Elms N., Nicholson G. J., Pugliese A. (2016)

Stages of a director’s tenure: Implications for monitoring. In APIRA Conference Proceedings 2016, Asia Pacific Interdisciplinary Research in Accounting (VIII), Melbourne (Australia).

Abstract:

Purpose: The purpose of this research is to a gain greater understanding of whether a director’s behaviour changes with their time on a board, and how any changes impact their ability to monitor effectively.

Approach: Using an interpretive case-study approach we establish patterns in director behaviour at varying levels of tenure in order to understand whether (and how) capacity to monitor evolves over a director’s time on a board.

Findings: We find tenure generally increases a director’s ability to understand firm specific issues, yet the extent and speed to which an individual director is able to monitor effectively varies according to each director’s experiences and competing commitments. Second, tenure can introduce inhibitors to effective monitoring through reduced effort and an attachment to the past. Finally, although tenure may obstruct independence, its effect appears contextual relationship dependent.

Research implications: Our findings challenge the theoretical assumption that director independence and director knowledge are in opposition suggesting a trade-off between these two essential monitoring characteristics is not a necessary outcome of tenure.

Practical implications: Our findings indicate the relationship between tenure and monitoring is more complex than generally thought and a simple one-size-fits-all approach to director tenure (such as a capped maximum tenure) may not be appropriate.

Originality / Value: These findings highlight the value of directly investigating director behaviour at an individual level.