The Opportunity for Re‐inventing Corporate Governance in Joint Venture Companies

Joint venture boards – compared with widely held companies – may prove more amenable to changes in corporate governance theory that significantly alter traditional patterns for directors, chairmen, and chief executive officers. Parent companies’ control over directors is more direct than that exercised by widely scattered shareholders or even institutional investors. Therefore, parent companies have a vested interest in joint venture board strength in order that parents be fittingly represented. Yet they also understand the crucial importance of relatively robust management. This dual, albeit competing, motivation makes attractive any approach to governance that assures strong directors, a rigorous chain of accountability, and, at the same time, an appropriately empowered chief executive. The author’s Policy Governance model offers these improvements to board leadership, but compels fundamental changes from traditional board practice. The ownership circumstances found in joint venture companies are favourable for implementing the new paradigm.