The Evolution of Corporate Governance: power redistribution brings boards to life

To understand the evolving perspectives and behaviour of directors and institutional investors, field research was conducted in 2004–2005 by way of a survey with corporate directors in four countries (Australia, Canada, New Zealand and the United States; n = 658) and institutional investors in Canada (n = 34). Reported changes in directors' views and practices are substantial and consistent across countries, the defining characteristic of which is a fundamental shift in the positioning of the board toward becoming a strategic partner to management. The role of institutional investors also shifted in ways that are complementary to this new role of directors (e.g., toward increased monitoring). While most research has focused on agency concepts of the board as monitors of management, our research suggests that the board is evolving towards a more collaborative role with management, consistent with stewardship theory. Our findings also suggest that directors are seeking a balance between collaboration and their role as monitors of management, rejecting the notion of the board as primarily a monitoring body. An evolutionary model is offered to explain these changes and implications are discussed.