To Accept or Refuse an Offer to Join the Board: Dutch Evidence
Practitioners, academics and policymakers have come up with numerous proposals aimed at enhancing board effectiveness. Board composition is believed to be one of the most important determinants of board effectiveness and, hence, firm performance. Whereas the proposals typically focus on the qualities that non-executive directors should bring in - the demand side - in this study, we focus on the supply side of non-executive directors. More specifically, this study explores the personal motives for people to accept or turn down offers to become a non-executive director. The results based on Dutch survey data indicate that it is possible to identify a limited number of dimensions representing the motives to either accept or to turn down an offer. Using partial least squares (PLS), a form of structural equation modelling that is particularly useful for small samples, we find "extrinsic motives" and "intrinsic motives" as reasons for both accepting and rejecting offers. We are able to identify a motive for accepting an offer that is related to the quality of management and supervision. Furthermore, our analysis indicates a third motive for rejection that we labelled "reputational concern". In addition, we find that directors' characteristics, such as experience and multiple directorships, explain the extent to which the various motives are used. Lastly, we find that particularly the intrinsic motives drive the extent to which a director accepts offers to join supervisory boards. We discuss how these findings affect corporate practices of recruiting non-executive directors.
|Note||Available online 23 June 2012|
|Persistent URL||dx.doi.org/10.1016/j.lrp.2012.06.001, hdl.handle.net/1765/32831|
de Jong, A., Hooghiemstra, R.B.H., & van Rinsum, M.. (2012). To Accept or Refuse an Offer to Join the Board: Dutch Evidence. Long Range Planning, 1–22. doi:10.1016/j.lrp.2012.06.001