Pye a Corporate Directing Governing Strategising and Leading in Action

Corporate Directing: governing,strategising and leading in action*

Annie Pye**

This paper elaborates the concept of corporate directing, integrating the processes ofgoverning, strategising and leading by which small groups of people effectively runorganisations. If governing and strategising are the warp and weft of this fabric, then leadingis the textural imprint that is created through the enacting of corporate directing. Based ontwo ESRC-funded research projects (19879 and 19982000), it offers data on which thisconcept is based, drawn from large UK plcs (e.g. Prudential, Marks & Spencer) and selectedinstitutional investors (e.g. Hermes, Philips and Drew).

Keywords: Corporate governance, leadership, corporate directing, executive directors, non-executive directors

Introduction

T his paper introduces the concept ofcorporate directing, which is taken to bean integrative process of governing, strategis-ing and leading by which directors enact theirroles in large organisations. Although thephrase has been used in other work relatingto this project, this is the first formal attemptto develop and articulate the concept with awider academic and practitioner audience.

Divided into three main sections, the paperbegins by outlining the background andcontext to the research project upon whichthese ideas are based. It does not includelengthy consideration of methodology andmethods as these have been well documentedelsewhere (Pye, 2001). However, this sectionsets the scene to the project and then looksmore closely at each of the dimensions ofdirecting: governing, strategising and leading.The emphasis is retained upon process ratherthan practice because it is common for allorganisations now to claim they have soundgovernance practices, but it is only throughthe doing of governing, i.e. how they actuallydo their practice, that it is brought about. Eachof these sub-themes considers something ofthe relevant literature as well as illustrations

from practice upon which these themes aredeveloped.

This is then followed by a discussionsection, which looks more closely at some ofthe difficulties of the concept of corporatedirecting. It raises a number of unresolvedquestions, which highlight some of the ob-stacles to developing a clear understanding ofthis subject. For instance, directors are heldindividually responsible for their actions inlaw, yet their decisions are usually made ina collective forum called the board, and itis a well-known fact that people sometimesact differently in groups compared to theirindividual actions. There is also an arrayof power issues that underpin corporatedirecting, including the power of investorsto define the acceptability of directors ex-planations of corporate performance; thepower of the Chairman to determine theeffectiveness of other directors and NEDs inparticular; and the power of the Triumvirate(Chairman, Chief Executive and FinanceDirector) to shape what happens at this level.Not surprisingly, with continuing efforts toencourage open and transparent governance,there appears to remain a strong principle oftrust that underpins the enacting of corporatedirecting.

* This paper was presented atthe 4th International Confer-ence on Corporate Governanceand Direction, 1517 October2001, at the Centre for BoardEffectiveness, Henley Manage-ment College.** Address for correspondence:School of Management, Uni-versity of Bath, Bath BA2 7AY,UK. Tel: 01225 386128; E-mail:[email protected]

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Corporate directing: research contextand model

The idea that top management is somehowdifferent to other management has beenaround for a long time. The work of Ham-brick and Mason (1984) in particular, iden-tified and distinguished characteristics andvalues of these higher echelons (see alsoNadler and Tushman, 1990; Tichy and Charan,1995; Finkelstein and Hambrick, 1996). Thegeneral view is that not only are they differentto other managers, but also that they make adifference to their organisations. So with this,our thinking went (in 1986, when we firstinitiated this project), perhaps it means thereare different competencies which are char-acteristic of effective top managers. Hence in19879, we studied chairmen, chief execu-tives (CEs) and board members in 12 largeUK plcs to explore this question.1 We quicklyfound, however, that no matter how care-fully one seeks to describe the competenciesof individuals, it is actually their effect ina collective dynamic (i.e. a small group ofpeople engaged in continuous, purposiveaction) that leads to the attribution of effec-tiveness being given (or not) by others to theirperformance.

So we began to look more closely at howsmall groups of directors ran large organisa-tions and the variety was considerable: e.g. atHanson, two central directors supported by aselect group of key people created a verytightly driven financial management system;at Glynwed, the shared ambition of boardmembers was that of becoming the lowest-cost producer; while at Lucas, they were aim-ing to be one of the top three in their keymarkets; and so on. What was consistent toall, however, was that they had a strategicambition and engaged in continuous andconsistent communication (largely within,but also outside, their organisations) abouthow it was they were collectively going toachieve that ambition and beyond (Manghamand Pye, 1991).

Some ten years later, in 19982000, I returnedboth to former contributors and to their organ-isations to ask once again, how do you run alarge organisation?2 And while there are somesimilarities in terms of the previous projectfindings, there are also many differences interms of how they conduct their roles, includ-ing:

(i) in 19879, no one talked of corporategovernance, whereas now most contri-butors raise this subject of their ownvolition, implying greater awareness ofand sensitivity to such issues;

(ii) relationships with major shareholdershave changed considerably across thedecade and directors now see accountingfor their strategic direction as crucial inthis context; and

(iii) the role of director, both executive andnon-executive, is felt to be more criticallyunder the spotlight.

Hence, this paper draws together these threethemes of governing, strategising and leadingtogether into the concept of corporate direct-ing.

As often confounds organisational behav-iour scholars, life does not happen in neatlylabelled boxes: this is the prerogative of aca-demic analysts. That is, in neither study havedirectors been able to distinguish betweentheir behaviour in terms of, for instance,doing a bit of managing and a bit of leading instead, as we described it in the first study,they simply do managing (Mangham andPye, 1991). However, my current data set isnot best reflected as the doing of managing,as directors horizons seem to have changedconsiderably, and to call it the doing ofleading would also only give a partial viewof what it is they do. Hence, my recent find-ings lead me to propose a new concept calledcorporate directing to describe the enactingof governing, strategising and leading byorganisation directors.

Each of these key components of directorsaction is worthy of an entire book on its own:indeed, many business schools run wholecourses on each one. However, it is arguedhere that these themes are highly interrelatedand interwoven, with each influencing andbeing influenced by the others in the processof corporate directing. Indeed, one mightconsider governing and strategising to com-prise the warp and the weft of a fabric in adynamic and complementary tension, withleading both in terms of its enactment andits perception by others creating the texturethat is shaped through the threads (see Figure1 below). This interweaving is a continuous,forever-evolving and changing process, hence,it is important to focus on the integratedthemes of governing, strategising and lead-ing, rather than the more static and stablenotions of governance, strategy and leader-ship.

This fabric metaphor is a useful one at thisstage as one may have several differentthreads (influences of strategising, for in-stance) that interweave the material, andtexture and pattern (leading) can change.However, like all good metaphors, it is onlyone way of seeing and may preclude otherways of seeing (Morgan, 1986). Hence the

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discussion section of this paper goes on toexplore corporate directing beyond thesebasic themes and identifies some of thetensions that underlie it.

One aspect that is particularly difficult toarticulate is a tension between the analysis ofindividual and collective (board) actions. Thatis, according to law, directors are held to beindividually accountable (and are paid in-dividually), but their actions at board levelare clearly part of a collective and, as is wellknown in the study of organisational behav-iour, people acting together may do thingsthat they would never do alone (Myers, 1994).For this reason, I argue that corporate direct-ing is a relational concept, known only throughrelationships with others which are dynamicrather than additive. So rather than addingthe individual abilities of each director on aboard to calculate the total capability of thatgroup, it is argued instead that a board maybe greater (and sometimes less) than the sumof its parts.

Contributors themselves have offeredmany observations of differences betweentheir own and others boards in their ex-perience, as well as the relationships and

emergent board culture in each case thateffectively provide directions for action.While this re-emphasises that corporate direct-ing is a collective process, it also illustrateshow three individuals, in particular thechairman, CE and finance director (FD) andtheir relationships (or sometimes partner-ships) stand out as key to shaping and de-fining board culture, which has significantimpact on board effectiveness. However,corporate directing is known through morethan just board behaviour and includes allaspects of directors communications, bothexplicit and implicit, as well as inside andoutside their organisation, in the process ofshaping their organisations future.

Governing

Governing has always been an important partof the directors role, but during the courseof the last decade, it has commanded evengreater attention. One reason for this, as Quelch(2000) notes, is that in that time, organisationsthemselves have grown significantly in econ-omic influence:

Basic warp and weft governing and strategising processes:

From: http://www.millo.dk/images/bckgrnds/examples.html

Enacted through leading, bringing colour and unique form to corporate directing:

From: http://needlepoint.about.com/library/pics/jacquard-top.jpg?once=true&

Figure 1: The process of corporate directing


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. . . it is true that 50 of the top 100 economiesin the world are multinational corporations,not countries. An increasing amount ofpower is in the hands of a relatively smallnumber of business people who answeronly to their globally dispersed share-holders. (Quelch, 2000)

While politicians are seen to be accountable totheir electorates, directors are (in theory, atleast) accountable to shareholders. However,this line of accountability has been called intoquestion on numerous occasions in the lastdecade, including the Maxwell Pension Fundscandal, Polly Peck and Barings Bank dis-asters and more recently, apparent irregu-larities at TransTech and Tomkins and thecollapse of Independent Insurance. TheCadbury Committee was established in 1992(followed by Greenbury, Hampel and Turn-bull Committees), to develop a code of goodpractice with regards to governance and,indeed, the Combined Code of Practice wasadopted by the Stock Exchange in 1998.

The Combined Code (1998) was generallywelcomed by contributors to my study,although many felt this had led to a degreeof box ticking to ensure that the board haddone the right things. For some, this had hada detrimental effect on the role of the nonexecutive director (NED), where it now tookup the greater part of their time. For thisreason, I wish to distinguish between govern-ance and governing: governance impliessomething static and a box that can be ticked,whereas governing implies a social processand collective phenomenon, i.e. done withand through relationships with other people.Corporate governance is often identifiedthrough indicators such as board compo-sition, committee structure, executive com-pensation schemes and risk assessmentprocedures etc., which offer a snapshot viewof governance practice rather than the dy-namic process of governing. To exploregoverning, i.e. how governance is enacted,means unravelling the complex network ofrelationships amongst those who comprisethe body (board and/or organisation) whosepractice is being observed as well as relation-ships with outsiders who observe andcomment on this organisations governance,e.g. investors analysts and major share-holders, PIRC,3 customers, regulators etc.

This distinction between practice and pro-cess is brought into sharp focus when oneconsiders new governance, the phrasecurrently being promulgated by Pricewater-houseCoopers to describe the growing bodyof issues such as intangibles, stakeholderdialogue, reputation, customer service and

sustainability, which are not covered by thetraditional umbrella. It is argued here thatnew governance is not very different to oldgovernance (i.e. executive compensation andboard composition) to the extent that bothsets of indicators are concerned with ensuringthat companies are open and transparentabout what they do.

However, some might argue that suchopenness can be self-defeating: that you mayactually get more criticism for trying to bemore transparent, as Shell have complainedrecently (Delfgauuw, cited in Bingham, 2001),while those who stay quiet avoid attention.This illustrates the key point in appreciatingthe process of governing, which is that thereare two sides to this relationship. It is notsimply enough to say that companies haveto widen their reporting function to include,for instance, corporate social responsibilityand the like, but they must actively manage theinformation flow in ways that are credible andinformative. The other side of this, though,in terms of both old and new governanceis the demands this process then makes ofinvestors how do they use the flood ofinformation now emerging from companies? because the record of many institutions ofmaking judgements on even old govern-ance issues is far from perfect.

In a presentation to the PIRC Annual Con-ference (2001), Reuters Company Secretary,Rosemary Martin, made a scathing attack oninvestors inability to think outside the tickbox. She explained how Reuters had beencriticised for having offices in politicallyunstable parts of the globe, such as Venezuela,Bosnia and Cuba etc., and hence scored badlyon governance indices as a consequence. Butas she pointed out, as the vehicle for promot-ing freedom of speech in such countries, theywould be denying their entire raison detre ifthey didnt have offices in such places! So, sheargued, investors must think outside theirboxes. To this end, she also explained howshe had recently launched an innovativedirectors training programme across theReuters group. But in response, investorsand analysts seemed barely interested in suchmatters: they apparently preferred to evaluateReuters based around the issues on theirvoting template and director training does notscore highly.

So if, as a recent report by McKinsey claimedwas the case, three quarters of (200) institu-tional investors (surveyed) said board prac-tices were at least as important as financialperformance when evaluating investments(Dickson, 2000), one would somehow expectthem to be more interested in and attuned tothis kind of detail. But it seems that generally



they are not, at the moment, at least. There is,of course, great danger in talking of investorsas if they comprise a homogenous group: theyare all different, depending on the style of fundsunder management. However, what theseillustrations show is that actively managingthese relationships is a key part of governing.Paradoxically, while there is public pressure(e.g. PIRC, CalPERS, Corporate Library) foropen governance, much of it seems to happenoffstage or backstage behind closed doors oraway from public record (Pye, 2001). As mydata illustrate and Golding (2001) confirms,these meetings are a routine expectationamongst fund managers who not only wantto understand the strategy being pursued,they also need to make a judgement on man-agements ability to achieve that strategy(Golding, 2001, p. 170). This leads on to thenext theme in my model.

Strategising

If governing is about ensuring the legal dutiesand liabilities of directors are met effectivelyand accountably, then strategising providesthe reason for why these duties and liabilitiesexist in the first place: that is, without visionand strategy, there is no need for existencein the sense that there would be no futuredirection for the organisation. Hence, strate-gising the process of developing the futuredirection of an organisation provides anotherimportant thread to corporate directing.

Strategic focus is the contemporary mantraamongst directors in my sample, althoughtwo did suggest it may be current businessfashion. However, the consistency with whichthis phrase was used in my data suggests thatstrategic focus is a very powerful framingdevice for strategic decision making, giving aclear illustration of the shifting power andinfluence of institutional investors. For example,two organisations (Avon Rubber and Glynwed)had shed their original founding businessduring the last decade to focus on what wasnow identified as core business. Likewise, thetwo conglomerates in effect re-invented them-selves as a focused engineer (Invensys-BTRand Siebe) and an aggregates company(Hanson). Both these cases show how strate-gising must resonate with the wider organis-ation environment: that is, no matter howcapable and skilful, for example, the Hansonsenior management are at implementing theirstrategy of tight financial control (Goold andCampbell, 1990) and regardless of the con-tinuing stream of individually and relativelysuccessful acquisitions, if the market isunsure about the future, then the share

price falls together with most measures ofshareholder value. Hence, the link betweenstrategic focus and shareholder value also hasto be accounted for to the outside (investor)world.

Strategising refers here to the process bywhich directors go about shaping the direc-tion, future, vision etc. of the organisation.This day-to-day work of practitioners in-cludes both the routine and the exceptional(i.e. intentionally structured agency) and con-duct towards particular strategic goals ordirection. Importantly though, not all direc-tors or boards are uniformly involved in thestrategising process, nor is their involvementconsistent over time: that is, in times of crisis,a board is likely to be very closely involvedin formulating strategy, whereas in non-crisistimes it may simply receive and debateexecutive proposals. Either way, however,this collective of executive and non-executivedirectors (i.e. board) shapes the future direc-tion of the organisation.

The Institute of Directors Standards for theBoard document describes this key part of thepurpose of the board as setting strategy,whereas Stiles and Taylor (2001, p. 31) describeit as to set the context of strategy. Based onmy research, the notion of strategising seemsmore appropriate, because it is certainly thecase that rarely are these boards actually theoriginators or formulators of strategy: indeed,as we found with the first research project,. . . it is not so much whether or not you havesomething called strategy which is important. . . what really matters is that if by commu-nicating that your organisation has a strategy,this helps to focus peoples minds and actionsand to define meaning, then strategy may be ahelpful construct (Pye, 1995, p. 457). Thuswe concluded at the time that it is the theprocess of communicating and the collectiveoutcome of that talk which is important, notthe label that you give to it (p. 457).

Likewise, here I find that the process ofcommunicating (amongst board membersand with others, inside and outside theorganisation) and the collective outcome ofthat talk is important in terms of shapingfuture direction. For this reason, adopting aprocess notion of strategising a continuousprocess, shaping the organisations future seems more reflective of my data than theidea of strategy, which somehow has acuriously retrospective aspect to it a theoryabout the past and current success of the firm.One FD summed this up very neatly:

I can think of, at the moment, at least threebig moves we could make, all of which wecould argue into our strategy but they



would take us into different strategicdirections . . . I think a lot of strategy isretrospective. There are certain things whichfit logically and until youve made the bigmove . . . the speed at which weve got tochange size means we cant do it organic-ally, so weve got to do it by acquisition,merger, . . . And in that sense, its goingto be not only what we want but whatwere able to achieve. And thats why . . .actually if you a look at a lot of large com-panies, their strategy develops retrospec-tively. (Finance Director, italicised emphasisadded)

So how do directors decide their organis-ations strategic direction? Undoubtedly, thisis primarily shaped by executive directors,although NEDs were also seen by some tohave a role to play. Several were quitedismissive of the strategy awayday: a goodbonding exercise and opportunity to talk topeople off the daily premises, but not the bestway to develop corporate strategy. This mayhardly be surprising when one considersfrom ones own personal experience thatoften the most influential conversations, orthe discussions that make you think a littledifferently or ask questions of something, areusually those that take place outside ofmeetings (although this is troublesome froman open governance point of view). So away-day bonding may be important for thesesocial reasons, but as far as formal strategyis concerned, for some it seems that little ofsignificant strategic value appears to comeout of them.

Again though, this further emphasises theneed to consider the strategising processrather than simply the strategy. Perhapsthe most important conclusion to be drawnfrom their comments, however, is that, call itstrategy or vision or whatever, almost alldirectors agreed that what is crucial is not somuch the words on paper (i.e. about having astrategy) but the process of dialogue and debateby which these words are brought into action.Naturally, the organisations strategy docu-ment must have key words in it that explainto anyone what the business is about andwhere it is going, but the process by whichthose ideas were generated and debated, ideaslistened to and discussed, peoples contri-butions respected and reflected upon, i.e.strategising process, is much more importantthan the final document.

And here again, there is an interestingdimension from the investors point of view,which is that they seem to pay scant attentionto the process by which strategy is generated,but simply want to know that the board has

one. Yet, how managers generate their strategicthinking and agree a direction has a hugeamount to do with quality of outcome andhow effectively they are able to implement it.In my research, it seems that investors rarelypay attention to this detail, although they areinterested in the managers themselves.

Leading

The way governing and strategising are viewedin practice underpins the third dimension inmy model: leading. Leadership is reflectedin just about everything an organisation does,not just in what the executive team does,although there is still a curious assumptionthat the further up the organisation you go,the more leadership you do. And somehow,the assumption goes, this kind of leadershipis different from other kinds of leadership asyou might find elsewhere usually lowerdown in an organisation. Bearing in mindthe original question with which we began,what is important about leadership at thislevel that might distinguish it from otherkinds of leadership?

If you could actually define what youmeant by (other kinds of) leadership, it mightmake it a bit easier to answer this question!Generally, it is taken to mean leadershipperformed by those in a director role, whichis then differentiated between executive andnon-executive directors. But the root of theword to lead has an interesting derivation,which refers to a road, a journey, to go to, totravel ahead:

To lead:to guide with reference to action oropinion;to bring by persuasion or counsel to orinto a condition;to conduct by argument or representa-tion to a conclusion;to induce to do something. (Said both ofpersons and motives, circumstances,evidence, etc.) (OED on line)

And contributors would agree with this, butwould also take a slightly more pragmaticline to the extent that they think thingsthrough, not necessarily to a conclusion,but instead, to a decision, which impliesfurther action (see Mangham and Pye, 1991,p. 20). In essence, their role is to lead the way,but it is not so easy to articulate how they dothis.

For instance, it is easy to become side-tracked into focusing on the people andindividual leaders involved, which then leadsone to altercast others into a non-leading



position. Yet boards illustrate a collection ofleaders who are together enacting collectiveleadership, even if one person, i.e. the CE,ultimately stands more clearly identified inthis process than any others, as primus interpares. When put like this, it is hardly sur-prising that traditional views of leadershipappear more appealing, as it is much simplerto rely on an inspiring and energising figure-head than to try to identify shared or collectiveleadership. For example, motivation, align-ment, cohesion and the ability to focus fol-lowers on goals, values and visions are thecentral features of good leadership (Kotter,1988) is somehow more palpable than aprocess of transformative change where theethics of individuals are integrated into themores of a community as a means of evolu-tionary social development (Barker, 2001).

From my data, it is clear that leading at thislevel happens through communication as wellas through a host of organisational processeswhich support particular strategic initiatives.That is, while leading is usually thought ofthrough face-to-face social influence, there aremultiple ways in which organisational struc-tures and systems influence the actions peopletake and the direction in which the collectivegoes. Interestingly, characteristic of somedirectors in my sample is an appreciation ofthe limits to their influence that is, they mayhave a broad corporate overview from thedirecting point of view, but as far as theinfectious quality of their executive leader-ship is concerned, most of them are awarethat they can really only inspire those rela-tively close to them. It is not impossible todeepen their influence and many do sothrough spending a lot of time on the road.A different illustration is the case of Sir PeterDavis in a series of TV advertisements runby Prudential in 1996. He was newly in postand took an essentially risky step to front theTV advertisements, which effectively apolo-gised for pensions mis-selling and committedPrudential to changing culture in the processof redressing the situation. In his view, thiswas a very effective means of powerfullyreaching all Prudential employees and show-ing that this was a real and total culturechange for everyone, rather more traditionalmeans such as training programmes and in-house communications within Prudential. Italso did much to repair their reputation withtheir customers.

It is easy to say that directors should begood communicators, but this is a nonsensephrase that may disguise the more importantability to relate to people: that is, they aregood at talking and listening to people as wellas being able to walk the talk. In addition, it is

not a quality that can be applied globally toall in my sample, as some are less influentialthan others in leading in this way. An alter-native analysis suggests that they are good atconsistently explaining their organising,something which they do all of the time, ineverything they do. Hence, while most effec-tive CEs and some chairmen are visible,perhaps more important for directors as awhole is that they are strongly connected totheir organisations and beyond, developingrelationships and rapport with people acrossthe field.

Discussion

The concept of corporate directing describesthe integrative process of governing, strate-gising and leading in action, i.e. the enactingof directors roles both individually andcollectively. It is a relational concept, onlyknown and brought about through otherpeople, and includes all aspects of directorssymbolic actions. Pfeffer (1981) describedmanagement as symbolic action: it is arguedhere that directing is symbolic (en)acting.

However, there are several tensions under-lying this concept, which will be outlined inthis discussion.

(i) With different director roles, does eachkind of role occupant demonstrate a dif-ferent kind of directing? For instance, isCE directing different to that performedby the FD, the chairman, the non-executive or the senior non-executive?In principle, I would argue from my datathat the answer is no: it is a generic termthat describes the integrative process ofgoverning, strategising and leading atthis level of organising. In practice, yes,observers undoubtedly find ways ofdifferentiating between the functionand performance of different individualsand (board) groups (Pye, 2000a; Stilesand Taylor, 2001) and indeed, investorshave quite distinct views on their ex-pectations of CEs as opposed to FDs asopposed to senior NEDs, as opposed tochairmen etc. Importantly, these differ-ences also change over time such that, onoccasions, a NED may be more involvedin strategy formulation than at othertimes.

(ii) This then leads one to consider whethereach director must perform well in allthree of these dimensions or is it simplythe case that collectively, as a board, theymust perform well across these three di-mensions? And how might one know



the difference? Herein lies a very inter-esting research challenge. Intuitively,one would argue that equanimity of in-dividual contribution is neither possiblenor necessary; however, practically (andtheoretically), it is then a very big stepup to evaluate the collective achievementof all three combined aspects of direct-ing.

(iii) This leads to perhaps the key tensionunderlying the concept of corporatedirecting, which is the relationship be-tween individual and collective. Direc-tors always say that each member oftheir board has to be an effective playerand that everyone must pull their weightetc., although it is always the case thatwhen members of a group work together,there is rarely total equality of input orability: as Jay (1980) pointed out in hisanalysis of Belbins work, nobodysperfect but a team can be. Yet legally,each directors performance is accountedfor individually: they are held to beaccountable for their own individualactions and indeed, are paid based onindividual performance. So in this case,if there is a weak link, in theory at least,this person would be highlighted andpresumably helped to leave if the weak-ness was seriously undermining boardperformance. Yet the weakest link inpractice seems to be an inability toaccount for the relationship betweenindividual and collective action.

(iv) So how does one then account for thedifferences between boards, even whenperhaps some of the directors are thesame? Certainly, in one case, a verysenior NED with experience in manydifferent boards illustrated one boardwhere he was a very effective andpowerful player and the company per-formed very well and another, where thecompany performed very badly and thewhole board appeared less than effectivein the face of a powerful CE. So, indi-vidually, this NED had taken his un-doubted skill sets and high professionalstandards to both boards and the out-come had been very different. So as faras inputs to the board are concerned, heremains the same person (individual)throughout, yet in terms of effectivenessof the collectives, the situations arealmost incomparable. One might saythat this is simply because of differentorganisations in different industry sec-tors at a particular time in their corporatehistories. However, the key point here isthat regardless of the individual input(s)

to any board, there are a host of con-tingency factors which mean that the waythings are done in each board, i.e. theboard culture, is very different.

(v) There are a host of power implicationsin this discussion, including questionsabout the power of board culture, thepower of investor influence and theenacting of both individual and collec-tive power and influence to shapecorporate outcomes. It is proposed herethat the emergent board culture dependsvery largely on the chairman, CE andFD and their relationships whicheffectively provides directions for ac-tion. The aphorism of the chairmanruns the board and the CE runs thecompany is often used to sum up theirparts, to which I would add that the FDalso ensures that the numbers add up.4

Effective relationships between theseplayers do not seem to depend on whereyou draw the lines between them, solong as each party understands andagrees where it is. Although it is hardto access this point, my data seem toevidence a series of partnerships under-pinning their doing of corporate direct-ing: that is, partnerships betweenchairman and CE, CE and FD and tosome extent, chairman and FD.

Importantly though, how they actuallydevelop these partnerships is different ineach board case. In some cases, the combina-tion can be very powerful, described by oneNED as impregnable. Consequently, enact-ing the NED role and NED effectiveness inthis process depends significantly on thechairman and also the CE. Hence, boardculture differs in each case, but as Petersand Watermans (1982) search for excel-lence revealed, it is impossible to define anideal culture, particularly where the tone andtenor of relationships amongst board mem-bers influences conduct and relationshipsboth inside and, in a much wider field,outside board meetings.

The power of investor influence is alsodifficult to ascertain and, where directlyquestioned, most contributors said investorsdid not act as a ghost at the bargaining(board) table. However, it is impossible toidentify the extent to which investor meetingshave influenced thinking and informationprior to any board meeting or discussion,although it seems most likely that thishappens. Hence, investors power is palpablygreater than in 1989, but the extent to whichit can be evaluated in corporate directingremains unclear (Pye, 2001).



A director of a company must in any givencase

(a) act in a way he decides, in goodfaith, would be most likely to pro-mote the success of the company forthe benefit of its members aswhole . . . and

(b) in deciding what would be mostlikely to promote that success, takeaccount in good faith of all thematerial factors that it is practicablein the circumstances for him toidentify.

This is taken from the statement of generalprinciples by which directors are bound inCompany Law, following lengthy debatethrough the recent Company Law Review.However, I can find no similar statementreferring to board conduct, even though it isa well-known fact that people in groups dothings that would be unthinkable when actingalone. This in part reflects the different powerto influence played out by different actorsin different situations and is something thatseems to remain relatively unexplored inboard contexts.

Given the above observations, I concludethat trust is a critical element that facilitatesboard relationships, both inside an organisa-tion (Stiles and Taylor, 2001) and with outsideinterest groups, including the wider society.Within the board context, director relation-ships seem characterised by respect, which inturn may lead to trust. However, these arequalities that are earned such that subsequentreturn on earning trust can be considerable,although it does occasionally need reapprais-ing in order to avoid complacency. Forexample, much attention is paid to ensuringdirector independence (e.g. Hermes website)as a means of heightening trustworthiness.Yet it is concluded here that independenceis an impossible ideal in this arena, where thenetwork of relationships over time is verydense and where things are only made tohappen through ones relationships with in-fluential others (Pye, 2000b) and where eventhe most independent NEDs are still depen-dent on the chairman and key executives forinformation, the very lifeblood of their role.

Conclusions

There is much more to running a largeorganisation effectively than either tickingthe boxes of corporate governance or devel-oping strategic direction or demonstratingdynamic leadership. Each board and organis-ation in my sample is unique in how it runs

its affairs, a uniqueness that changes with timeand people. This paper offers some work-in-progress findings that draw together someaspects of this process and proposes theconcept of corporate directing.

It is argued here that corporate directing isa valuable way to conceptualise the processesof governing, strategising and leading bywhich small groups of people effectivelyrun organisations. Governing and strategis-ing can be considered as the warp and weft ofthe corporate directing fabric to which thenotion of leading is interwoven to create thetextural imprint that defines the fabric: henceeach weave and fabric is different. The em-phasis is on the continuous process of enact-ing their roles in which it is almost impossibleto distinguish between doing a bit of govern-ing, a bit of strategising or a bit of leading:instead, they do directing.

Hence, corporate directing is described as arelational concept, known through and iden-tified by other people. It is also symbolic inconduct and consequence: through all aspectsof their behaviour, both individual andcollective, directors are seen to communicatetheir organising (Mangham and Pye, 1991),shaping a collective appreciation of corporatedirection. Given that much of their time isspent developing relationships outsidetheir organisations and that the power todefine the acceptability of corporate explana-tions of performance now seems to lie outsidethe organisation, this also includes relation-ships with investors, analysts and others,as well as with other board members andorganisational members. It is important toremember that there are two sides to theserelationships: hence where openness andtransparency in governance is consideredimportant, it holds implications for bothparties to the relationships and not simplycorporate directors.

Challenging questions still remain, whichinclude: the difficulty of teasing out therelationship between individual and collec-tive action and how this might be known andevaluated; differences in the power to influ-ence the enacting of corporate directing; andthe importance of trust in an era of opennessand transparency in the conduct of corporatelife. As one contributor pointed out, if thechairman and/or CE and/or FD connive todo wrong things, then it is very difficult foranyone (and non executives in particular) tofind out what is going on. Hence, the roles ofchairman and CE are of particular importanceto the enacting of corporate directing, as theformal focal point of this higher echelon isthe board, where the chairman and CE have apowerful influence on shaping board culture



and the way things (including governing,strategising and leading) are done.

Notes

1. This project was funded in 19879 by theEconomic and Social Research Council, undergrant number WF 2925 0020 and involved46 interviews conducted with board membersat Avon Rubber, Beazer, BTR, Coats Viyella,Glynwed, Hanson, Lucas, Marks & Spencer,Metal Box, Prudential, Reckitt & Colman andTSB.

2. The author is grateful to ESRC for theircontinued funding of this work, under grantnumber R 000236868. This paper is based ondata generated from 25 interviews with pre-vious contributors; 35 interviews with currentboard members in Avon, Beazer, Coats Viyella,Glynwed, Hanson, LloydsTSB, Marks & Spen-cer, Prudential, Reckitt & Colman and ScottishPower; and interviews with chief executivesat (or similar) Hermes, Gartmore, Liontrust,Merrill Lynch and Philips and Drew.

3. Pensions and Investment Research Consul-tants, an influential pressure group that ad-vocates greater transparency in governance.

4. One FD described his felt need to tell the storyof the accounts, in order ensure that othersshared the same interpretation as he made. Inaddition, Golding (2001) makes the point thatearnings figures are easily and frequentlymanipulated. Hence, there is also consider-able power in this role.

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Annie Pye is a Senior Lecturer in Manage-ment at the University of Bath, School ofManagement. She was funded by ESRC in19982000 to repeat her 19879 study of chiefexecutives, chairmen and board members inlarge UK organisations, e.g. Prudential,Marks & Spencer, Hanson, etc. Her empiricalwork and writing relates to strategy, leader-ship, structure, culture, top teams, corporategovernance and social capital: perhaps bestsummed up by the phrase sensemaking.She wrote The Doing of Managing with IainMangham and publishes in a range of journals,including Organization Science, Journal of Man-agement Inquiry and Corporate Governance.



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