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Improve Board Effectiveness: the Need for Incentives
Author(s) -
Shen Wei
Publication year - 2005
Publication title -
british journal of management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.407
H-Index - 108
eISSN - 1467-8551
pISSN - 1045-3172
DOI - 10.1111/j.1467-8551.2005.00449.x
Subject(s) - incentive , corporate governance , accounting , executive compensation , executive board , business , corporate title , stock options , order (exchange) , public relations , management , economics , political science , finance , microeconomics
Roberts, McNulty and Stiles (2005) focus on the attitudes and behaviours of non‐executive directors in their recommendations for improving board effectiveness. This paper addresses the importance of providing incentives for non‐executives in order to improve board effectiveness. It first points out that the current norms and practices in corporate governance suggest that, without strong incentives, non‐executive directors are unlikely to become engaged in corporate governance, to challenge executive decision, and to remain independent of executive influences. It then proposes that, for non‐executive directors to develop the attitudes and behaviors recommended by Roberts, McNulty and Stiles, it is important to require them own a significant amount of company stocks over a long period of time. It also addresses some concerns regarding the use of stock ownership to improve the effectiveness of non‐executive directors in corporate governance.