| The Board's missing link. | |
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MedLine Citation:
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PMID: 12632807 Owner: NLM Status: MEDLINE |
Abstract/OtherAbstract:
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If a dam springs several leaks, there are various ways to respond. One could assiduously plug the holes, for instance. Or one could correct the underlying weaknesses, a more sensible approach. When it comes to corporate governance, for too long we have relied on the first approach. But the causes of many governance problems lie well below the surface--specifically, in critical relationships that are not structured to support the players involved. In other words, the very foundation of the system is flawed. And unless we correct the structural problems, surface changes are unlikely to have a lasting impact. When shareholders, management, and the board of directors work together as a system, they provide a powerful set of checks and balances. But the relationship between shareholders and directors is fraught with weaknesses, undermining the entire system's equilibrium. As the authors explain, the exchange of information between these two players is poor. Directors, though elected by shareholders to serve as their agents, aren't individually accountable to the investors. And shareholders--for a variety of reasons--have failed to exert much influence over boards. In the end, directors are left with the Herculean task of faithfully representing shareholders whose preferences are unclear, and shareholders have little say about who represents them and few mechanisms through which to create change. The authors suggest several ways to improve the relationship between shareholders and directors: Increase board accountability by recording individual directors' votes on key corporate resolutions; separate the positions of chairman and CEO; reinvigorate shareholders; and give boards funding to pay for outside experts who can provide perspective on crucial issues. |
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Authors:
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Cynthia A Montgomery; Rhonda Kaufman |
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Publication Detail:
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Type: Journal Article |
Journal Detail:
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Title: Harvard business review Volume: 81 ISSN: 0017-8012 ISO Abbreviation: Harv Bus Rev Publication Date: 2003 Mar |
Date Detail:
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Created Date: 2003-03-13 Completed Date: 2003-04-16 Revised Date: 2004-11-17 |
Medline Journal Info:
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Nlm Unique ID: 9875796 Medline TA: Harv Bus Rev Country: United States |
Other Details:
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Languages: eng Pagination: 86-93, 141 Citation Subset: H |
Affiliation:
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Harvard Business School, Boston, USA. |
Export Citation:
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| MeSH Terms | |
Descriptor/Qualifier:
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Commerce
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ethics,
organization & administration* Ethics, Business* Governing Board / economics, ethics, organization & administration* Humans Interprofessional Relations / ethics Organizational Affiliation / ethics Organizational Innovation Social Responsibility* United States |
From MEDLINE®/PubMed®, a database of the U.S. National Library of Medicine
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