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Boards at WorkHow Directors View their Roles and Responsibilities$
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Philip Stiles and Bernard Taylor

Print publication date: 2002

Print ISBN-13: 9780199258161

Published to Oxford Scholarship Online: January 2010

DOI: 10.1093/acprof:oso/9780199258161.001.0001

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The Control Role of the Board

The Control Role of the Board

Chapter:
(p.60) 5 The Control Role of the Board
Source:
Boards at Work
Author(s):

Philip Stiles (Contributor Webpage)

Bernard Taylor (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199258161.003.0005

Several control mechanisms have been proposed to ensure that managerial discretion is aligned with shareholder interests. The major external mechanism is the market for corporate control, in which the threat of takeover induces incumbent management to greater efficiency. However, this mode of control has limited effectiveness due to imperfections in the market and the wider effects of takeover bids. A great deal of attention has focused on the chief internal mechanism for control: the board of directors. This chapter examines the role of boards of directors in corporate control and argues that, contrary to the managerialist tradition, the boards can exert control over the running of the organisation by using management control systems, assessing top management, and determining their incentives and sanctions. In addition to monitoring past and present organisational performance, directors also actively diagnose opportunities for the firm through data from control systems, thereby facilitating organisational change.

Keywords:   boards of directors, corporate control, management control systems, top management, incentives, sanctions, organisational performance, organisational change

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