探花直播

Public companies should appoint a 鈥楥ontrarian Director鈥� who systematically challenges management recommendations to the board and suggests a range of alternative outcomes, argues a Cambridge graduate student in recently published research.

A Contrarian Director (CD) would help prevent rubber-stamping of management decisions by too-collegial boards whose supposedly 鈥渋ndependent鈥� directors are anything but, according to MBA student Siobhan Sweeney. Her paper cites last year鈥檚 comment by Warren Buffett that companies recruiting such directors often 鈥渄o not look for Dobermans. They look for Cocker Spaniels and then they make sure their tails are wagging.鈥�

According to Sweeney, there have been 鈥渟ignificant failings of boards,鈥� as shown by the recent financial crisis and other corporate failings.

Currently, 鈥渟ocial and psychological incentives propel directors towards collegial consensus,鈥� and acting as a devil鈥檚 advocate in the boardroom is 鈥渃urrently a dangerous career path.鈥� So appointing a CD to every public company board is an 鈥渋nnovative solution that is simple yet has the ability to significantly increase the board鈥檚 ability to discharge their corporate governance and risk oversight.鈥�

探花直播CD concept was inspired by the Catholic Church鈥檚 鈥楧evil鈥檚 Advocate,鈥� introduced in 1587 to argue against a candidate鈥檚听canonisation听in order to uncover any character flaws, but听modelled听more on the Advocate General of the European Union, who delivers impartial recommendations to the full EU Court of Justice.

探花直播CD鈥檚 role would be more impartial than that of the church鈥檚 Devil鈥檚 Advocate: while both present a negative hypothesis, the CD鈥檚 proposed role is then to 鈥渁ssess the strength of the negative hypothesis to assist the board to form a balanced opinion.鈥�

探花直播CD鈥檚 name derives from the literal Greek translation of 鈥榗ontrarian,鈥� who 鈥渉abitually opposes or rejects prevailing opinion or established practice鈥� 鈥� and in the context of the CD provides significant recommendations to the board.

Under the paper鈥檚 proposal, companies would adopt their charters to state that a CD appointed to their board 鈥渉as a duty in respect of every recommendation to the board of substance to give careful consideration to the possible case, if any, against the recommendation. 探花直播CD must then prepare for the Board a written report, which outlines the case or possible case against the recommendation. 探花直播written opinion of the CD would be non-binding on the board and CEO.鈥�

To help companies choose CDs, a new Institute of听Contrarian听Directors would be established in order to maintain a list of qualified CDs 鈥� people with analytical skills and experience, but who have not previously served as public company directors except as a CD. If a company asks the Institute to suggest a CD, and the company does not make the appointment, the Institute would not make a further CD suggestion to that company for five years to prevent the company 鈥渟hopping for an amenable CD.鈥�

鈥� 探花直播introduction of the CD institutionalises the ability to stand outside the tide of Groupthink and effectively warn and caution the board,鈥� said Sweeney, who was a corporate lawyer in Australia before beginning the Cambridge MBA programme last year.

Sweeney鈥檚 paper, , was recently named the winner of the 2015 Cambridge-McKinsey Risk Prize at the Centre for Risk Studies at 探花直播 of Cambridge Judge Business School.

探花直播award, in conjunction with consulting firm McKinsey & Company, was announced at the recent 6th annual Risk Summit of the Cambridge Centre for Risk Studies at Cambridge Judge. 探花直播award is open to current students at Cambridge Judge.

鈥� 探花直播judges were particularly impressed by the originality and spark of Siobhan Sweeney鈥檚 proposal on contrarian directors, which speaks directly and practically to corporate governance,鈥� said Danny Ralph, Professor of Operations Research and Academic Director of the Centre for Risk Studies at Cambridge Judge. 探花直播judges, who consulted with other risk professionals and academics, were Professor Ralph and Dr Sven Heiligtag, a principal at McKinsey鈥檚 global risk practice based in Hamburg.

Adapted from an article originally published on the website.