Governance

'The New Executive Director Takes the Shifting Power Balance into Account'

February 25, 2015

How can an executive director grow in the boundary between management and supervision? Mijntje Lückerath, Professor of Corporate Governance, will address this question at the Inspiration Lecture on March 24th. She says: “Executive directors have had to cede power in recent years, while non-executive directors have had to seize power. The new kind of executive director takes this shifting power balance into account."

Which dilemmas in the area of governance do executive directors encounter?

"The higher up your managerial role is within an organization, the more you realize the importance of good corporate governance. The dynamics between executive and non-executive directors are crucial, as are the long-term goals of the organization, since they can be critical for the successful realization of our strategies. Questions that an executive director faces include “how do you as a leader, along with the non-executive directors, create a balance between control and trust?” and “how can both executive and non-executive directors together create value for the organization within a reciprocal relationship?"

“Power between executive directors and non-executive directors does appear to shift too much,” says Jos Streppel, chairman of the Corporate Governance Monitoring Committee. He also commented: "A non-executive director is the supervisor, consultant, and employer. He does not develop strategies and is not ultimately responsible for their execution. He can at most be held responsible for not taking note of errors or for intervening too late. Therefore, we need to be aware of non-executive directors taking on too many responsibilities. As you can see, this threatens the power balance."

What is the relationship between an executive director and a non-executive director?

“Executive directors are satisfied with their non-executive directors. A survey of 25 CEOs of the 100 largest companies in the Netherlands found that 80 percent of these CEOs are satisfied with how their Supervisory Board (SB) performs its supervisory and advisory roles. However, forty percent of these CEOs think that the Supervisory Board could spend more time networking. That could be detrimental to the time currently spent on supervisory duties."

How does a new executive director deal with the shifting power balance?

"It is important that the Supervisory Board and the Board regularly consult each other on the time that the Supervisory Board spends on its duties. That is how mutual needs can be met within the specific situations in which the company finds itself. By doing so, non-executive directors can thus perform their duties optimally."

In an Inspiration Lecture on March 24, Prof. Dr. Mijntje Lückerath will discuss the control of governance and how it can add order and value to your organization. In addition to the formal requirements, “good governance” and the so-called “soft controls” (behavior and unwritten rules) are essential. The theme is discussed in relation to the other subjects in the Senior Executive Program: Strategy, Organization, and Leadership. Register for this Inspiration Lecture.
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