The Multiple Roles of Corporate Boards of Directors

This Article discusses the multiple roles of corporate boards, including the manager-monitoring, relational, and strategic management roles. The author begins by discussing the developments in the manager-monitor role of boards of directors in the United States, including the trends toward having a greater number of outside directors, the creation of specialized committees, and ensuring board member’s expertise in certain areas. Next, the author examines developments in the relational monitoring role of board of directors. The author then goes on to address the several theories and empirical studies regarding the roles of corporate boards.

Based upon meta-analysis that insider-dominated and outsider-dominated boards achieve a higher return on assets, the author makes a couple of proposals in order to enhance board performance. The first proposal is the use of a dual board structure with an insider-dominated board for “business review” and an outsider-dominated board to review “conflicts.” A second proposal is for corporations to appoint a corporate ombudsperson with access to all corporate meetings and information in order to improve the flow of information.