Prize-winning paper suggests appointment of devil’s advocate to public boards

The winning paper was authored by Cambridge Judge MBA student Siobhan C Sweeney from Australia. Ms Sweeney was awarded £3,000 for her success. The Contrarian Director (CD) concept was inspired by the Catholic Church's 'Devil's Advocate' concept that was introduced in 1587 to argue against a candidate's canonisation in order to uncover any character flaws. It is similar in principal to the role of the European Union's Advocate general, who delivers impartial recommendations to the full EU Court of Justice. "The introduction of the CD institutionalises the ability to stand outside the tide of groupthink and effectively warn and caution the board," said Ms Sweeney, a former corporate lawyer in Australia before beginning the Cambridge MBA programme last year.hideIn a statement issued by the Judge Business School it was explained that the CD's name derives from the literal Greek translation of 'contrarian,' who 'habitually opposes or rejects prevailing opinion or established practice' and, in the context of the CD, provides significant recommendations to the board. The paper-entitled The Creation Of The Contrarian Director And Their Role In Achieving Workable Board Independence And Better Risk Oversight-says a CD would help prevent rubber-stamping management decisions by overly collegiate boards whose supposedly 'independent' directors are anything but. The business school said that the paper cites last year's comment by Berkshire Hathaway's Warren Buffett that companies that recruit such directors often 'do not look for Dobermans. They look for Cocker Spaniels and then they make sure their tails are wagging'. The 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.The award is open to current students at Cambridge Judge. "The judges were particularly impressed by the originality and spark of Siobhan Sweeney's proposal on contrarian directors, which speaks directly and practically to corporate governance," said Danny Ralph, Professor of Operations Research and Academic Director of the Centre for Risk Studies at Cambridge Judge. The judges, who consulted with other risk professionals and academics, were Professor Ralph and Dr Sven Heiligtag, a principal at McKinsey's global risk practice based in Hamburg. Cambridge Judge explained that under the paper's proposals companies would adopt charters to state that a CD appointed to their board 'has 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. The CD must then prepare for the board a written report, which outlines the case or possible case against the recommendation. The written opinion of the CD would be non-binding on the board and CEO'. The CDs role would be more impartial than that of the church's Devil's Advocate, explained the statement. While both present a negative hypothesis, the CD's proposed role is then to 'assess the strength of the negative hypothesis to assist the board to form a balanced opinion'. Ms Sweeney suggested that a new Institute of Contrarian Directors be established in order to maintain a list of qualified CDs. CDs would be people with analytical skills and experience, but who have not previously served as public company directors except as a CD, she said. Ms Sweeney's paper notes that there have been 'significant failings of boards', as shown by the recent financial crisis and other corporate failings. "Social and psychological incentives propel directors towards collegial consensus," stated Ms Sweeney. As a result, acting as a devil's advocate in the boardroom is 'currently a dangerous career path', she added. The appointment of a CD to every public company board would be a simple and 'innovative solution' that has the ability to 'significantly increase' the board's ability to 'discharge their corporate governance and risk oversight', said the student. Many risk management associations and individual risk managers will no doubt support Ms Sweeney's arguments but perhaps suggest that they are actually best placed to carry out the role as chief risk officer with a board position.

Prize-winning paper suggests appointment of devil’s advocate to public boards

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