Chapter 4: Monitoring of Corporate Groups by Independent Directors
A.C. Pritchard* INTRODUCTION I. Independent directors have become a popular “cure-all” in the United States for whatever the latest malady ailing the modern corporation happens to be. Whenever a corporation has found its way into the headlines as the subject of the scandal du jour, it is overwhelmingly the case that it is the managers who are caught with their fingers in the till, having manipulated the numbers, rolling the dice with the shareholders’ money, or otherwise abusing the trust of shareholders and other corporate constituencies. They are, after all, the ones in charge of the day-to-day operations of the company. All too frequently the managers, who have charged some outrageous perk to the corporation’s bill, or who have relabeled an expense as a capital expenditure, are at the very top levels of the corporate hierarchy, perhaps even serving on the board. Immunity from greed, fear, and other weaknesses of character are apparently not required to advance to the top of the corporate hierarchy. It is the venality at the very top that most offends. Given the lofty levels of compensation that CEOs in the United States typically receive, it is hard for the average person (or more importantly, the average politician) to understand the desire for further aggrandizement and reluctance to accept responsibility for poor performance. One suspects that sense of outrage at the abuse of trust is mirrored, and perhaps magnified, inside the boardrooms of the corporations caught up in the wrongdoing. The directors who have placed their...
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