11.3.2 Collaboration between executive directors and NEDs

A model developed by Adams and Ferreira (2007) points in the same direction. The role of the board and especially the NEDs comprises monitoring and advising. Executive directors and managers are less inclined to share information with independent NEDs if they are monitored very intensely. These independent NEDs are not able to execute their monitoring role properly without enough and the right information. And for the advisory role, it is better if NEDs are able to liaise easily with executive directors and management in order to improve their advice. In addition, during these advisory sessions information is generated that can be used by NEDs in their monitoring process. This model entails that corporate governance regulation with a focus on boards that are mostly independent might be detrimental for the company and its shareholders.

Westphal’s (1999) research is in line with the model of Adams and Ferreira (2007). Social ties enhance the involvement of the whole board and encourage better cooperation between executive directors, the CEO and management on the one hand and NEDs on the other hand. Colleagues are more inclined to ask for advice if social relationships exist, because they are less worried about making an uncertain impression on colleagues who’s task it is to monitor them. In these situations the advice seeker is more inclined to share information with his monitor or advisor. Although it is believed that advice seeking behaviour is stronger in boards with less experienced and knowledgeable members, Westphal’s empirical research proves the opposite (1999: 19). Social ties have a positive influence on advice seeking if the expertise of the board members is high.

There must therefore be a certain kind of mutual trust and friendship to create a good and comfortable working environment, but NEDs must also perform their monitoring task effectively and without biases due to friendships. Forbes and Milliken call this board effectiveness, which consist of two subjects (1999: 492-493). The first subject is board task performance, which entails the ability of the board to execute their monitoring tasks as well as their advising tasks. The second subject is the ability of the board to cooperate. There should be a balance between task effectiveness and cohesiveness to let a board function well.