When accountability and identity collide: how director identity shapes board tenure

ABSTRACT

This paper examines why some non-executive directors outstay their welcome and serve on boards beyond recommended tenure limits. Based on interviews with experienced non-executive directors in Australia the study shows that directors can serve for too long on corporate boards and that these prolonged tenures can create governance concerns for shareholders. To explain what motivates board directors to serve beyond the tenure limits generally accepted as best practice, the study draws on role identity theory and provides evidence that board directors can be reluctant to relinquish their board position if doing so means that they can no longer call themselves a board director. Decisions of continued board service can therefore create a tension for non-executive directors who are expected to be accountable and promote shareholders’ interests yet may instead be motivated to protect their own identity as a director. These insights have relevance for boards and corporate governance practice and suggest a board renewal policy can act as an important defence against directors’ reluctance to leave a board voluntarily.

KEYWORDS:

• Corporate governance
• accountability
• role identity theory
• director tenure

1. Introduction

Repeated corporate board scandals over the last two decades have ensured that the debate on corporate board accountability is seldom out of the headlines (Elms & Nicholson, 2020; Lauwo & Otusanya, 2014; Steckler & Clark, 2019). Despite a persistent academic and professional concern with improving board accountability, reflected in for example repeated revisions and tightening of corporate governance codes (Mees & Smith, 2019), an important dimension of corporate board accountability has received limited empirical attention in academic research: non-executive directors’ (henceforth NED) motivations for serving beyond recommended tenure limits and in turn its implications for corporate boards’ ability to self-regulate.

Research shows that prolonged board tenures can compromise independence and increase cognitive entrenchment, with deleterious effects on governance effectiveness. For example, scholars have found long board tenures can reduce financial and strategic performance (Huang & Hilary, 2018; Jia, 2017), diminish financial reporting quality (Kim et al., 2014) and inhibit directors’ ability to challenge and bring fresh perspective to board debates (Elms & Pugliese, 2023; Veltrop et al., 2018). In response, regulators have established guidance to limit NEDs’ tenures. While few jurisdictions have mandated a maximum length of tenure, most provide a recommended limit of between 9 and 12 years, thus providing a clear signal for when it is time for a NED to step down and give way to new candidates and to facilitate board renewal (Huang & Hilary, 2018). Shareholders and investor groups appear supportive of these recommendations with research indicating that boards with longer serving directors are penalised by shareholders who view them as entrenched and outmoded (Brown et al., 2017). Despite this, analysis of board practice suggests that board tenures do not always adhere to the recommended guidelines (Dou et al., 2015). For example, NEDs are commonly found to serve on corporate boards for periods of 20, 30 and even 40 years (Burke et al., 2019; IRRCi:2017; Lublin, 2013). This suggests a gap exists between regulatory and investor expectations of NEDs and their actual behaviours surrounding continued service on a board. This study aims to explore why this tenure tension exists by addressing the following research question: what motivates non-executive directors to serve on boards beyond recommended tenure limits?

We sought to gain insights into NEDs’ motivations for remaining on boards and their perceptions of tenure limits through in-depth interviews with 11 Australian NEDs, each with deep directorial experience and altogether had served on 68 boards. Australia has a well-developed set of corporate governance guidelines, which are generally well-adhered to (Kiel & Nicholson, 2003). Yet, like many other jurisdictions, prolonged board tenure remains problematic. In 2019 a study reported NED board tenure of up to 43 years, with 11% of all NEDs across the Australian Stock Exchange (ASX) serving in excess of 12 years, a figure that increased to more than 25% in certain sectors, and 19% across mid-sized firms (Guerdon Associates, 2019). Hence, Australia serves as a relevant setting for exploring the motivations for prolonged board tenure and the broader implications for corporate boards’ ability to self-regulate.

Within the accounting discipline, the corporate board is considered an internal accountability mechanism. The corporate board must ensure that the company’s management act in accordance with the interests of the shareholders (Brennan & Solomon, 2008), and increasingly, a wider range of stakeholders (Vitolla et al., 2020). The corporate board is also collectively responsible for compliance with financial and non-financial reporting, audit, disclosure, and listing rules (Ahmed & Uddin, 2022). The literature on corporate board accountability is dominated by an agency theory perspective, and the resultant principle that NEDs are appointed to monitor the CEO to ensure that the CEO’s actions are aligned with long-term return on investment (Shapiro, 2005). This is reflected in corporate law whereby directors are expected to maximise shareholder wealth under their fiduciary duty to the firm (Nir, 2020). However, anecdotal evidence suggests that NEDs are not always motivated to safeguard shareholders’ best interests. For example, the Financial Times reported that Times Warner’s CEO commented that “If directors join a board because of status or reputation … then they are not as interested in making money – and to that extent, they don't represent the interests of the shareholders” (Rovnick, 2018). Similarly, the corporate board of Xerox was deemed to have shown “brazen self-interest” by blocking a merger with Fujitsu “for their own personal self-interest” (Rovnick, 2018).

Fama and Jensen (1983) in their seminal article on agency theory posit that NEDs are incentivised to act in the best interest of the organisation and its shareholders, since “directors have incentives to develop reputations as experts in decision control … the value of their human capital depends primarily on their performance” (p.315). Thus, failure to act in shareholders’ interests can lower NEDs’ value in the directorial labour market and impact their ability to gain subsequent board appointments (Fama, 1980; Fama & Jensen, 1983). This has important consequences for governance in practice, as it suggests that boards can be trusted to self-regulate, since not fulfilling their duty to shareholders would negatively impact NEDs’ reputation (Hendry, 2005). However, mounting evidence in practice and research suggests otherwise. Research in behavioural agency theory has sought to introduce a more nuanced view of human behaviour to agency theory, and specifically “places much greater emphasis on agent motivation than the standard agency theory” (Pepper & Gore, 2015, p. 6), however, this research has in the main limited itself to reassess the motivations of the CEO (e.g. Capezio et al., 2011; Miller et al., 2014; Zolotoy et al., 2022), but not of the NEDs whose motivations have been left relatively unexplored.

This study is framed using the socio-psychological theory of role identity to explore NED motivations for prolonged tenure, adding to the growing body of research in behavioural governance that has extended our understanding of director motivation by drawing on theories of identity (e.g. Elms & Nicholson, 2020; Hillman et al., 2008; Withers et al., 2012). Our findings show the importance of the NED identity to many directors, and how the NED identity can become more important to them than fulfilling their role requirement to step down from the board when guidelines suggest that they should. Instead, maintaining their identity as a director serves as a compelling reason for prolonged tenure. As such we help to explain why some directors are reluctant to leave a board, as doing so may mean relinquishing an important part of who they are. Overall, our results show that prolonged tenure is a governance concern for corporate boards, that are at risk of being viewed as stale because some NEDs are reluctant to relinquish the esteem and social regard they derive from their role and continue to serve beyond the recommended term limits.

This article makes three contributions; to theory, to research, and to practice. Firstly, our findings show that director motivations are more complex than how the agency-theory informed literature typically interprets them to be and that NEDs are instead subjected to the same vagaries of self-interest as the CEOs that they are appointed to monitor (Certo et al., 2007; Gibbs, 2016; Yusuf et al., 2018). Consequently, our study highlights and adds nuance to our understanding of the limits of agency theory and its boundary conditions in the context of board tenure and opens the field of role identity as an important vista for the board tenure debate.

Secondly, by explicitly incorporating role identity theory, we show how a given context – in this case, the question of board tenure – can lead to an internal conflict for a NED between adhering to the role requirements of the NED role and the esteem that comes from acting in shareholders’ interest on the one hand and the need to act against those very same requirements to maintain their role on the board and the identity they derive from it on the other. As such, we identify a context dependent situational paradox; where adhering to the premise of role identity and enacting the behaviours that come with the role such as stepping down after a certain period of tenure, can compromise the very role identity they seek to maintain.

Our final contribution is to inform the discussion on the limits of a board’s self-regulation that underpins corporate governance practices in many countries, including Australia. Existing practices on board tenure limits rest on the assumption that NEDs will exhibit a commitment to shareholders’ interests above their own when discharging their NED duties. Our results however show that this is not always the case and that the underpinning principles of agency theory that informs board practice in Australia and beyond provide insufficient safeguards against excessive tenure. The issue of term limits is therefore important in this regard and suggests that a board tenure policy can act as an important safeguard against long-serving directors who are reluctant to leave on their own account for fear of relinquishing their identity.

2. Literature and theoretical background

2.1. Motivation for continued board service

NED roles are sought after positions, and NEDs of major corporations arguably inhabit some of the most prestigious and influential positions in the private sector (Certo, 2003). NED roles are not only attractive from a status perspective; the role comes with substantial fees and emoluments as well as meaningful influence on corporate strategy (Certo et al., 2007; Dalton et al., 2007). However, some scholars have argued that since directors are likely to have had (or may still be enjoying) a successful and well-remunerated executive career, the financial rewards associated with directorships are unlikely to be the primary motivation for serving on a board (Adams & Ferreira, 2008; Stout, 2003). Moreover, since the role comes with great risk and personal liabilities, for example in the event of corporate mismanagement (Ryan et al., 2010), calls have been made for a greater understanding of individuals’ motivation to join – and remain – on a board (Hambrick et al., 2008).

Motivation can be extrinsic or intrinsic. Extrinsic motivation centres on externally driven reward, recognition, or sanction, whereas intrinsic motivation rests not on external validation or punishment but on levers that enhance the individual’s sense of autonomy, competence, or avoidance of self-inflicted punishment. Extrinsic motivation and intrinsic motivation operate concurrently and collectively make up an individual’s total motivation (Ryan & Deci, 2000). Survey based research has shown that both extrinsic and intrinsic incentives can be relevant to a person’s decision to join a board (e.g. Burke, 1997). De Jong et al. (2014) found that extrinsic rewards were important in some instances, but the individuals in their sample indicated they selected boards primarily on intrinsic incentives, such as the ability to contribute to board discussion and the firm’s future growth prospects. Once on the board, research suggests that directors are more likely to remain when a firm is performing well (Boivie et al., 2012) and leave when performance declines or firms face a crisis (Fich & Shivdasani, 2007; Withers et al., 2012) suggesting some role played by extrinsic motivations.

Overall, the literature provides some insights as to why NEDs join a board, and why they leave, yet it lacks a clear explanation as to why they remain on boards beyond recommended tenure limits. Prior research on corporate board motivation has highlighted that a deeper understanding of how these motivational drivers shape board practice is needed since much corporate governance literature relies on agency theory, which explains board service primarily in terms of extrinsic motivations such as director fees and the fear of director labour market sanctions (Mira et al., 2019). However, a significant hurdle in understanding director motivation, in general, has been the lack of direct access to boards due to the sensitive nature of their work (Leblanc & Schwartz, 2007). This has led to a reliance in corporate governance research on secondary data that can show us what boards look like but lacks the real-life insights to inform us how directors think, and as such, what motivates directors to remain on corporate boards (Ryan et al., 2010). As a result, the literature projects an incomplete picture of director motivation, limiting the ability to understand more fully what stands in the way of board accountability and good corporate governance practices when it comes to board service and adherence to the principles of self-governance surrounding board renewal.

2.2. Role identity: a source of motivation and behavioural choices

Role identity theory sits under the meta concept that is self-identity. Self-identity, or simply identity, is concerned with the meaning that a person attaches to the reflexive question of “Who am I?” (Brown, 2015). Role identity theory builds from symbolic interactionism, which argues that people do not act towards one another like a person would an inanimate object, but rather they interact. Interaction in turn creates the foundation of social life and thus social interaction both shapes and is shaped by individual identity (Denzin, 2004; Mead, 1934). Since people interact in groups, a person can have as many distinct selves as there are distinct groups whose opinions matter to them (Hogg et al., 1995). Consequently, key to a person’s self-identity are the various roles they occupy in society (Stryker, 1968; Stryker & Serpe, 1982). For example, a person may derive meaning from their role identity as a “student”, an “accountant”, a “teacher”, a “mother”, a “friend”. Each role identity reflects a set of standards prescribing the behaviours considered appropriate by others, which are used by those who occupy the role to guide actions and behaviour (Hogg et al., 1995; Stryker, 2007).

Although people hold multiple role identities, each role differs in their level of importance to a person’s overall sense of self, a property known as identity salience (Petriglieri, 2011). The salience of each role identity is used to organise, or rank, identities in an internal hierarchy. When a person has the possibility of enacting alternative or conflicting role-related behaviours the identity hierarchy is relied on to guide behaviour (Stryker & Serpe, 1994), such that the most important identity to the person at the time is enacted on. Thus, an important aspect of role identity theory is that how a person responds in any given situation will depend on the relative salience of each identity.

Identity salience, or the importance attached to a given role identity, is derived from a person’s commitment to the role, where commitment is conceived through social ties and the importance of the relationships dependent on a person occupying a particular role (Stryker, 2007). Recognition by significant others is also relevant to identity salience as it increases the perceived importance and therefore commitment to a role. For example, a role that is viewed as prestigious or societally advantageous will bestow admiration and respect for the person who inhabits the role and can change how people view them (Ashforth et al., 2008; Ashforth & Mael, 1989). Once a person becomes committed to a role identity, they will be motivated to maintain and validate that identity by acting in ways that are consistent with the behavioural standards attached to the identity – a process known as identity verification (Stets & Burke, 2005). Self-esteem is the underlying motivation in this process as verification of an identity produces positive emotions such as self-efficacy, self-worth, and self-regard (Stets & Burke, 2005; Swann, 1987). As such, the verification of important role identities is a critical aspect for a person’s well-being and is a reason people act how they do. Conversely, the inability to verify a salient or committed identity will lower self-esteem and can lead to negative emotions such as hopelessness and an overall sense of loss (Burke & Stets, 2009). Similar feelings of distress can also occur from an identity threat, which arises when a person perceives that their ability or future opportunity to enact an important role identity is under threat or may be taken away (Petriglieri, 2011).

Role identities are tied to the occupancy of a specific role or position, such as the role of NED. This differs from social identities that are based on self-categorisation (Tajfel, 1982; Tajfel & Turner, 1979). Role identity also differs from professional identity which defines how a person views themselves in relation to their work-based expertise (Pratt et al., 2006). While professional identity centres on what a person does and requires the possession of certain technical skills, and membership in a common professional body (e.g. Brouard et al., 2017; Hamilton, 2013), role based identities are not necessarily coupled to the person’s identity as a professional but rather are defined by the parameters of the role. So, whereas each NED may hold a professional identity that is derived from their qualifications, functional background or career profession, their role identity as “director” stems solely from holding a position as director on a board.

A key aspect of role identity is the notion that individuals are motivated to maintain an idealised conception of themselves. Since the role of director is widely considered socially advantageous (Boivie et al., 2016; Hambrick et al., 2015), once a person joins a board, they are likely to grow strongly committed to their director role identity, especially if their social network and relationships become tied to them inhabiting the role of a NED. According to role identity theory, to sustain this view of themselves, NEDs will seek out opportunities to verify their identity by acting in accordance with the behavioural standards attached to the role of director (Hogg et al., 1995). For corporate directors, this means displaying behaviours that accord with prevailing corporate governance guidelines, legal and societal expectations attached to the director role. Although corporate governance codes can vary across jurisdictions there is a common underlying primacy that directors safeguard the interests of its shareholders. Thus, from a role identity perspective, corporate directors who are strongly committed to their identity as director, can be expected to behave and make decisions that are aligned with the established duties and expectations of the role (Hillman et al., 2008).

3. Research design and methodology

This study uses primary data collected through interviews with experienced NEDs. Interviews were considered the most appropriate data collection method because our objective was to explore participant experiences at a level of detail that would not be possible from a survey or other quantitative methods. NEDs hold elite roles, and consequently, we were mindful of the well documented challenges of accessing and interviewing elite respondents such as issues of sampling, confidentiality and establishing rapport (Leblanc & Schwartz, 2007; Nakpodia & Adegbite, 2018). As such, our approach relied on purposeful sampling which emphasises the selection of information rich cases, by targeting specific groups of individuals who have deep knowledge and extensive experience of the topic under investigation (Palinkas et al., 2015). In our case that meant using the technique of snowball sampling and beginning by drawing from the connections of two well regarded and experienced directors. These directors were able to draw from their network to put us in contact with a second layer of potential study participants from different types of organisations.

Our sampling strategy was to seek out directors who could draw from a variety of experiences of serving on corporate boards. We intentionally sought out directors who had more than five years experience as a director and had served on at least two boards. The final sample varied significantly in their depth and type of experience including NEDs currently serving on, or with prior experience of serving on, the boards of public companies, government-owned organisations (GOCs), private companies, and mutual banks. In Australia, where our study is set, there is a pervasive commonality in the role responsibilities, and esteem of NEDs across different types of organisations, consequently, the inclusion of NEDs from different types of commercial organisations was appropriate and warranted. Similarly, our sample included diversity in gender (55% female, 45% male), functional backgrounds and career experience. Participants’ qualifications included legal, accounting, engineering, and management and represented organisations within the financial services, construction, energy, education, sporting, and healthcare industries. Almost all (90%) had completed formal governance training.

In total, we contacted 18 directors, 11 of whom were available and willing to participate in our research. Across this sample, our respondents could draw on accumulated experience from serving on 68 boards, including 17 current board positions comprising two listed firms, two non-listed public firms, six government-owned corporations, five private firms, and two mutual banks. Table 1 provides an overview of our final sample of participants.

Table 1. Detail of interviewees.

	Interview length (minutes)	Gender	Board seats held	Current board service – organisation type					Functional background	Board sector experience
				Public listed	Public, non-listed	GOC	Mutual	Private
NED 1	62	M	5			x			Economics	Construction
NED 2	36	F	2				x	x	Accounting	Financial services
NED 3	53	F	7			x			Legal	Energy
NED 4	38	F	9	x		x			Engineering	Energy
NED 5	51	F	3					x	Management	Health, Education
NED 6	39	F	2	x					Planning	Construction
NED 7	73	M	8			x		x	Management	Various
NED 8	63	M	10			x			Accounting	Various
NED 9	37	M	11		x			x	Commerce	Healthcare, Consulting
NED 10	43	F	2			x		x	Legal	Education, Sport
NED 11	74	M	9		x		x		Commerce	Financial services
Totals:	569		68	2	2	6	2	5

3.1. Research setting

Our research setting is Australia. While there is no common set of governance practices that apply to every form of commercial venture in Australia, there are strong similarities in the governance practices that different structures of firms are expected to follow. Currently, there is no mandated limit on the amount of time that a director can serve on a corporate board, although a recent survey in Australia revealed that 59% of respondents felt that board tenures should be set at a maximum of 10 years or less (Governance Institute Australia, 2021). Similarly, there is no mandated retirement age. However, the matter of director tenure is present within the recommended guidelines issued by the ASX which recommends listed companies reassess the independence of any director who has served more than ten years on the board. Mutual banks are required to follow a comparable set of guidelines issued by the Australian Prudential Regulation Authority (APRA) which considers tenure beyond 12 years is only appropriate in “limited circumstances” (APRA, 2015). Given their public ownership and funding, government-owned entities are expected to operate on similar good governance principles.

3.2. Data collection

We collected data using semi-structured interviews. This approach allowed flexible and open conversations to take place and the opportunity to explore motivations and “hidden facets” (Qu & Dumay, 2011, p. 246) of human behaviours. All interviews were conducted face-to-face in a private space. To encourage openness, participants were advised that all responses would remain anonymous and although interviews were recorded, participants were informed they could request the recording to stop at any time–although none did. Given the challenges of elite interviews (Harvey, 2011) we followed methodological best practice, which notes the importance of thorough preparation (Kvale & Brinkman, 2009). This meant gaining a close familiarity with each participant by reviewing background data available on public websites and social media platforms which helped to develop a rapport during the interview. To allow for spontaneous responses participants were provided only minimal information regarding the content of the interview beforehand.

A feature of the semi-structured interview is that the content can vary between participants, depending on the direction of the conversation, and thus the interview questioning deviated (Robson, 2002). However, the overall intent of each interview remained the same, which was to address three main themes. First, participants were encouraged to reflect on their own motivations for serving and remaining on boards. For example, we asked, “how long have you served on (each organisation’s) board?” “What motivates you to remain?” and “How will you know when it’s time to leave?” Second, we asked participants to consider the perceived motives of their colleagues, especially longer serving directors, for continuing to serve on boards. For example, we asked, “Who has been the longest-serving director you have shared a boardroom with?” “Why do you think they stayed so long?” Asking participants to consider the intentions of their colleagues is a well-established method for encouraging them to reflect on personally challenging elements without introducing a social desirability bias in their responses (Robson, 2002). Finally, we asked participants – drawing on their experiences and observations of fellow board members – what they considered to be the consequences of long tenure.

Interviews took place during November and December 2016.¹ By the conclusion of the final interview, the viewpoints of the participants began to appear repetitive, revealing common themes, indicating a level of saturation had been reached. For consistency, all interviews were conducted by the first author. One hour was set aside for each interview, while some fell slightly short of this, others exceeded the hour. Overall, the interviews provided around 10 h of recorded conversation which was transcribed into 197 pages of textual data.

3.3. Data analysis

Our interview questions and subsequent analysis were designed to explore directors’ motivations for continued board service and specifically prolonged tenures. As we were focused on what Alvesson and Kärreman (2007) speak of as investigating a “mystery” (p.1266), where the intention is to apply a new conceptual frame where the existing theory is parsimonious, our analysis began inductively and followed an interpretive approach to draw meaning from the data. This initially involved reading and re-reading all transcribed interviews, and coding data segments with simple descriptive phrases, while remaining open to the discovery of new insights and patterns. At this stage we drew on the work by Corley and Gioia (2004), to identify common codes and concepts within our data using a process of constant comparison. These second-order concepts were given more relevant labels derived from the literature (see Table 2). When role identity began to emerge as a possible explanation, we iterated back and forth between the data and theory, to search for concepts that related to our emergent findings using a process Gioia et al. (2013) describe as moving from inductive to abductive research. At this stage, (re)-engagement with theory and literature allowed theory to inform the findings without a preconceived model of what the data might reveal, that is, “some combination of knowing and not knowing … that allows for discovery without reinventing the well-ridden wheels” (Gioia et al., 2013, p. 21). Our final stage of analysis involved aggregating these concepts into overarching themes that formed the basis of our research findings. This process of data reduction is illustrated in Figure 1.

Figure 1. Data reduction.

Table 2. Second-order concepts: supporting quotes.

Concept	Exemplary quotes
Financial rewards	[The fees] are a nice supplement. NED9
	Sometimes it is the money – they need the money. NED3
Professional development	I just think that it’s fun. To see a business, grow and prosper, and you feel ‘hey, I have contributed to that’, I think that is a nice thing to be able to do. NED 7
	I think it’s interesting … there are always new challenges. The environment changes, the competitive environment changes, government regulation, government policy changes – so there are always new challenges there. So, it’s actually sort of interesting area of work. NED9
Social recognition	You know mention of the board and it’s ‘oh the board’. I would say the mass of the population (when I say) I sit on a board – ‘ooh, sit on a board’. There is a real status thing. There still is a status thing. Even when you read about the failures. I’m still astounded that people still hold boards up on that level. NED6
	You really reach the pinnacle in many ways when you’re in that director’s group. NED9
Declining value	I think that you just fall into easy patterns of attendance, of diligence in inquiring, of energy, relevance and you can become flat. That’s no good for anyone. It’s no good for the company. NED11
	The longer they’re there it’s a little bit too easy to just, they know the business too well, the drive necessarily to challenge or to have different thoughts or to be more interactive with the organisation can be diminished because ‘well I’ve been here a long time I know it all’. NED5
Self-interest	I think they tend to stay sometimes for the wrong reasons. It’s for their own reasons rather than what’s good for the organisation. NED 7 They’ve forgotten that they’re there as a representative of the shareholder. NED11
Director identity	[they say] “I’m on the board of X, Y, Z”. … . And they get a sense of identity out of doing that. NED7
	It becomes their way of life, yes, and their position in life. NED8
Loss of Identity	The directorship becomes an important part of their personal identification – you know who I am – and so they’re very unwilling to change. NED3
	I never showed it but inside I was really resentful my term was up. NED6
Defending long tenure	The board that I’ve been involved with the longest there is a group of three of us – who have been there now for 9/10/11 years. In fact, if anything, I think we’d challenge more there than perhaps a newer director simply because we know some of the things to challenge. NED 4
	I think a lot of them genuinely believe they still have a lot to offer and contribute because they’ve been there a while and they know the place inside out. NED7
Safety net	Sometimes it’s their only one [directorship] – that’s even worse then. Well, if they go, that’s the end of their career – they’re finished, so that’s even worse. NED9
	I could walk away at any time and still have a really rich and fulfilling [board career] but when you get down to some of those [directors], that is their life. If they walk away, what is there left? NED10

Throughout our coding, we used NVivo 11 (qualitative software) to both systematise the process and provide an audit trail. Coding was initially performed by the first author and then cross-checked by the second author with any disagreements resolved through discussion and review of the data. It is worth noting that despite our strategy to sample directors from a spread of organisational structures, our analysis indicated no apparent difference in respondent experiences relevant to our research questions.

4. Findings

Our analysis identified four themes that reveal insights as to why NEDs remain on boards beyond recommended tenure limits. Firstly, our results explain what motivates directors to remain on corporate boards revealing both extrinsic and intrinsic rewards attached to the role of director. Second, the data shows that prolonged tenure is a governance concern for boards, with implications for shareholder value. From here, we incorporate identity theory to provide insights as to why, despite the known consequences, directors may choose to remain on boards for prolonged periods. Our third theme sheds some light on this question by suggesting that leaving a board poses a threat to directors’ identity. The final theme explores how NEDs respond to this identity threat and propose that NEDs will act in a way that protects their director identity, even when it conflicts with their duty as a director. Further supporting evidence for the themes and illustrative quotes presented in the text can be found in Table 2.

4.1. Motivation to stay

Our data revealed that both extrinsic and intrinsic rewards are attached to the role of NED. Financial rewards and emoluments played a part in NEDs’ decision to serve, and remain, on corporate boards, as highlighted by one participant who stated: “Let’s be honest–the director’s fees these days are pretty healthy” (NED 7). The finding that pecuniary incentives play a role in continued board service decisions is not new but rather mirrors arguments put forward in the literature addressing NEDs’ motivations. We took this as confirmation that our sample had a good level of representativeness and reflected prior literature.

Financial rewards were far from the only important driver, however, as our analysis also found clear evidence of intrinsic motivations in the form of intellectual stimulation, professional challenges, and continuous development. These themes suggest that NEDs derive significant personal and intrinsic satisfaction from adding value to organisational performance.

I actually find boards quite intellectually stimulating, I like the different conversations. I think what often people don’t necessarily give enough credit to is the amount of learning that takes place when you let yourself be involved in different areas … [Being on a board] is an opportunity to interact with all different types of people, and I guess for me personally I like the ability to be contributing in other ways and to do different things. So, for me, I find that is what stimulates me. (NED 5)

The strongest motivator to emerge amongst respondents, and a primary reason for continued service on corporate boards, was the personal value NEDs draw from serving as a corporate director. The prestige and social regard derived from the role of director were described by participants as an important source of value that seemed to extend beyond financial rewards and professional development. This is evident in the following unabashed description by one director explaining the value they derived from their corporate board position.

It’s like another world, where else do you get the respect just because of your role [as a director]? (NED 6)

Another director explained that being known as a director by the outside world, and the associated respect, is as important as actually being a director:

People like to be a director – and like to know that people know that they’re a director. (NED 5)

The idea that individuals want other people to know they hold a position as a director illustrates again the significance of the social recognition associated with being a director. Importantly, this high level of social regard was evident across the range of organisations from which we drew our sample and was not limited to the more prestigious public companies. As explained by one respondent, the societal regard derived from being a director stems from the role as opposed to the firm:

In Australia being a director of a company, particularly if it is a substantial company, and it doesn’t have to be public listed, it could be a private company, it gives them a [opportunity to say] ‘I’m a director of so and so now’. (NED 7)

Overall, the comments offered by participants indicated that being a director is important to a NED’s self-worth. The notion that NEDs derive self-meaning – that is, identity – through their role as director is further evidenced in the following comment:

For one or two there may be a financial reward but certainly around [corporate] boards you’re not in it for the money … I think it’s more that that’s become their way of life and it provides some satisfaction. (NED 8)

Across our sample, there was evidence that a combination of intrinsic and extrinsic motivations influenced NEDs’ decisions to continue their tenure on the board. In this regard, the findings reflect that both intrinsic and extrinsic motivating factors direct behaviour. Intrinsic motivation stems from finding an activity in and of itself interesting and satisfying, whilst extrinsic motivation is typically conceived of as either being concerned with the avoidance of punishment or achievement of a reward. The two types of motivations are however linked. For example, positive external validation of one’s role, whilst originating outside the individual, has been found to enhance intrinsic motivation (Deci & Ryan, 2008). That is, the extrinsic accolade, prestige and status attached to the director role, provide intrinsic value through their identity as a director and their sense of accomplishment and esteem. Thus, a prominent – and new – empirical finding that emerged from the data was the significance attached to being a director and the esteem and social regard attached to the director role. Whilst colloquially the potential for self-serving motivations to shape directors’ board tenure is well known (Rovnick, 2018), this has not been systematically explored and verified in scholarly research to date, and as such our finding is interesting.

4.2. Governance concerns with long tenure

Having illustrated the motivation for directors to remain on boards, the second theme confirmed why this can be problematic. Participants acknowledged a problem exists with directors serving for “too long” on corporate boards, and that these prolonged tenures can create governance concerns for boards and shareholders. In terms of what constituted “too long” participants generally concurred that a tenure above 9 or 10 years may become problematic. For example, one director explained:

my observation is … about three to six years [is the] sweet spot. At six to nine [years] it’s like when it gets too sweet. (NED 6)

Another participant noted:

I think if you’ve been there for over 10 years then maybe you want to be questioning ‘do you still have the independence’. (NED 2)

In a further example, a participant indicated that although there is no mandate or specified time limit in Australia, a maximum tenure of 10 years is the “guideline” widely followed by corporate boards:

You’ve got the ASX guidelines these days, which doesn’t specify a time period, but everybody knows that [it is] kind of 10 years. (NED 8)

The above quotes are important because they highlight that in practice there is a common understanding that tenure beyond 10 years is contrary to good governance and best practice. Moreover, since these responses corresponded with recommended tenure limits the findings indicate that this guidance is widely shared within the director community. Yet, despite our finding that there is a broad understanding that good governance practice deters directors from serving for longer than 10 years, participants could easily recount experiences of board colleagues who had served for longer periods of 15, 18, and above 20 years, confirming that prolonged tenure is a problem for boards.

When asked about the consequences of long tenure on boards, our participants expressed a belief that prolonged tenures can diminish the value of directors’ contributions. Take for example the following comment by one participant reflecting on the performance of a long-serving colleague. Although the long-serving director continued to contribute, the quality of their contributions was perceived to decline over time.

On one board in particular that I’ve sat on, a director who I think was on the board for too long and not because they weren’t contributing in a capacity sense, but I think they just got a little stale and some of their ways in which they were then framing a lot of their questions just wasn’t necessarily constructive. (NED 3)

The reflection in the above comment – that tenure can cause directors to become stale in their thinking – was a common observation amongst many of our participants and supports findings from the literature that show long-serving directors are more susceptible to cognitive entrenchments (e.g. Brown et al., 2017; Elms & Pugliese, 2023). Another participant offered insights on what entrenchment means for board functioning by describing how one long-serving director had really started to lose their way continuing:

… It’s business as usual … they don’t interrogate, they accept the truth from the CEO, they accept the truth from the Chair and I reckon if you’ve stopped asking questions, you’ve stopped adding value to the board. (NED 1)

Of particular concern in this comment, is that despite no longer adding value, the long-serving director in this example had remained on the board. This is in contradiction to the assumption that NEDs will always make decisions in the best interest of the organisation and its shareholders, by choosing to remain, rather than leave the board, when they stop adding value.

The sentiment above – that tenure decisions are not always made with the shareholders’ interests in mind – was not uncommon. Rather, the idea that tenure decisions give rise to competing interests, between the director’s own interest and those of the shareholders, emerged as an important finding. This conflict of interest is further evidenced in the following observation shared by one participant:

Unfortunately, it would be the one director duty that I see directors most breach – that duty to act in the best interests of the board when it comes to their tenure – it’s actually more about keeping their board seat … they just want to stay on the board, they just don’t want to give up their board seat. (NED 3)

The comment above indicates when it comes to self-regulating their own board tenure, many NEDs fail, prioritising their own interests over their accountability to the organisation and its shareholders.

4.3. Threat to directors’ identity – why directors overstay their welcome

Our earlier finding indicated that the social regard attached to the role of director is a primary motivation for continued board service. Moreover, for many NEDs, being known as a director by the outside world provides intrinsic value that informs themselves and others of who they are. From a role identity theory perspective, these insights suggest that the role of director provides a significant source of identity (Hogg et al., 1995). Given the relative importance of the role of director to many NEDs’ self-identity, tenure limits – whether recommended or enforced – are likely to pose a threat to their identity, since leaving a board may necessitate the director to abandon a highly important role identity. An identity threat is defined as occurring when individuals’ “sense of self is called into question” (Kreiner & Sheep, 2009, p. 32), and from our data, we found a reluctance by directors, not to leave a board per se, but a reluctance to relinquish their director identity. For example, one participant’s observation of a longer serving colleague and rationale for why that director had remained on the board for so long highlights not only the importance of the director identity to their colleague’s self-worth but how the loss of that identity would create a “void” in their life.

[Being a director] is where they get their value from– their validation from–it’s that ‘I am … .’, ‘this is who I am’. So, if that went, what would fill the void? (NED 10)

The finding that leaving a board may pose a threat to directors’ identity aligns with the literature which finds an identity threat occurs when an individual is prevented from the future enactment of that identity (Petriglieri, 2011). As a result of this threat, it is not surprising that the decision of some long-serving directors on whether to remain, or retire, from a board, appeared to create an internal conflict between their duty to the board and the firm’s shareholders and a self-interest in protecting their identity. This conflict was laid out by one director when recounting their self-disappointment at their own reaction when they faced this very situation. In this instance, the board had guidelines for maximum board terms, and the director had arrived at that term limit.

Well, take my example … where did that moral high ground go when it was my turn to leave [the board]? The moral high ground disappeared. I was a bit disappointed with myself on that, but it went through my mind – you’re a director on a public board, you’re paid whatever, you get to fly here, fly there, you’re looked up to and adored–I mean would you want to leave? No. (NED 6)

The comment above highlights the difficulty directors face in self-regulating their own tenure when leaving a board poses a threat to their identity. While the director in this case expressed an awareness that the right thing to do – i.e. “moral high ground” – would be to accept the tenure limit imposed, they describe a strong resistance to relinquishing the social rewards and identity attached to the role of director. Also notable in the decision process described above is the limited consideration for the organisation or shareholders’ interests, suggesting a prioritisation of their own director identity above the interests of those that they represent.

4.4. Identity protection

The above finding suggests tenure limits may pose a threat to NEDs’ director identity. In responding to threats, individuals develop coping strategies. It therefore follows that when an important role identity is threatened, an individual will act to protect that identity. The literature has provided examples of how individuals respond to identity threats using defensive tactics such as denial of the threat and altering the source of the threat (Breakwell, 2015; Petriglieri, 2011). Within our data, we found evidence that suggests directors may respond to an identity threat by defending their own (long) tenures and refuting the known consequences of long tenure. For example, one participant defended their own long tenure by commenting:

I’m a person that will continue to challenge no matter what. Doesn’t matter how long I’ve been there I just keep [challenging] – because that’s my job is to say, well let’s look at this, or look at that. (NED 7)

In the above comment, the director defends their ability to challenge, regardless of their tenure. This is despite the same NED commenting separately on problems associated with long tenure observed in other directors, including the inability to continue challenging. This comment was consistent with another participant’s observation that long tenured directors fail to recognise their own limitations, rather, they perceive their contributions to remain highly relevant to the board due to their depth of corporate knowledge. This is evident in the following example quote:

I think a lot of them [long-tenured directors] genuinely believe they still have a lot to contribute because they’ve been there a while and they know the place inside out. (NED 8)

Interestingly, another participant who also acknowledged some long-term directors justify their length of tenure by pointing to their knowledge contribution rebutted this defence;

Well, quite often you’ll hear them say “Oh, there’s nobody else who could take it on.” That’s patent nonsense. There are lots of people … well qualified who will take on those [board] roles. (NED 9)

Our findings thus far suggest that tenure decisions can pose a threat to NEDs’ identity if it is expected to restrict their ability to enact their director role identity in the future, creating a reluctance to “step down” and relinquish their director role identity. However, within our data, we also found contrary findings that indicated in some instances the decision to leave a board was, at least on the surface, made in line with good directorial practice rather than in self-interest and the preservation of directors’ role identity.

I walked away because I found that I was starting to treat issues ‘I’ve been there, I’ve seen that, I’ve done that–yes, this is the answer’, without actually listening to what was the new information. So, I walked away and said, hey, I can’t do that anymore. (NED 11)

In the example above, the participant points to cognitive behaviours associated with long tenure and importantly demonstrates the ability to recognise and act on those cues. This challenges our earlier assertion that NEDs fail to recognise their own limitations and fail to self-regulate their own tenure. Further analysis suggested an explanation for these differing perspectives may be the existence of – or potential for – other board positions. That is, we found a pattern whereby if a director held a portfolio of directorships, the decision to leave a board appeared to be easier. This may be because when a director holds multiple positions, leaving one will not threaten their identity as they can continue to enact their director role identity through other existing and future directorships. In this way, having a portfolio of directorships acts as a safety net to protect directors’ identity. This is explained further in the following comment.

Having a portfolio is a good thing, because you’ve got four boards and you have to drop one, it’s actually better than having one job because you lose one job you’ve nothing. If you’ve got four [board roles], you lose one, well it’s tough but it’s not the end of the world. (NED 7)

The above comment implies that when the question of stepping down from a board is raised, the availability of other directorship opportunities is important as it can provide a form of identity safety net that protects directors’ identities, removing the threat and facilitating a directorial decision that is aligned with shareholders’ interests rather than a NED’s self-interest.

5. Concluding discussion

Our study set out to understand why the phenomenon of prolonged director tenure persists across corporate boards. Applying the sociological lens of role identity our findings highlight the intrinsic significance that comes with inhabiting the role of director. Through interviews with serving NEDs, we confirm that prolonged tenure is a growing concern for corporate boards and provide an explanation as to why NEDs remain on boards beyond generally accepted tenure guidelines by offering identity as a primary motivation in these decisions.

Our first contribution centres on our findings that reveal the significance of the director role identity in shaping the tenure intentions of NEDs. Whereas prior research has focused on the financial and intellectual rewards of board directorships to explain board service (e.g. Certo et al., 2007; Dalton et al., 2007), we found nuanced insights that illustrate how the self-esteem and respect that NEDs experienced for inhabiting the role of director is a primary motivator for remaining on boards. Whilst media scrutiny has previously reported that some NEDs act in their own rather than shareholders’ interests when faced with decisions that could benefit shareholders but diminish their own directorial prospects, our empirical research provides novel and compelling scholarly evidence of this phenomenon in relation to corporate board tenure through the lens of role identity.

Role identity provides an interesting alternative to view NEDs’ propensity for prolonged tenure. The salience of role identity and how it can shape NEDs’ sense of self adds a deeper understanding to the debate of prolonged tenure and its associated problems. Our analysis indicates that a NEDs decision to continue in the NED role is less about what they gain such as intellectual stimulation and money, and more about how the director role identity serves as an important source of self-meaning. In this way, the findings challenge the behavioural assumptions of agency theory, which permeates much corporate governance guidance and suggests some important boundary conditions in the context of corporate board accountability. Specifically, our findings suggest that contrary to the view of Fama and Jensen (1983) and the adjusted motivational assumptions of Pepper and Gore (2015), which have both left the NEDs’ motivations for board service unchallenged, our results show that not all NEDs are neutral, and shareholder centred. Instead, rather than be incentivised by their value in the directorial labour market, as assumed under agency theory (Mira et al., 2019), some NEDs are incentivised by the social regard and self-identity bestowed by inhabiting the role of director. Significantly, when this role is salient to the overall identity of the NED, a NED may disregard any corporate governance guidance that threatens their ability to inhabit the role of director at the expense of shareholder interests, and in doing so act counter to what agency theory would predict. This finding has important implications for how agency theory is understood in corporate governance research. Specifically, it suggests that the behavioural assumptions as regards NEDs’ motivations in agency theory and behavioural agency theory should be adjusted to account for broader motivational facets. Making such an adjustment, that NEDs are not only out to safeguard shareholders’ interests but may also seek to safeguard their own personal interests, will however necessitate a reconsideration of the degree to which NEDs and boards more generally are left to self-monitor.

This leads us to our second contribution, where we show how the context of board tenure can lead to an identity conflict. This manifests in a tension between the expected behaviour of the NED and the potential for lower self-esteem that can stem from not acting by role standards (Burke & Stets, 2009; McCall & Simmons, 1978) on the one hand, and the personal sense of esteem, social recognition, and personal identity that NEDs experience from inhabiting the role on the other hand. While the literature argues that a salient role identity will lead an individual to act in accordance with the expectations of that role (Hogg et al., 1995), we find that in the context of decisions over continued board service, directors may fail to conform with the standards of their formal NED role that requires them to step down when established guidelines suggest. This is despite our finding that a general understanding exists across the director community of the fiduciary, societal, and role expectations that NEDs will step down if their actual or perceived independence is compromised by their length of tenure. A number of interviewees reflected that stepping down from a board was a decision that went to the core of who they were and how they defined themselves. Consequently, some long-serving directors were reluctant to relinquish their director role viewing the decision to remain or leave as a potential threat to their identity as a NED. In response, and to manage the threat, we found directors defended their long tenure by changing the narrative or perception of their value to the board. Since identities are strengthened when a decision context relates to or threatens that identity (Ashforth & Johnston, 2001; Withers et al., 2012), it follows that tenure decisions are likely to heighten directors’ role identity creating an identity tension for long-serving directors if the decision to leave the board means relinquishing their most important identity. In the absence of other directorships, a director may discard their accountability to the shareholder, with potentially harmful implications to the organisation on whose board they serve. Alternatively, as indicated by the findings, when directors hold other directorships or opportunities, the threat to their director identity is lessened and consequently, this cohort of directors may be more likely to adhere to tenure limit guidelines.

This finding also has theoretical implications for research on role identity threat. Prior research has identified three distinct responses to a meaningful identity threat, which centres on either discrediting the source of the threat, concealing an important identity, or attempting to position their role identity in a more positive light to anyone capable of threatening that identity (Petriglieri, 2011). We find the outline of a fourth approach, that of viewing oneself as distinct, and different from other NEDs, such that performance is perceived by the focal NED not to be diminished and persisting with an image of being indispensable in the role, despite governance guidance suggesting otherwise. This identity threat response also signals a unique position for directors that may differ from other professional identities. Whereas leaving a job in a profession, for example, accountancy does not generally require a person to relinquish their identity as an accountant, since a chartered accountant retains their status as an accountant regardless of whether they are employed in an accounting role at any given time. However, as there is no official accredited formal title for directors to signify their expertise when they do not hold a board position, a director is only a director when they hold a board role. Thus, the threat to identity associated with exiting a role may be greater for directors than for other professions. Overall, these findings suggest that without the safety net of other directorships, directors may seek to protect their identity and prioritise their own self-interest over the interest of the shareholders they are appointed to serve. This, in turn, informs our third and final contribution, that of emerging parameters that should be more formally reflected in the debate on term limits.

The continued emphasis on agency theory as a foundation for board accountability, reflected in Australian governance guidance, suggests that unless there is heed paid to these inherent human tensions between shareholders’ interest and NED self-interest, governance quality and board accountability may be compromised. Specifically, we suggest that if Australia and other countries decide to persist without mandatory term limits, there will remain meaningful opportunities for NEDs to remain on boards long after their ability to challenge and contribute to board outcomes has diminished. This in turn has the potential to undermine board accountability and shareholder interests, since agency theory’s argument against prolonged tenure in the form of diminished director market value is insufficiently strong to counter the social trappings of the NED role as defined by role identity. Consequently, our findings suggest that if shareholder primacy remains a priority, changes to corporate governance guidance should be considered if corporate boards are to remain relatively free of oversight and continue to rely on self-regulation. Our findings suggest that failure to account for personal interests such as those we identify can limit the board’s role as an accountability mechanism.

Thus our findings have implications for practice and policy by highlighting the self-meaning a person derives from being a NED and the subsequent tension that can arise if an individual is asked to voluntarily relinquish their most important identity. Although tenure limits remain recommended – not mandated – in most jurisdictions, few boards have adopted policies to prevent long tenures. For example, a 2016 study in the US revealed that only 26% of surveyed directors had term limits on their board, even though 48% believed they should (CGRI, 2016). Our findings suggest boards without a renewal policy to stipulate a maximum tenure for directors may face difficulties in removing longer serving directors, reducing board renewal opportunities. In such a situation, a board turnover policy with guidelines around tenure limits and/or retirement ages can act as an important tool in board succession planning, and as a defence against longer serving directors reluctant to leave on their own account for fear of relinquishing their identity.

The data for this study was collected in 2016 at a time when director tenure in Australia, and globally, was attracting great interest from policymakers and investor groups who were strongly encouraging mandated tenure limits. In Australia, there has been no significant change to the policy that recommends tenure be considered as part of directors’ overall independence but does not stipulate any maximum time. When a fourth edition of the ASX corporate governance guidelines was released in 2019, the consultation process attracted numerous submissions asking for a set guideline or tenure maximum to be provided. While no changes were made in the guidance, the level of interest highlights the consequences of prolonged director tenure remain a significant concern from a practitioner’s perspective.

The findings in this study rely on the recounted first-hand experiences of directors using interviews. While this method of data collection provides an insider perspective of the “black-box” of corporate governance it is worth noting some associated limitations. First, interviews are by nature subjective, relying on recollection and perceptions. Further, a person is likely to be biased when they discuss their own performance (Kreiner et al., 2006). We endeavoured to mitigate this limitation by encouraging participants to comment not only on their own experiences but also to provide their perceptions of others they had shared a boardroom with, such that by referencing another they had an opportunity to also talk indirectly about themselves. Second, our findings may be limited by the research scope. Our sample strategy aimed to achieve depth and not breadth, using a subset of Australian directors, and may therefore be limited to countries and environments that share a similar cultural and corporate governance environment.

We encourage future research to consider other decisions faced by directors that may give rise to a similar conflict between a director’s identity and their accountability to the shareholder. For example, how does a director’s role identity influence board decisions when presented as a target of a merger or acquisition; and whether an impacted director can decide free from self-interest if their position on that board and their identity as a director is threatened. Further, research into director identities remains relatively unexplored and offers interesting avenues for future investigation (Elms & Nicholson, 2020; Withers et al., 2012). While this study focused on the single role identity associated with being a director, NEDs often hold other roles – for example as an executive or entrepreneur – and belong to various social groups. A greater understanding of these multiple role and social identities, and how professional identity and role identity interplay and shape director behaviour is warranted to further develop our knowledge in this area. Similarly, exploring how directors’ motivations to serve on boards changes over time and once they have gained their first board position would also offer interesting insights.

Finally, the study raises the question of the role of the nomination committee in managing board tenure. The nomination committee has responsibility for oversight of board nominations, board renewal, and succession planning, which arguably also encompasses ensuring adherence to tenure limits, however, the guidance also makes clear that the ultimate decision on board recommendations and board composition rests with the entire board, not just the nomination committee (Australian Institute of Company Directors, 2020). Our results and those showing the extent of the problem of prolonged tenure in pockets of corporate Australia suggest that the remit of it, and guidance for, nomination committees may be insufficiently clear. While our data was unable to probe sufficiently into this area, we consider this an interesting area for future research to explore.

6. Conclusion

NEDs’ motivations for corporate board service are more complex than agency theory informed research has uncovered to date. Rather than be motivated solely by a desire to serve the interests of the firm’s principals and deliver on their fiduciary duty, our study shows that NEDs’ motivations are more intricate and that some are also driven by self-interest. Our engagement with role identity theory reveals that certain NEDs identify so strongly with their director role that it compromises their responsibility to the shareholders whose interest they are supposed to serve. Instead, prolonged tenure as a NED becomes a means of sustaining their own identity, suggesting that a broader discussion of whether or how boards self-regulate their tenure is needed.

Acknowledgment

The authors acknowledge the insightful comments of the editor and two anonymous reviewers which greatly improved the paper. The authors also thank Professor Gavin Nicholson and Professor Andrew Brown for their valuable advice and suggestions.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Ethics approval was granted by Queensland University of Technology, approval number 1600000932. All interview participants provided signed consent.