Supervisory boards in high growth SMEs and mandated board members: two dilemmas Online publication date: Sat, 01-Aug-2015
by Maryse J. Brand; Theo J.B.M. Postma
International Journal of Business Governance and Ethics (IJBGE), Vol. 10, No. 2, 2015
Abstract: Two dilemmas for boards of growing small and medium-sized enterprises in a two-tier context as a result of their need for external resources (i.e., capital) and the concomitant introduction of external directors (expertise) are discussed in this paper. Firstly, split loyalties can occur when an externally mandated non-executive director may be pressured to act primarily in the interests of his/her mandating firm (e.g., a major investor), which may diminish the incentive to act in the best interest of the focal firm. Secondly, a culture clash is likely when external directors in the much prevalent family-based SME prefer formal control above informal governance which may harm the board's effectiveness. We propose that a one-tier board structure in combination with an effective chairperson is a solution to mitigate both dilemmas.
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Business Governance and Ethics (IJBGE):
Login with your Inderscience username and password:
Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.
If you still need assistance, please email subs@inderscience.com