No value in boards of directors
Article Date: Oct 23 2007Entrepreneurs find the concept of boards of directors a turn-off, according to a study from the Association of Chartered Certified Accountants (ACCA). Owner-managers of small and medium-sized enterprises (SMEs) interviewed by ACCA believed that boards would simply constrain them in running their businesses.
The study of 60 SMEs finds that few have working boards, and the handful of non-executive directors who are used are mostly relatives. Business owners like to take key decisions themselves and fear losing control to ‘outsiders’, the research claims, adding that even those who acknowledge that additional directors could fill existing skill gaps do not believe they could afford them.
Colin Coulson-Thomas, professor at the University of Lincoln, who carried out the research, suggests the downside to this approach is that operational issues typically take priority over strategy. Hardly any of the businesses studied had working boards which met regularly or addressed longer-term strategic issues.
In fact, boards and non-executive directors were seen as a ‘large company’ issue dealing with compliance rather than adding value to SMEs. Says Coulson-Thomas: ‘What was most striking – and sad – about these findings were that virtually no entrepreneurs were able to sum up succinctly what was special about their business or what their long-term vision was. Some of them had real potential, which independent advice in the shape of new directors could help them realise, but they couldn't see it.’
Paul Moxey, head of corporate governance and risk at ACCA, comments: ‘SMEs are missing out on the experience, objectivity, fresh thinking and skills that effective boards can provide.’
