Bezemer. P., Maassen, G.F., Van den Bosch, F.A.J. & Volberda, H.W. (2007). The hidden effects of corporate governance reform in the Netherlands: Non-Executive directors' changing external and internal service roles, paper presented at the EURAM conference, Paris, May 2007.

The Hidden Effects of Corporate Governance Reform (121.55 kB)

Triggered by principles of the agency theory, the majority of corporate governance reform initiatives seek to strengthen the control role of non-executives. However, the influence of corporate governance reforms on the external and internal service roles of non-executive directors generally has not been a focus of attention.

This paper aims to address this issue by investigating the impact of two reform initiatives on the service roles of non-executive directors between 1997 and 2005 in the Netherlands.

Archival data of the top-100 listed companies in the Netherlands, shows that the non-executive directors’ service roles have changed in response to both reform initiatives. The emphasis has shifted from an external service role to an internal service role, i.e. from directors acting as boundary spanners to directors who provide advice and counseling to executive  directors.

This  development diminishes possibilities for generating positive network effects through board ties and has implications for non-executive directors’ function.