11.4.5.2 Composition/structure building block

Holding separate meetings without executive directors – and members of the management board for supervisory directors – strengthens the power of independent NEDs. In these meetings without executive directors (independent) NEDs can speak freely without being influenced by these executives. This measure should avoid the lack of impartial leadership and therefore decreases the probability of groupthink (O’Connor 2003: 1300). The corporate governance codes of all three countries recommend having meetings of the supervisors without the executive directors or members of the management (board) being present. These meetings are especially intended for evaluating the performance of these groups.

The establishment of board committees can avoid the structural faults in the organisation. These committees are responsible for hiring outside consultants, the auditor and other advisors. As a result, the information flow is given a formal structure and independent supervisors do not have to rely on information from executive directors and members of the management board. The idea behind the establishment of board committees is to address structural faults in the organisation with respect to information gathering and decision procedures (O’Connor 2003: 1301). All three countries in this study have requirements regarding the establishment of board committees. However, the requirement with respect to independence is not in place everywhere. The involvement of shareholders in the Swedish nomination committee and the possibility to have executive directors on the British nomination committee are not in line with measures against groupthink.

By limiting the tenure of directors, the risk of cohesiveness of the group, which is one of the antecedents of groupthink, is decreased. Long periods of serving on one board might strengthen social ties and is therefore a source of cohesiveness. However, too many changes to the board might be unbeneficial in situations when human capital is required to work properly. Independence between people diminishes as they cooperate together longer, therefore a maximum tenure will enhance independence. However, it is difficult to find a suitable threshold. A supervisor might not be independent anymore after a couple of months in office, whereas others stay independent during their full time in office (O’Connor 2003: 1303-1304). Therefore, this latter measure is a means against independence in appearance, but whether it also strengthens independence in fact is dependent upon the people involved. The United Kingdom no longer considers a NED independent after nine years in office. The Netherlands limits the maximum tenure of a SD/NED to twelve years. And Sweden does not include any requirements regarding maximum tenure in its corporate governance code.

Diversity on the board is a powerful measure to avoid cohesion, because it prevents like-minded group members from making group decisions and increases group effectiveness. Diversity might cover gender, race, class, ethnicity, age, national origin, sexual orientation, socio-economic background, expertise and temperament. O’Connor focuses on gender diversity, because women have moral authority and are more inclined to promote ethical conduct. Nomination committees must consider diversity in their policy or in the outline profile of the board, because diversity is expected to decrease homogeneity and consequently lowers the probability of groupthink (O’Connor 2003: 1306-1313). The United Kingdom, the Netherlands and Sweden all consider independence in their corporate governance codes, which is good from a groupthink perspective. The Netherlands has recently introduced a target percentage for the board of structure regime companies: thirty per cent men and thirty per cent women. The Netherlands therefore scores highest with respect to diversity and its prevention against groupthink.