The Contribution, Power and Influence of Part‐time Board Members

• Author: Andrew Pettigrew,Terry McNulty
• Date: 01 July 1996
• DOI: http://doi.org/10.1111/j.1467-8683.1996.tb00145.x
• Published date: 01 July 1996

160

CORPORATE GOVERNANCE

The Contribution, Power and Influence

of Part-time Board Members

Terry McNulty

and

Andrew Pettigrew

The paper compares the contribution, power and influence of non-executive directors and

part-time chairpersons within large

UK

PLC’s, using interview data collected for a pilot

study. Two questions are addressed:

What contribution,

if

any, is made by non-executive directors and part-time chairmen?

How, if at all, do part-time chairpersons exercise power and influence?

The paper reveals that part-time chairmen and non-executive directors claim to contribute to a

broad range of issues, ranging from the strategy of the firm, to the appointment, selection and

dismissal of board members. Contribution

is

made by part-time chairmen and non-executive

directors converting power sources into influence.

A

variety of influence methods

are

used by

part-time chairmen and non-executive directors to contribute as board members. Part-time

chairmen influence most by assertiveness, using the authority that comes with leading the

board. Non-executive directors influence most through persuasion and coalition formation.

Non-executive directors less on their positional authority to exert influence, and more on their

personal knowledge, experience and expertise, as well as their ability to form relationships

with individuals both inside and outside of the boardroom.

Key words: Power; Influence; Non-executive directors; Chairpersons; Board of directors.

Introduction

n the context of recent financial scandals

I

and perceived mismanagement of

UK

companies, there have been calls to strengthen

the role of non-executive directors in both the

control and leadership of firms (Cadbury

Report,

1992).

This paper is about the contri-

bution, power and influence of part-time

chairmen and non-executive directors in

UK

public limited companies. The questions

addressed within this paper are:

what contribution,

if

any, is made by non-

executive directors and part-time chairmen

as board members?;

how,

if

at all, do part-time chairmen and

non-executive directors exercise power

and influence?

Given the part-time responsibilities of

many chairmen and all non-executive direc-

tors, we use the collective label of “part-time

board members” to refer to individuals per-

forming these roles. The paper is organised

into four parts. The first part of the paper

reviews literature about boards and directors.

The second part of the paper describes the

research process and sample of part-time

board members interviewed for the study.

The remainder of the paper compares the

contribution, power and influence of part-

time chairmen and non-executive directors,

using data collected during interviews with

twenty-nine part-time board members. Em-

pirical data are used in section three to de-

scribe the issues upon which part-time board

members claim to have exerted influence.

Section four

of

the paper describes how part-

time board members exercise influence in

and around the boardroom.

The main study findings are that part-time

board members claim to have exerted influ-

ence across a broad range of issues. The

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1996

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SCHOLARLY RESEARCH

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THEORY

PAPERS

161

issues are: the hiring and firing of board

personnel; the conduct and process of the

board; the strategy of the firm; the manage-

ment structure, culture and functions of the

firm and firm financing. The contribution of

part-time board members does not always

conform to the wishes of the executive,

neither is

it

confined to just times when firms

are experiencing crises as reported in Lorsch

and MacIver

(1989).

Contribution is dependent on part-time

board members’ ability to mobilise and use

power and influence. Part-time board mem-

bers use a variety of influence methods to

exert leverage in and around the boardroom.

The methods of influence used by part-time

board members include: assertiveness, per-

suasion, coalition formation, pressure and

blocking. The influence methods used by

part-time board members reflect the sources

of power available to part-time board mem-

bers. Part-time chairmen influence most by

assertiveness. In so doing, part-time chair-

men use the authority that comes from being

leader of the board. Non-executive directors

influence most through persuasion and co-

alition formation. Non-executive directors

rely less on positional authority to exert influ-

ence, and more on their personal knowledge,

experience and expertise, and ability to form

relationships with individuals both inside

and outside the boardroom.

Literature Review

Our starting assumption is that the contri-

bution of chairmen and non-executive direc-

tors will be shaped by the duties and responsi-

bilities of the board of directors within a firm.

Therefore, an important question to ask is

what do boards do?

Goodstein, Gautum and Boeker

(1994)

identified three perspectives on board func-

tioning. The three perspectives are the

governance perspective, the resource per-

spective, and the strategic perspective. An

assumption behind the governance perspec-

tive is that there are conflicts of interest

between management and the owners of the

firm. The governance perspective treats the

board as a mechanism for ensuring organis-

ational action accords with owner interests.

Specifically, outside directors function to

resist the opportunism and self-interested

behaviour of managers. Resource dependency

theories assume that the interests of managers

and owners are similar (Jonnergard and

Svensson,

1993).

Resource dependency

theorists have emphasised the institutional

role of boards in helping to link the organis-

ation to its environment and secure critical

resources (Mintzberg,

1983;

Pfeffer,

1972).

The strategic perspective of board function-

ing is now being given more attention, having

historically been neglected (Goodstein et al,

1994).

The strategy function of the board,

besides acquiring resources or representing

stakeholder interests, involves making im-

portant decisions that enable the organisation

to change (Goodstein et al,

1994).

Lists of board duties developed by both

academics and interested policy-makers,

contain tasks which concur to varying

degrees with the governance, resourcing and

strategy perspectives on board functions.

Lorsch and MacIver

(1989)

argued that the

major duties of the board are: selecting,

assessing, rewarding and

if

necessary, re-

placing the CEO; determining strategic direc-

tion; and assuring ethical and legal conduct.

Demb and Neubauer

(1992)

contend that the

most important tasks of the board are: setting

strategic direction; securing succession, hiring

and firing the CEO and top management;

controlling, monitoring and supervising

management; caring for shareholderslensur-

ing dividends and deciding on the use of

resources, investments and divestments. In

the

UK,

the Institute of Directors

(1995)

have

argued that the four main tasks of the board

are: establishing vision, mission and values;

setting strategy and structure; delegating to

management and exercising responsibility to

shareholders and other parties.

We know very little about the behaviour of

part-time board members in the UK, and how

their behaviour is shaped by the duties of the

board. Demb and Neubauer

(1992)

identified

’pronounced diversity’ when directors re-

ported their involvement in the duties of

the board. Amongst the British directors in

Demb and Neubauer’s sample there existed a

wide spectrum of opinion about the way

boards should be involved in strategy.

Opinions ranged from boards having an in-

iating role, an approving role and a decision-

making role. Grumbar and Kelly

(1993),

executive search consultants, surveyed over

200

chief executives and non-executive direc-

tors drawn from the top

500

UK publicly

quoted companies. Grumbar and Kelly found

that chief executives and directors differed in

their understanding of the present role of

non-executive directors and disagreed over

what the role should be. Chief executives and

non-executive directors disagreed about the

amount of influence non-executive directors

should have in board decisions about: the

choice of chairmen; the choice of chief execu-

tive; the choice of new non-executive direc-

0

Blackwell

Publishers

Ltd.

1996

Volume

4

Number

3

July

1996