SME managing director and non-executive director trust relations: The dynamic interplay between structure and agency

This article explores the trust relations between managing directors (MDs) and non-executive directors (NEDs) within small- and medium-sized enterprises. Complex mechanisms are revealed within repeated cycles of social interaction that result in the NED changing from an effective agent acting rationally on behalf of the company to an ineffective agent acting subjectively on behalf of the MD. Inherent tensions exist during this change of role and trust relations that threaten the self-esteem of both parties. NEDs being part of a peer network, serving for a fixed term and succession planning are proposed to counter these detrimental effects.