The Director’s Chair: The Many Roles of the Board Director

A personal perspective from 25 years in risk management

The world is getting smaller, more intense, and risks are amplified for the same reasons. All business operates within interlinked networks we refer to as an eco-system. The business eco-system has similarities to the ones found in nature, notably the mutual interdependence of many ostensibly autonomous participants, the flow of energy, information – and money – and the subtle interplay of supply chains. This interdependence and complexity – as well as the possibility of harmful predators, unanticipated disruptions, man-made or natural – provide a broad set of ongoing challenges for corporate management, in Japan and elsewhere. Collectively, we can categorize these challenges as risk management.

In this essay I will examine the multiple roles and tasks of the independent outside Director in a Japanese company with publicly listed shares, but these observations apply to many senior managers in supervisory roles. There is a saying, where you stand depends on where your sit. The independent Director sits near the top of the company’s decision-making and control apparatus but as a rule does not have executive or functional responsibility. He stands apart from active management in an oversight role. Let’s take a closer look at this role.


Pity poor Hitachi.

In 2015 Hitachi, accustomed to the forgiving corporate governance culture of Japan, acquired control of Italian railway operator Ansaldo STS, a publicly listed company, without fully comprehending the traps for the unwary that lurk in corporate governance environments outside Japan. The shareholder list of Ansaldo STS, it turns out, was loaded with sophisticated hedge funds that have cleverly exploited their “rights” as minority shareholder “victims” to try to shake down Hitachi for more cash. The case for victimhood made by the hedge funds is superficially appealing, but on closer analysis unpersuasive.