Recasting trust and distrust in the boardroom

Morris Mthombeni,Amon Chizema

doi:10.1108/cg-06-2021-0235

Abstract

PurposeThis study aims to analyse trust and distrust as specific board processes between the board chair and chief executive officer (CEO) aimed at reducing corporate governance (CG) risk partially mitigated by regnant CG mechanisms. This study incorporates the nascent literature that posits trust and distrust as two separate constructs that co-exist simultaneously to recasts them in the CG domain.Design/methodology/approachThis paper analysed data from 20 in-depth interviews conducted with board representatives at four financial services firms in The Netherlands, South Africa and Zimbabwe.FindingsThis paper found that the foundational bases of the chair–CEO relationship determine how trust and distrust are apportioned between them, which impacts board dynamics. This paper also confirmed that the constructs of trust and distrust are separate thus do not sit at opposite ends of a single continuum. Finally, this paper found that high levels of task-based distrust (as opposed to mistrust) are necessary during periods of organisational distress and more effective if there are also high levels of relational trust between the parties.Originality/valueThis paper empirically examines the relationship between trust and distrust in CEO–chair dyadic relationships in multiple companies across multiple countries. This paper also introduces the concept of tempered trust, which is defined as interpersonal trust tempered by task-based distrust, recasting the traditional characterisation of trust and distrust in the CG domain, thereby making a useful contribution to the literature on board dynamics.

Highlights

An underlying assumption in agency theory is that distrust, rather than trust, plays a dominant role in the regulation of governance actions and behaviours (Eisenhardt, 1989a; Roberts, 2001)
From the interviews conducted across the four case studies, we found that the chair–chief executive officer (CEO) relationships varied in several ways – from values and professional and contractual issues to formal and informal governance mechanisms (Goodman et al, 2021)
We found that the foundational bases of the chair–CEO relationship determines the trust and distrust mix, which has implications for effective board dynamics

Summary

Introduction

An underlying assumption in agency theory is that distrust, rather than trust, plays a dominant role in the regulation of governance actions and behaviours (Eisenhardt, 1989a; Roberts, 2001) This view places trust and distrust at the centre of the discourse on corporate governance (CG) relationships (Nicholson et al, 2017), constructs that are often considered to be the polar opposites of each other (Schoorman et al, 2007) and have been characteristic effects of accountability (Roberts, 2001).

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Conclusion