be established. This may mean that the curious propensity to collect directorships, as some badge of honour it would seem, needs to be called into question by shareholders and by the profession’s body. That directors with six or more appointments have any hope of providing any more than a cursory contribution is beyond us. The challenge, of course, is holding directors to account for this level of performance, among peers, in the public domain and through any legal processes that may be required.
    Click here to read the full article. Thank you to the editors for the opportunity to make a contribution. I hope it stimulates some debate and, in some small way, advances the understanding of how boards can and should contribute to business success. If you have any feedback, or would like to explore the issues raised in the article, please contact me.
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    Thank you!

    Governance Phd Research
    Christmas is nigh. In four days time, the hurly-burly that typically precedes Christmas—decorating houses, selecting gifts, preparing food and organising travel and accommodation—will be over. The decorations will be taken down and packed away, and most of us will take some time off work. As we relax, many of us recall major events from the year and ponder what the future might hold. I'm no exception, although I have some unfinished business to deal with first: to say thank you.
    • Thank you for your support and encouragement through 2014.
    • Thank you for your interest in the research outcomes that are starting to take shape.
    • Thank you to those unnamed people that have been there when the going has been tough.
    The goal I set twelve months ago, of completing the doctoral thesis for submission by Christmas, has slipped my grasp. However, good progress was made throughout the year. My new goal, of submitting the thesis by Waitangi Day, is quite achievable. Despite this hiccup, the level of support and encouragement that has flowed throughout the year has been amazing. Thank you. I have met people—some of whom have become friends—at conferences; in business meetings; at workshops; and, on LinkedIn, Twitter and email. Some of the conversations have blown me away. That such a broad church of people from all around the world might be interested in learning how boards can influence business performance has given me great hope; that the research may have some real value in practice.
    I will 'sign off' from the thesis write-up on 23 December, and not return to it until 2 January. I'm tired and need a break to recharge for the final push to submit the thesis and then to prepare for the oral examination.
    Looking to 2015, I have three main priorities:
    • Complete the doctorate!
    • Recommence advisory work, and share my research findings
    • Secure one, or maybe two, new board appointments
    If you think you might want some assistance in 2015; or, if have a board vacancy; or, if want to hear about my research or have me speak; or, if you simply want stay in touch, please let me know. I'd love to hear from you. To follow my work, please check this page periodically—the musings will continue to be published for as long as people read them and say they are helpful. Merry Christmas.