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AOL/Time Warner and WorldCom:Corporate Governance and the Effects of the Deregulation Paradox
Unformatted Document Text:  6 CORPORATE GOVERNANCE: The Quintessential Form of Self Regulation The Role of Corporate Boards The role of a corporate board of directors is to provide independent oversight and guidance to a CEO and his/her staff of senior executives. This can involve everything from approving new strategic initiatives to reviewing CEO performance. Corporate boards provide a level of professional oversight that embodies the principles of “self regulation.” As Siebens (2002) points outs, this is considered “evidently preferable” than competent authorities intervening with compulsory measures. (p.111) One of the important goals, of corporate governance should be to prevent significant mistakes in corporate strategy and to ensure that when mistakes happen, they can be corrected quickly (Pound, 2002). The problem occurs when a corporate board of directors ignores its fiduciary responsibility to company stockholders and employees by failing to challenge questionable corporate strategy and/or by permitting unethical business practices to occur. More problematic, is when a corporate board loses its sense of independence. In recent years, many CEOs have tended to operate with corporate boards that have proven highly compliant rather than objective. It was not uncommon to find corporate boards that were packed with men and women loyal to the CEO. There is extensive research that examines the internal dynamics between companies and corporate boards of directors (Cohan, 2002; Turnbull, 2002; Siebens, 2002; Salmon, 2002; Monks & Minow,1995). According to the said authors, there are numerous factors that can contribute to a failure in corporate governance. They include:

Authors: Gershon, Richard. and Alhassan, Abubakar.
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6
CORPORATE GOVERNANCE:
The Quintessential Form of Self Regulation
The Role of Corporate Boards
The role of a corporate board of directors is to provide independent oversight

and guidance to a CEO and his/her staff of senior executives. This can involve everything

from approving new strategic initiatives to reviewing CEO performance. Corporate boards

provide a level of professional oversight that embodies the principles of “self regulation.”

As Siebens (2002) points outs, this is considered “evidently preferable” than competent

authorities intervening with compulsory measures. (p.111) One of the important goals,

of corporate governance should be to prevent significant mistakes in corporate strategy

and to ensure that when mistakes happen, they can be corrected quickly (Pound, 2002).
The problem occurs when a corporate board of directors ignores its fiduciary

responsibility to company stockholders and employees by failing to challenge questionable

corporate strategy and/or by permitting unethical business practices to occur. More

problematic, is when a corporate board loses its sense of independence. In recent years,

many CEOs have tended to operate with corporate boards that have proven highly

compliant rather than objective. It was not uncommon to find corporate boards that were

packed with men and women loyal to the CEO. There is extensive research that examines

the internal dynamics between companies and corporate boards of directors (Cohan, 2002;

Turnbull, 2002; Siebens, 2002; Salmon, 2002; Monks & Minow,1995). According to the

said authors, there are numerous factors that can contribute to a failure in corporate

governance. They include:


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