Peter Crow
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Governance and management: is a clear separation best?

23/8/2013

1 Comment

 
I have been working on a paper which explores issues surrounding the separation of governance and management. The topic is potentially quite controversial, because it questions the basis of most modern governance practice. Hopefully, the findings will be presented at a conference in the USA early next year.

The paper is needed because we have witnessed many corporate failures in the last decade, and autopsies suggest that a failure of governance was a contributing factor in many cases. Clearly, the separation of governance and management espoused by agency theory(*), and by many since, has provided no guarantee of success. Various defensive positions have been erected by Boards including lack of information; poor implementation of strategy; and, management fraud. Important questions lie just below the surface, including what role the Board should play, and whether a clear separation between governance and management is the best model to achieve the organisation's aims.

The answers to these questions have potentially far-reaching ramifications. I would appreciate hearing your views and experiences, to inform my research. If you can share links or references to any prior papers, that would be great as well. Please feel free to provide a (public) comment here, or, if you would prefer, contact me via email.

(*) The "traditional" view—that the roles of governance and management must be held separate—is based on agency theory. Agency was proposed by Jensen and Meckling in the 1970s. It has become the dominant theory of governance, in both research and practice. However, in the four decades since, no robust evidence to explain how such a model delivers better performance has emerged.
1 Comment
Jade Teki
23/8/2013 03:38:07

In my experience there needs to be an overlap - even a slight one - as governance that is too far removed from management is often out of touch - leading to managers either being out of their depth, resource light, and/or the Board expectations not being real/acheivable under the current conditions. Without the overlap reporting can only go so far and relationship between the board and the managers can sour quickly leading to other issues.

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