Corporate governance and board accounts: exploring a neglected interface between boards of directors and management
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Corporate governance and board accounts: exploring a neglected interface between boards of directors and management Daniel Johanson
Published online: 15 August 2008 Springer Science+Business Media, LLC. 2008
Abstract There is an absence of research about what information boards of directors have access to and how they use that information. The purpose of this paper is to explore and theorize about the content and use of information to boards of directors. The paper introduces and elaborates on the concept of ‘board accounts’, which is defined as the information supplied to boards of directors by top-management. The paper locates the board accounts in the Swedish institutional setting and demonstrates how the concept can be operationalized in an empirical setting. On the basis of a unique material of archived board records in a Swedish company, the paper explores the board accounts over a period of 10 years (1989–1998). It is found that while use of the board accounts in the case study company changes considerably over time, the content of the board accounts remains largely unchanged. This raises questions about where and when directors receive information, the reliability of the information in the board accounts, and recent attempts to integrate corporate governance and management accounting (CIMA, Performance reporting to boards: a guide to good practice, 2003; CIMA strategic scorecard: boards engaging in strategy, 2005; Seal, Management Accounting Research 17(4):389–408, 2006). Finally, the paper discusses the merits of historical archive-based approaches in this field and possibilities for future research. Keywords Corporate governance Boards of directors Management Board accounts Management accounting Corporate strategy Archive-based approach
D. Johanson (&) Department of Accounting, Auditing and Law, Norwegian School of Economics and Business Administration (NHH), Bergen, Norway e-mail: [email protected]
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1 Introduction In the past decade or so, the structures and operations of boards of directors have received increased interest from both academics and practitioners. Problems of corporate control at the highest level of organizations have been brought together under the broad concept of corporate governance. Basically, the corporate governance problem originates from the separation of ownership of an organization and control over that organization’s operations. Assuming a separation of ownership and control and a divergence of interests between shareholders and managers, there is a need to monitor and control managers (Jensen and Meckling 1976; Fama and Jensen 1983). The board of directors is paramount in the context of good corporate governance and in avoiding the corporate failures that have so often been cited in the business press. Academic research on boards of directors is nowadays abundant in financial economics (Hermalin and Weisbach 2003) as well as management research (Daily et al. 2003; Pye and Pettigrew 2005). Much of this research has drawn on agency th
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