UK listed companies’ board members’ values: What is the impact on wealth creation?

Corporate entities exist and operate with the primary objective of creating value (Mahajan, 2016). The role of boards in creating value for various stakeholders is well-recognised and is elaborately commented on by scholars (Kakabadse et al., 2018; Kakabadse, 2015; Huse, 2008). Scholars recommend various combinations of board compositions to improve boards’ ability to add value to organisations and their stakeholders, such as board independence, and board capital. Board independence refers to having a majority of independent directors on boards. Another tool for board independence is independent board leadership, i.e. separation of roles between the CEO and the Chair. Independent boards are expected to prevent value destruction by supervising and challenging the executives. Board capital - intellectual and relational - on the other hand, helps board add value by improving their stewardship role of advising and mentoring the executive efficiently (Johnson, Schnatterly, Hill, 2013; de Villiers, Naiker, and van Staden. 2011). Boards globally have adopted many of these recommendations to improve their ability to create value.
However, a lack of moral leadership and absence of values in decision making has led to significant corporate distress such as Volkswagen (Hotton, 2015), Sports Direct, Carillion scandals (Merrick, 2018) and highlight the need to change the way companies are governed. A few studies such as Adams et al., (2011) explore the role of personal values of directors in their decision making, though the field is still in a nascent stage of development (Johnson et al., 2013). Strategic Leadership theory (Finkelstein et al., 2009) as well as Upper Echelon perspective (Hambrick and Mason, 1984) acknowledge that values of corporate leaders may influence their actions and firm outcomes. However, empirical evidence of the role of value- set of board members in board governance needs to be investigated to explore their role in value creation by boards. In this paper, we address this research gap and answer following research questions:
Qu. How do values of board members of listed companies in the UK, influence wealth creation?
We collect data by interviewing 15 Chairs of listed companies in the UK and seek their perspective on the impact of their value-set in their decision making. Findings of the study suggest that religious beliefs and practices which directors are exposed to in their impressionable years form their value-set which guide their perspective and actions all their lives. Additionally, a few experiences of adult life, such as suffering gender-based discrimination, and parenthood add new values which have a profound impact on thinking and actions of directors. These experiences/ exposures impact the perspectives and actions of board members irrespective of their gender, ethnicity and background. Both sets of values – formed during impressionable years and later years of life – impact directors’ decision-making and contribution in boardrooms.
The paper also discusses how these two sets of experiences form value-sets of directors. The value-set influenced by directors’ exposure to religious practices and beliefs continues to impact their decision making even after they have consciously distanced themselves from any established religion. These value-sets influence their decision relating to their accepting and leaving professional engagements, and their approach to governance. Additionally, value-set of directors which are derived from their professed religion may also have the potential to change the culture in organisations. The value-sets of later age, formed through their experiences, such as discriminaion and parenthood give directors’ a higher sensitivity towards certain causes and instil conviction and zeal to pursue their commitments even beyond boardrooms. The study also reveals that directors often attribute their corporate/ professional success to their value-sets and claim that ‘righteous governance’ ensures sustainable value creation and prevention of potential value-destruction in companies. Acknowledging and operationalising the values which form their attitude and influence actions will not only lead to the personal success of directors, but will give a competitive edge to listed companies in the UK. Thus, companies aiming to achieve these objectives may obtain them through their directors who are driven by their values.
The findings contribute significantly to Strategic Leadership theory (Finkelstein et al.,
which suggests the role of values of board directors in corporate performance but
if at all, been empirically established. To the best of knowledge of the authors,
operationalisation of values of directors in value creation by boards and firm outcomes
academically investigated. The findings also contribute to Moral Leadership
1992) by presenting the evidence of the role of values in the decisions of boards’ Chairs.
Additionally, the article has significant practical implications as well. The findings suggest that boards of listed companies move from their monitoring, mentoring and resource provisioning role to the role of the moral compass of the organisation. By putting the moral aspect of governance as the bedrock of governance will only result in sustainable benefit to a multitude of stakeholders, and create wealth.