Recasting trust and distrust in the boardroom

• DOI: https://doi.org/10.1108/CG-06-2021-0235
• Published date: 23 February 2022
• Date: 23 February 2022
• Pages: 1004-1025
• Subject Matter: Strategy,Corporate governance
• Author: Morris Mthombeni,Amon Chizema

Recasting trust and distrust in the

boardroom

Morris Mthombeni and Amon Chizema

Abstract

Purpose –This study aims to analysetrust and distrust as specific board processes betweenthe board

chair and chief executive officer (CEO) aimed at reducing corporate governance (CG) risk partially

mitigated by regnantCG mechanisms. This study incorporates the nascentliterature that posits trust and

distrustas two separate constructs that co-exist simultaneouslyto recasts them in the CG domain.

Design/methodology/approach –This paper analysed data from 20 in-depth interviews conducted

with board representatives at four financial services firms in The Netherlands, South Africa and

Zimbabwe.

Findings –This paper found that the foundationalbases of the chair–CEO relationship determine how

trust and distrust are apportioned between them, which impacts board dynamics. This paper also

confirmedthat the constructs of trust and distrust are separate thusdo not sit at opposite ends of a single

continuum. Finally, this paperfound that high levels of task-based distrust (as opposed to mistrust) are

necessary during periods of organisational distress and more effective if there are also high levels of

relationaltrust between the parties.

Originality/value –This paper empirically examines the relationship between trust and distrust in

CEO–chair dyadic relationships in multiple companies across multiple countries. This paper also

introducesthe concept of tempered trust, which is definedas interpersonal trust tempered by task-based

distrust,recasting the traditional characterisationof trust and distrust in the CG domain, thereby makinga

usefulcontribution to the literature on board dynamics.

Keywords Board dynamics, Chairperson, Chief executive, Trust,Distrust

Paper type Research paper

Introduction

An underlying assumption in agency theory is that distrust, rather than trust, plays a

dominant role in the regulation of governance actions and behaviours (Eisenhardt, 1989a;

Roberts, 2001). This view places trust and distrust at the centre of the discourse on

corporate governance (CG) relationships (Nicholson et al.,2017), constructs that are often

considered to be the polar opposites of each other (Schoorman et al.,2007) and have been

characteristic effects of accountability (Roberts, 2001). This study joins scholars that focus

on directly revealing the mechanisms of trust in CG (Huse and Zattoni, 2008;Migliore and

Horton DeClouette, 2011), in so doing deviates from the work of scholars that considertrust

indirectly and alongside accountability (Roberts, 2001) or equate distrust with mistrust

(Kostis and Na

¨sholm, 2020) an effort to motivate for rigid control mechanisms (Roberts

et al.,2005

). Trust and distrust have been evaluated simultaneously by scholars from

different and unconnected fields like coopetion (Raza-Ullah and Kostis, 2020) and sports

leadership (O’Boyle et al., 2020),but this study is one of few CG studies to do so.

While governance mechanisms are implemented to counter the risks and uncertainties

(Elkelish, 2018) that give rise to distrust and mistrust (which is distinct from distrust) (Kostis

and Na

¨sholm, 2020), some researchers have shown that their increased use paradoxically

leads to even higher levels of distrust (Goranova et al.,2017). Such scholars, who suggest

Morris Mthombeni is based

at Gordon Institute of

Business Science,

University of Pretoria, Illovo,

South Africa.

Amon Chizema is based at

School of Business and

Economics, Loughborough

University, Loughborough,

UK, and Gordon Institute of

Business Science,

University of Pretoria,

Johannesburg, South

Africa.

Received 4 February 2021

Revised 30 November 2021

Accepted 13 December 2021

©Morris Mthombeni and Amon

Chizema. Published by

Emerald Publishing Limited.

This article is published under

the Creative Commons

Attribution (CC BY 4.0) licence.

Anyone may reproduce,

distribute, translate and create

derivative works of this article

(for both commercial and

non-commercial purposes),

subject to full attribution to the

original publication and

authors. The full terms of this

licence may be seen at http://

creativecommons.org/licences/

by/4.0/legalcode

PAGE 1004 jCORPORATE GOVERNANCE jVOL. 22 NO. 5 2022, pp. 1004-1025, , ISSN 1472-0701 DOI 10.1108/CG-06-2021-0235

that relying on agency theory solutions amplifies the negative effects of distrust (Cuevas-

Rodrı

´guez et al.,2012

;Goranova et al.,2017), may find solace in stewardship theory which

suggests that managers are not motivated by individual goals but are instead stewards

whose motives are aligned with the objectives of principals in an organisation (Lo

¨hde et al.,

2021).

In this paper, we challenge and aim to recast the current boardroom logic that is

informed by traditional theoretical depictions of trust and distrust as polar opposites in

CG literature (Roberts, 2001) and tease out the more nuanced internal relationships of

the board of directors that drive the effectiveness of boards (Sur, 2014). We build on the

extant literature on trust between CG actors ((Huse and Zattoni, 2008;Price et al., 2018)

and add to recent scholarship that acknowledges the co-existence of trust and distrust

(Kostis and Na

¨sholm, 2020;Schillemans and Bjurstrøm, 2020) in the boardroom

(Nicholson et al., 2017).

Relying on a multi-disciplinary, multi-theoretic and multi-country approach (Mnif and Borgi,

2020), our intention is to illustrate contribute to the re-conceptualisation of trust and distrust

as essential and complementary constructs between board chairs and chief executive

officers (CEOs) in a manner that couldreveal additional and more effective CG mechanisms

(Garg and Eisenhardt, 2017;Koskinen and La

¨msa

¨,2017;Krause, 2017;Mostovicz et al.,

2011;Schillemans and Bjurstrøm, 2020;Sur, 2014;Watson et al., 2021). To this end, our

research question is:

RQ1. How does trust and distrust influence effective board dynamics, focussing

specificallyon the role of the board chair and CEO?

Our study aims to contribute to the literature of CG and to practice. First, the study seeks to

contribute to the growing body of literature that is calling for better understanding of CG

processes (Nicholson et al., 2017), going beyond the characterisation of governance

through structure. Second, our study seeks to improve our understanding of the concepts

of trust and distrust in CG and demonstrate the conditions under which distrust is

considered useful.

Literature review

Trustand distr ust –bipolar or separate constructs in corporate governance

Trust refers to a person’s belief that another party to a transaction or relationship will make

sincere efforts to uphold commitments and not take advantage of them, given the

opportunity (Rousseau et al.,1998). Yet there is a risk that the other party may not behave

predictably and will instead use guile to act in their own self-interest. Therefore and in

general, trust is depicted as occurring under conditions of risk and as a mechanism for

reducing uncertainty (Skinner and Spira, 2003). This requires the trusting party (the

“trustor”) to develop sufficiently favourable expectations of the intentions and behaviour of

the other party (the “trustee”) to prompt a willingness to become vulnerable to the trustee’s

future conduct (Grobler andHotlzhausen, 2018;Mayer et al., 1995;Rousseau et al., 1998).

Definitions of distrust typically use trust as the reference point.Consider the distrust defined

as “confident negative expectations regarding another’s conduct” (Lewicki et al.,1998,

p. 439). As such, most researchers conceptualise trust and distrust as “antithetical” (Bigley

and Pearce, 1998, p. 407), at mutually exclusive ends of a single, continuous construct

(Migliore and Horton DeClouette, 2011). According to this traditional view, a “complete lack

of trust and distrust are the same thing” (Schoorman et al.,2007, p. 350). This view is

consistent with earlier conceptualisations of distrust as an “absenceof faith in other people”

(Ross et al.,2001, p. 569). Here, the general positivity bias in thetrust literature, which rarely

engages with the negative consequences of trust like unethical behaviour (Chen andEweje,

2020), supports this positioning of distrust (Gargiulo and Ertug, 2006;Yenkey, 2018) and

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