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Oversight and Delegation in Corporate Governance: deciding what the board should decide

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  • Michael Useem

    (Wharton School of the University of Pennsylvania.)

  • Andy Zelleke

    (University of Pennsylvania's Wharton School.)

Abstract

American boards of directors increasingly treat their delegation of authority to management as a careful and self-conscious decision. Numerically dominated by non-executives, boards recognize that they cannot run the company, and many are now seeking to provide stronger oversight of the company without crossing the line into management. Based on interviews with informants at 31 major companies, we find that annual calendars and written protocols are often used to allocate decision rights between the board and management. Written protocols vary widely, ranging from detailed and comprehensive to skeletal and limited in scope. While useful, such calendars and protocols do not negate the need for executives to make frequent judgement calls on what issues should go to the board and what should remain within management. Executives still set much of the board's decision-making agenda, and despite increasingly asserting their sovereignty in recent years, directors remain substantially dependent upon the executives' judgement on what should come to the board. At the same time, a norm is emerging among directors and executives that the latter must be mindful of what directors want to hear and believe they should decide. Copyright (c) 2006 The Authors; Journal compilation (c) 2006 Blackwell Publishing Ltd.

Suggested Citation

  • Michael Useem & Andy Zelleke, 2006. "Oversight and Delegation in Corporate Governance: deciding what the board should decide," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(1), pages 2-12, January.
  • Handle: RePEc:bla:corgov:v:14:y:2006:i:1:p:2-12
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    References listed on IDEAS

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    1. Dherment-Ferere, I. & Renneboog, L.D.R., 2000. "Share Price Reactions to CEO Resignations and Large Shareholder Monitoring in Listed French Companies," Discussion Paper 2000-70, Tilburg University, Center for Economic Research.
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    Cited by:

    1. Pugliese, A. & Bezemer, P.J. & Zattoni, A. & Huse, M. & van den Bosch, F.A.J. & Volberda, H.W., 2009. "Boards of Directors’ Contribution to Strategy: A Literature Review and Research Agenda," ERIM Report Series Research in Management ERS-2009-013-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    2. Jelena Nikolić & Verica Babić, 2016. "The Implications Of Ownership Concentration Forshareholder Protection And Strategic Decision-Making," Economic Annals, Faculty of Economics, University of Belgrade, vol. 61(211), pages 69-98, October -.

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