11.3.2.1 Engaged but non-executive, challenging but supportive, and independent but involved

Roberts et al. (2005) have made similar conclusions based on forty in-depth interviews by the Higgs Committee (see section 7.1.4). They distinguish three characteristics a NED should have: ‘engaged but non-executive, challenging but supportive, and independent but involved’ (Roberts et al. 2005: S6).

Engaged but non-executive entails that NEDs need to have a thorough understanding of the business. They can acquire this understanding and knowledge by visiting plants, company events and have informal meetings with management and executive directors. This engagement is preferable for the NED in order to create credibility within the company, but is also necessary to let him feel certain of his ground when he criticises executive directors and management. Therefore, executive directors prefer to have NEDs with past or current experience as executive director. In addition, it is important that these NEDs do not pursue executive directors’ activities at the company and limit themselves to monitoring and advice. Engaged therefore but non-executive. ‘[NEDs] should ideally be people who are already satisfied with what they have done, because then they find it easier to be a contributor rather than an active player’ (Roberts et al. 2005: S13-S14).

Challenging but supportive entails that NEDs should use their acquired information to ask the right questions. Due to their position, NEDs have less knowledge of the company than executive directors, but their distance to daily business enables them to display objectivity. This objectivity, in combination with experience and modest knowledge or experienced ignorance, should result in questioning and challenging of the executive directors and managers. This experienced ignorance is only valuable if NEDs dare to speak freely about their concerns. However, challenging by NEDs must remain supportive in order to have effect (Roberts et al. 2005: S14-S15).

This citation illustrates the characteristic independent but involved. It entails that independence does not mean a total distance from executive directors or CEO, but independence in fact. This means that a NED should have an independent mindset when he monitors executive directors or management. Independence means the ability to see things differently and put them in perspective, based on one’s own experience and acquired information and knowledge. Sundaramurthy and Lewis call this ‘a simultaneous need for control and collaboration’ (2003: 397). It is impossible to focus on monitoring only or on advising only. That is the reason why the agency theory, which proposes independent monitoring, and the steward theory, which proposes less monitoring and advice, both fail to describe board behaviour. These dysfunctional dynamics must be replaced by combinations of control and collaboration, conflict and trust, and diversity and shared understandings (Sundaramurthy and Lewis 2003: 407-410). Although these combinations seem to be paradoxical it will help to obtain a better understanding of board behaviour and also the impact of board independence and director independence.