Corporations and Directors: Comparing the Profit and Not- for-Profit Sectors

K.V. Nagarjan is an assistant professor of Commerce and Administration
at Laurentian University.

This slim volume summarizes and presents a surprisingly large amount of
information. Hatton is concerned with the role played by corporate
directors in both the for-profit and the not-for-profit sectors. He
begins by presenting thumbnail sketches of various corporate types over
the centuries. Chapter 2 discusses the legal aspects of the distinction
between for-profit and not-for-profit corporations. In Chapter 3, we
find a succinct survey of the diverse viewpoints held within the
literature on the role of the director in corporate governance. Hatton
highlights two contrasting views, which remain the central focus of his
analyses: those of Myles Mace, a former Harvard Business School
professor, and those of Murray Ross, an erstwhile president of
Toronto’s York University. While Mace takes a descriptive approach,
Ross follows a normative path, articulating what the role of directors
ought to be. The two authors’ writings were culled for a list of
issues, which Hatton incorporated into his interviews with a group of 33
university board members who also had experience serving on for-profit
corporate boards. His findings are presented in Chapter 4.

His major finding is that, despite differences in terms of corporate
goals, mission statements, and ownership structure, directors’ roles
in both sectors are similar. Picking a good management team is at the
top of the list of a board’s responsibilities. Hatton also found that
a surprising number of directors of for-profit corporations mistakenly
believed that their responsibility is to the shareholders, although they
are legally charged with looking after the interests of the corporation.
Among the issues dealt with in the context of not-for-profit
corporations are the role of celebrity directors and the importance of
fund raising as a function of the directors.

If the strength of Hatton’s work lies in its search for similarities
among the roles of directors in the for-profit and the not-for-profit
sectors, its weakness is the lack of discussion of the implications of
his findings. Corporate governance has become more complicated with the
rising concern over social and environmental issues. While Hatton
alludes to these issues, he does not systematically explore their
implications for the changing role of corporate directors. Such a
discussion would have made this thought-provoking book even more useful.