Examining the Non‐Executive Director's Role from a Non‐Agency Theory Perspective: Implications Arising from the Higgs Report

Abstract

In January of 2003, the British government published Derek Higgs’ report on the role and effectiveness of non-executive directors on British corporate boards (Higgs, 2003). The government’s original request for the report came in the wake of several high-profile corporate scandals, most notably those involving Enron, WorldCom and Tyco in the USA. Its intent was to help prevent the emergence of a major corporate governance failure within a British corporation by strengthening the Combined Code of Corporate Governance (Financial Reporting Council, 2003) to better reflect theory and best practice. It followed in the footsteps of past investigations into corporate governance issues commissioned by the British government including, but not limited to, the Cadbury Report (Committee on the Financial Aspects of Corporate Governance, 1992), the Greenbury Report (Study Group on Directors’ Remuneration, 1995), the Hempel Report (Committee on Corporate Governance, 1998) and the Turnbull Report (ICEAW, 1999). Higgs commissioned three studies to collect and analyse data on British corporate boards to be used in his final report. One of those studies involved in-depth interviews with 40 board chairmen and non-executive directors, a task that was undertaken by the research team of Terry McNulty, John Roberts and Philip Stiles. Contrary to several of the structural and regulatory recommendations within the larger Higgs review that were criticized by corporate and investment communities (see Jones and Pollitt, 2004 for an in-depth discussion of such criticisms) and which have been subsequently scaled back by the Financial Reporting Council responsible for changes to the Combined Code (Keenan, 2004), the McNulty, Roberts and Stiles (2003) report focused on the behavioural dynamics of board members (especially non-executive directors) that might promote board effectiveness. In line with Higgs’ original commission, McNulty, Roberts and Stiles’s report was both descriptive and prescriptive in nature, including several recommendations about behaviours that could help strengthen board effectiveness by creating ‘intelligent accountability’ (as opposed to distant accountability). As McNulty, Roberts and Stiles summarized, ‘Board structure and composition condition but cannot determine board effectiveness. Instead, board effectiveness depends upon the experience, skill and judgement of individual executive and non-executive directors and the ways in which they combine to shape board conduct and relationships’ (2003, p. 2). Following the publication of the Higgs review, and in light of the controversy it sparked within the UK, we asked John, Terry and Philip to supplement their contribution to the Higgs review with a consideration of the theoretical implications arising from their research. The end British Journal of Management, Vol. 16, S1–S4 (2005) DOI: 10.1111/j.1467-8551.2005.00443.x

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 35 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.