2.4.5 More executives on the board and their dilemma

In the UK all executive directors are members of the board.1

However, in the US it has become common that the CEO is the only executive member of the board. Outside or independent directors should, as is argued in the US, form a large majority in order to counterbalance the power of the US "imperial" CEO, who is often chairman as well.

There are advantages in having all the executive directors as members of the board, as is the practice in the UK. The first obvious advantage is that the NEDs learn more about how and why each executive director takes certain decisions. It leads to a more balanced discussion. Executive directors, who regularly meet with NEDs will have more ease in also pointing out to the NEDs what the dilemmas and weaker points in their propositions are. The UK concept of balance on the board is not one executive versus many non-executives. Second, the NEDs can see for themselves whether the executive directors form a team, when the NEDs are all in personal contact with the team of executives at regular meetings. Finally, such an arrangement gives the non-executive directors greater exposure to potential successors of the current CEO, and the executive directors are obliged to think more broadly about the company as a whole.2

Executive directors have the dilemma of playing a dual role within their companies. They are on both sides of the divide between board and management. They have to take off their management hat when entering the board room and replace it with their board hat. Theoretically there is no conflict, because both management and board hats require devotion to the company's best interests. But in practice this dual role has led to a questioning of the principles on which unitary boards in the UK are based. While at times executive directors are in an invidious position, for example where the matter at issue is the future of their chief executive, a mix of executive and outside directors can be made to work well. The advantage over having the chief executive alone speaking for the management of the business is that the board has the opportunity to hear the views of other key executives and to raise matters with them. While chief executives will understandably meet with their executive colleagues before a board meeting to agree on a common line, to have them actually present and even give their views will add to the better information and understanding by the NEDs.3