Friendships in the boardroom: a case study of director identity and accountability failure
Natalie ElmsPurpose
Drawing on role identity theory, this study explores how relationship dynamics and boardroom norms shaped directors' interpretation and enactment of accountability in a high-profile case of corporate governance failure.
Design/methodology/approach
This qualitative case study analyses data from public inquiry documents, including director witness interviews and official reports, to give rare insight into boardroom practices.
Findings
Strong relational ties within a boardroom can create tension between directors' friendship obligations and their fiduciary duties to shareholders, weakening behavioural independence despite formal independence classifications. In addition, limited reinforcement of directors' role standards weakens directors' identification with the role, allowing a competing friendship identity to become more salient and contributing to director disengagement and accountability failure.
Practical implications
The findings suggest a need for regulators to reconsider definitions of board independence and for boards to actively reinforce director role expectations through formal and informal board practices.
Originality/value
The study extends role identity theory within corporate governance by introducing friendship as a distinct boardroom role identity and showing how competing identities can redirect directors' accountability. It also demonstrates the value of public inquiry data for governance research by providing rare insider accounts of director behaviour and boardroom processes that are usually inaccessible to researchers.