Managers as Monitors: An Analysis of the Non‐executive Role of Senior Executives in UK Companies

Abstract

An important aspect of current governance practice is the use of non‐executive directors to monitor the behaviour of company management. This paper examines the extent to which senior executives are utilized as non‐executives in large UK companies. The results suggest that executive directors are not an important source of non‐executive directors. The average number of non‐executive directorships held by each executive is 0.22. Indeed, 85% of executives hold no additional directorships. The holding of non‐executive directorships is positively related to the strength of board monitoring in the executive's company, executive tenure and company size. Executives in companies with greater growth opportunities and operating in regulated industries are less likely to hold non‐executive directorships.