We are witnessing an organic change in American corporate governance. The balance of power among owner, manager, and director is in the process of transformation. The once archetypal model of the CEO’s unchallengeable control of the board of directors and shareholders is fading. The future will definitely see a new paradigm of governance. What is uncertain, as we enter a new century, is exactly how the power to control corporate behavior will be configured among shareholders, directors, and managers.
A series of factors is triggering a modification of the current structure of corporate governance. Financial institutions, which have pressed openly for changes in corporate directors’ roles, now own a growing proportion of shares. The hostility to, and the lessened availability of financing for, hostile corporate takeovers has diminished takeovers as catalysts for corporate change, at least for a time. The Securities and Exchange Commission has modified its rules to facilitate communication among shareholders and has pressed corporations to reveal more information concerning senior management compensation. At the same time, the business press and academic journals, in their increasing attention to governance issues, have suggested an urgent need for governance reform.
In this article, our focus is on the role of the board of directors in corporate governance and the range of potential changes in the rules and norms governing board behavior. We believe that an independent... To read the complete article, login or sign-up using the form below.
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