Why do executives serve as non-executives? Pre-Cadbury evidence from UK non-financial companies

Abstract

This paper examines the extent to which executives in the largest UK non-financial companies served as non-executives in other companies prior to the governance reforms of the mid-1990s. The paper also seeks to identify factors that affected the holding of additional directorships by executives. The results reported here suggest that possession of non-executive directorships by executives was not widespread. The average number of additional directorships held by each executive was 0.15 with CEOs being the principal holder of such positions possessing an average of 0.33. Indeed, 89.5% of executives (76.4% of CEOs) held no additional directorships. The holding of additional directorships was positively related to the level of non-executive representation on the board of the executive's company, executive tenure and company size but negatively related to executive ownership. The presence of CEO duality had a positive impact on the holding of additional directorships by CEOs.