Differing perceptions of non-executive directors’ roles in UK SMEs: Governance conundrum or cultural anomaly?

Rosie Boxer, Aidan Berry, Lew Perren

Research output: Contribution to journalArticle

Abstract

This paper presents a new model for the development of trust in the working relationships between managing director (MD) and non-executive director (NED) dyads in UK small- and medium-sized enterprises (SMEs). It proposes a NED role trust typology of NEDtells, NEDadvises and NEDacts. This typology is influenced by the literature on trust development in working relationships within corporate governance and in small business contexts. When UK SME NED role practice is mapped against this new model, different patterns of NED role trust emerge for MDs and NEDs. The MDs perceive a role biased towards NEDadvises, whereas the NEDs perceive a role that is balanced between NEDtells and NEDadvises. This dual role was described by one NED respondent as being ‘schizophrenic’. This paper presents and discusses these findings and the implications for the wider corporate governance debate on NEDs, with particular reference to the recent UK banking crisis. The new model presents a possible explanation for governance failure attributed to the NEDs’ behavior and recommends that further research investigate whether the CEOs and the MDs that also act as NEDs on other boards exhibit these different patterns of NED role trust. Do they exhibit another form of schizophrenia or are they chameleons, that is, able to switch between different patterns of NED role trust with ease? Or are they just NED role impersonators, analogous to a contestant on Stars in Their Eyes? “Tonight Matthew I’m going to be … a non-executive director!”
Original languageEnglish
Pages (from-to)38-50
Number of pages13
JournalAccounting Forum
Volume36
Issue number1
DOIs
Publication statusPublished - Mar 2012

Keywords

  • Non-executive directors
  • Working relationship trust development
  • Interlocking board membership

Fingerprint Dive into the research topics of 'Differing perceptions of non-executive directors’ roles in UK SMEs: Governance conundrum or cultural anomaly?'. Together they form a unique fingerprint.

  • Cite this