Exploring social networks of non-executive directors in Australian third sector organisations

The appointment of a member to a board of directors in the third sector is a largely unexplained and unquestioned process. Generally, non-executive board members are unpaid and are often appointed via membership of a social network, without any formal recruitment or selection processes. These same board members also play an important and responsible role in the governance and sustainability of socially responsible third sector organisations. Hence, there is a real tension between the seemingly informal appointment process and the formal responsibility of such a position. This paper aims to shed light on the appointment processes to Australian boards of directors in non-executive positions in the third sector. There is little critique of this ‘idealised’ rationalised model, which is the dominant model used to describe the appointment process in the human resource management literature (Legge 1995). In fact, critique of appointments made using such social networks are rarely discussed even when those networks are physically mapped by the director interlock researchers (Alexander 2003). Appointment processes used in board-level appointments are less well covered in the literature, other than in this rationalist frame (Moodie 2001). A questionnaire collected demographic data from 65 board members from a diverse group of third sector organisations. Interviews followed with eight of those board members. Thematic analysis from the questionnaire and interviews allowed for the emergence of themes about perceptions of board membership appointment. Appointment to non-executive director positions on Australian third sector boards is conducted predominantly by word of mouth, at least on the first occasion. The lack of transparency in the appointments process creates a dilemma for third sector boards. This dilemma is heightened by the knowledge that pressure exists – from both stakeholders and regulatory bodies – for increased transparency of corporate governance processes in the sector. The appointment of non-executive directors through social networks and informal word-of-mouth processes may prove unsustainable in the future. Significant contradictions and paradoxes therefore exist as to how social networks in Australian third sector boards function, particularly in how this relates to the appointment and composition of these boards