11.3 Social relationships

Corporate governance research often focuses on one economic theory and in particular on the agency theory. The agency theory focuses mainly on monitoring by independent supervisors. Social ties between executive directors and supervisors are generally considered to have a negative influence on independence. The consequences are expected to be negative for the company’s results, because social ties and less independence are associated with lower quality monitoring. But the role of supervisors is not limited to monitoring only and comprises advising as well. Therefore, Daily et al. hypothesise that a ‘multitheoretic approach to corporate governance is essential for recognising the many mechanisms and structures that might reasonably enhance organisational functioning’ (2003: 372). Such a multitheoretic approach should be able to explain the supervisors’ multitude of tasks and the influence of social relationships within these tasks. Hence, this section addresses the human side of corporate governance by focusing on the social aspects of monitoring and advising as well as the links with independence.