The Handbook of Board Governance, 3rd Edition

59Re-empowering the Control Function of Boards

Marie-Soleil Tremblay, BAA, MBA, PhD, FCPA, FCA

Fellow Chartered Professional Accountant and Professor of Accounting at the École nationale d’administration publique

Bertrand Malsch, MBA, MSc, LLB, BCL, PhD

Associate Professor of Accounting, Smith School of Business, Queens University

Introduction

In this chapter, we examine the control function of the board of directors in the light of two highly valued characteristics of board composition: directors’ independence and expertise. Specifically, for each characteristic, we alert to the existence of widespread implicit beliefs and attitudes within corporate governance circles that can severely restrict their intended benefits as controlling mechanisms. We offer practical advice on how to detect and mitigate such restrictions and re-empower the control function of boards.

Independence and Control

Curbing Managerial Opportunism

Modern governance principles, at least the way they are generally taught in textbooks and training programs for corporate directors, are rooted in an adversarial understanding of the relationship between shareholders and management. In essence, managerial opportunism, that is, managers exploiting opportunities in their own self-interest by leveraging their intimate knowledge of the corporation, constitutes a significant threat to the realization of shareholders’ and business interests. From this point of view, the control function of boards of directors ...