Discriminación de las mieles por su origen botánico, parte A

2.2.1 Definitions

In the opening chapter, I suggested that we may be at a defining moment in terms of research into corporate governance (Daily, Dalton & Cannella, Jr., 2003), not least demonstrated by the fact that corporate governance is a term with a number of interpretations. These include understandings and research undertakings that relate to corporate governance as managing stakeholder relationships (Wheelen & Hunger, 2002); standard setting and compliance with codes and legislation (e.g. Farrar 2001; Commonwealth Association for Corporate Governance, 1999); effective resource allocation (Hillman, Cannella, Jr. & Paetzold, 2000) and the economics associated with the separation of ownership and control (Berle & Means, 1932/1999), including managing investment capability (Korak-Kakabadse, Kakabadse & Kouzmin, 2001). Other topics central to understandings of governance include aspects of decision making (Forbes & Milliken 1999), accountability (Cadbury, 1999; Langevoort, 2001) and power (Fondas, 2000).

As Huse (2005, p. S69) reminded readers: “Any definition of corporate governance will be biased… and most theories have been efforts to explain existing pheonomena from practice”. However, it is usual for definitions of governance to emphasise the mutual importance of internal and external constituencies and, in particular, the idea of relationships, exemplified by Wheelen and Hunger’s (2002) claim that governance is fundamentally about relationships between stakeholders. These relationships – between, for example, the board of directors, management and stakeholders – determine the direction and performance of the organisation (Wheelen & Hunger, 2002). Farrar (2001) also underscores the primacy of stakeholder groups, but places some emphasis on the role of governance in terms of standard setting and accountability: governance is about providing standards for management and the board, and being accountable to the

organisation’s investors. When the government and the public enjoy a controlling interest in the company, it may be reasonable to assume that this will pose particular challenges to effective governance.

In studying governance it is useful to take all of the nuances and perspectives into account, and to acknowledge the legitimacy of each research orientation as a contributor to our greater understanding of governance. However, this study accepts a broad conception of corporate governance – corporate governance as the governing mechanisms for organisations, as distinct from the day to day management of organisations. Tricker (1984) makes this difference clear, explaining that governance “involves setting the corporate direction, involvement in executive action, supervision and accountability” (p. 10). Elaborating on this powerful role, Tricker points out that:

The board of directors, as the group that comprises the governance body seldom appears on the management organization chart: yet it is the ultimate decision making body in a company. The role of management is to run the enterprise; the role of the board is to see that it is being run well and in the right direction. (Tricker, 1998, p. 3)

Further, as Bryan (1995) suggests, the board has:

ultimate authority over the management, it approves all major decisions; reviews the company’s progress; and continuously advises company management. Thus, the attitudes and environment set by a board of directors have a powerful influence over the direction of a company. (p. 7)

Implicit in this understanding, is the importance of maintaining positive relationships between the board of directors and management, the necessity of having high calibre, knowledgeable directors, and the need for these individuals to work productively as a board. A number of studies, which I will canvass later in this chapter, suggest that board selection and director diversity are factors that impact on the success or otherwise of those relationships and the company, particularly in relation to director versus management rapport, decision-making, competitive advantage and firm performance.

2.2.2 Board Context

Given the crucial strategic roles of boards, however, company directors must take cognisance of many factors, including the contemporary organisational environment, which is global, technologically advanced, and, arguably, more diverse than in previous eras. These factors contribute to a raft of new and emerging issues which boards are required to understand, and about which they need to make decisions affecting the future viability of the company (Burke, 1997b; Garratt, 1999; Grady, 1999; Ingley & van der Walt, 2001; Vinkenburg, Jansen & Koopman, 2000). van der Walt and Ingley (2001) point to the “new skills and approaches” required to effectively govern today’s organisations, claiming that: “No longer is the traditional role of the board sufficiently competent to lead companies into the new millennium” (pp. 315-316). The authors claim that, “not only are boards of directors required to be more accountable to shareholders and stakeholders, they also must bring greater professionalism in the execution of their directorship of the companies they serve” (van der Walt & Ingley, 2001, p. 316). Indeed, it is the significance of the current environment, and the role of Crown Companies within it, that has stimulated the need for an exploration of the processes of board selection and composition.

2.2.3 Pathways and Progressions to Governance

The question as to why individuals might choose to take up a directorship of any company is, on the surface, easy to answer. Arguably, the position is well-paid (Conyon & Gregg, 1994; Liu & Taylor, 2008), and public disclosure is not always required. In Australian and New Zealand companies, the ‘pool’ for director remuneration in relation to CEO remuneration has continued to steadily rise between 2000 and 2007, and predictions are that remuneration will increase due to the reported ‘onerous’ requirements of the director role (Korn/Ferry International, 2008). It has been reported that directors are frequently ‘shoulder-tapped’ (e.g. Harwarden & Stablein, 2008) or that they see a governance role as a natural progression from full-time work into retirement (Daily, Jacobs, & Dalton, 2004). Ghaffari’s (2007) finding that over 40% of women directors have a corporate background, suggest that it is credible to propose that, for women as well as men, a governance role is indeed an accepted option for extending a corporate career.

Other, less instrumental, pathways to board membership have also been noted, such as allegiance to a company that directors had a personal relationship with through family connections (Maclean & Harvey, 2008), and credentials gained through community involvement (Terjesen, Singh & Vinnicombe, 2008). For some, there is also a sense of excitement in being a director (Huse & Solberg, 2006). Although, recently, as companies worldwide are subject to increasing scrutiny and compliance requirements, the decision to accept a position on a board may be less automatic (Korn/Ferry International, 2008).

With respect to gender differences in paths to the boardroom, early research suggested that women directors are chosen, at least in part, because they are women and that they tend to have a community (as distinct from purely business) profile (Mitchell, 1984). More recent findings, however, have indicated that excellent business credentials and advanced education are today crucial considerations for women directors (Burke, 1997a; Burke & Mattis, 2000), although some evidence suggests that women tend to be less economically motivated and “more philanthropically driven” than their male counterparts (Burgess & Tharenou, 2002, p. 42). Sealy, Vinnicombe and Singh (2008) report that 11% United Kingdom FTSE 100 board members are women and just over 11% of directors on ASX Top 100 companies are women (Korn/Ferry International, 2008), a disparity with men that is unsurprising given the gendered nature of all levels of management (Simpson & Lewis, 2007).

Regardless of the motivation for wanting to be a director, it is a role that requires intellectual capacity and some commercial expertise, in appropriate combination across the board, to ensure the organisation remains a viable entity. Directors need a repertoire of qualities and skills to validate and usefully augment their enthusiasm for the task.