Need a non-executive director? Why not a CEO?

In the US – but in other places as well – there's a crying need for more non-executive directors, those outsiders who help the company make the toughest decisions. Complaints of "shortages" are often countered with assertions that the old-boys-club of boardrooms ought to look at women, ethnic minorities, even academics, rather than simply at themselves. But there's another channel for directors, the future members of the old-boys-club. They are the sitting CEOs. People who are already CEOs have clearly got something going for them, right?. Maybe it will rub off on us. Having a CEO from a big-name company on our board will raise our profile, build our reputation. What could be wrong with that?

Plenty, according to a think-piece published by Stanford University's corporate governance research centre. There is currently "no widely accepted, rigorous study" that shows that sitting CEOs are better board members than other outsiders or that companies with CEO directors get better advice or monitoring. "In fact, recent survey data suggests that active CEOs might not always be the best board members because of the time constraints of their full time job and personality attributes that may make it difficult for them to contribute constructively to a boardroom environment," they write.

Source document: The discussion paper "Are Current CEOs the Best Board Members?," by David Larcker and Brian Tayan, is a six-page pdf file.