Investigating the Development of the Internal and External Service Tasks of Non-executive Directors: The Case of the Netherlands (1997-2005)

Abstract

During the last decade, globalization and liberalization of financial markets, changing societal expectations and corporate governance scandals have increased the attention for the fiduciary duties of non-executive directors. In this context, recent corporate governance reform initiatives have emphasized the control task and independence of non-executive directors. However, little attention has been paid to their impact on the external and internal service tasks of non-executive directors. Therefore, this paper investigates how the service tasks of non-executive directors have evolved in the Netherlands. Data on corporate governance at the top-100 listed companies in the Netherlands between 1997 and 2005 show that the emphasis on non-executive directors’ external service task has shifted to their internal service task, i.e. from non-executive directors acting as boundary spanners to non-executive directors providing advice and counseling to executive directors. This shift in board responsibilities affects non-executive directors’ ability to generate network benefits through board relationships and has implications for non-executive directors’ functional requirements.