Corporate Governance and Director Accountability: an Institutional Comparative Perspective*
| Date | 01 March 2005 |
| Author | Ruth V. Aguilera |
| DOI | http://doi.org/10.1111/j.1467-8551.2005.00446.x |
| Published date | 01 March 2005 |
Corporate Governance and Director
Accountability: an Institutional
Comparative Perspective
*
Ruth V. Aguilera
Department of Business Administration, College of Business and Institute of Labor and Industrial Relations,
University of Illinois at Urbana-Champaign, 1206 S. Sixth St., Champaign, IL 61820, USA
Email: ruth-agu@uiuc.edu
This paper examines the role of boards of directors in light of institutional contingencies
and recent best practice governance guidelines and regulation such as the United
Kingdom Higgs Review and the United States Sarbanes-Oxley Act 2002. Particular
attention is paid to discussing the role of independent directors across countries, and the
implications for corporate governance innovation. It concludes by posing questions
about recent corporate governance transformations and providing suggestions for future
research.
‘Having served on the board of public companies
since 1993, [she] has watched the culture of board-
rooms change from golf games, cigars and fancy
dinners to meetings that begin at 6 a.m. and intense
pressure to submerge oneself in ever-changing ac-
counting and governance regulations.’ (Wall Street
Journal, 21 June 2004, p. R4).
Introduction
In the post-Enron era, corporate governance
reforms around the world are fully underway to
bring greater power balance within the firm –
particularly reining in over-mighty chief execu-
tives – and to resolve power struggles among the
different stakeholders. Corporate governance sys-
tems provide several mechanisms to ensure that
firms are run effectively and maximize share-
holder and/or stakeholder value. On the one
hand, the external market for corporate control
seeks to direct managerial behaviour towards
given market expectations and national legisla-
tion such as the Sarbanes-Oxley Act (SOX) 2002,
which imposes new responsibilities on corporate
executives, auditing firms and boards to solve
conflicts of interests and increase firm account-
ability. On the other hand, the internal market
for corporate control is conceptually entrusted to
the board of directors. Boards are by definition
the internal governing mechanism that shapes
firm governance, given their direct access to the
two other axes in the corporate governance
triangle: managers and shareholders (owners).
Boards of directors are one of the centrepieces of
corporate governance reform. In effect, the board
of directors has emerged as both a target of
blame for corporate misdeeds and as the source
capable of improving corporate governance.
Licht (2002) defines governance as the rules
and structures for wielding power over other
people’s interests, including the use and abuse of
power. Organizational democracy is likely to be
in jeopardy when a given stakeholder group has
too much power. For example, some US business
leaders claim that ‘an indiscriminate increase in
*
Research support from the Vernon K. Zimmerman
Center for International Education and Reserach in
Accounting at the College of Business and the European
Union Center at the University of Illinois at Urbana-
Champaign is greatly appreciated.
British Journal of Management, Vol. 16, S39–S53 (2005)
DOI: 10.1111/j.1467-8551.2005.00446.x
r2005 British Academy of Management
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