Does having a former politician or ex-governmental official provide a firm with a competitive advantage over firms that do not have such representation on their boards?
Do Canadian directors wish to have an ex-politician or a former government official serve alongside them on a corporate board in place of other prospective directors?
Those are the questions that StFX Gerald Schwartz School of Business faculty member Dr. Mark Fuller and co-author Chris Bart from the Caribbean Governance Training Institute ask and answer in a recent article just published in the open access journal Corporate Board: Role, Duties and Composition.
In researching the article, “The political duality: On the advantages and disadvantages of ex-politicians and former government officials serving on boards of directors,” Dr. Fuller says they conducted a survey of 82 Canadian board members and followed up with in-depth qualitative interviews with 10 directors.
“Obtaining perspectives on corporate governance directly from board members is notoriously difficult, and typically American-centric, so our research is rare and novel in this regard,” he says.
Their findings suggest that firms in heavily-regulated industries, firms that sell a lot to government, and firms that frequently interact with foreign governments may benefit from having a former politician or an ex-government official on their board of directors.
Nonetheless, he says, 61 per cent of their survey respondents preferred someone without political or government experience to join their board of directors.
“In addition to implications for theory, our article has implications for corporate governance. Prior research in the literature suggests that the appointment of someone with previous political or government experience to the board may affect expected future returns by the firm, and our survey respondents would agree,” Dr. Fuller says.
“Corporate political activity also has the potential to increase the perceived value of the firm. With 73.1 per cent of our survey respondents expecting the role of business to grow a little or a lot over the next decade, understanding of the impact of corporate political activity on that role is critically important.”
This research is, in part, made possible by the Government of Canada Research Support Fund.
