Mitigating the Exposure of Corporate Boards to Risk and Unethical Conflicts

Loyola University Chicago Risk Management and Corporate Governance Monograph Series

25 Pages Posted: 25 Jun 2008

See all articles by Shann Turnbull

Shann Turnbull

International Institute for Self-Governance; Sustainable Money Working Group; New Garden City Alliance

Multiple version iconThere are 2 versions of this paper

Date Written: April 27, 2008

Abstract

Directors of corporations governed by a single board (i) Have excessive and unethical powers to become "Sources of risk" and (ii) Lack processes to systematically obtain information independently of management on the Strengths, Weaknesses, Opportunities and Threats (SWOT) of either their managers or the business to be "Managers of Risk". The removal and/or mediation of unethical conflicts can be achieved by amending corporate constitutions to separate governance powers from the power to manage business operations. Systematic independent information on the SWOT of managers and the business can be obtained by the corporate constitution introducing advisory councils appointed by those individuals on whom the business depends for its existence such as its customers, suppliers and other stakeholders. Besides mitigating the operating, reputational and financial risks of directors and the firm, evidence is provided how stakeholder councils have produced competitive advantages. The changes in corporate constitutions described in the paper protect the reputations and personal liabilities of directors by removing perceptions of unethical conduct and provides them with creditable evidence that they can carry out their fiduciary duties with due care and diligence to monitor managers and manage business risks.

Keywords: Competitiveness, Conflict management, Corporate Governance, Ethics, Operating efficiency, Requisite variety, Risk Management, Multiple boards

JEL Classification: G32, L15, L22, L25, M14

Suggested Citation

Turnbull, Shann, Mitigating the Exposure of Corporate Boards to Risk and Unethical Conflicts (April 27, 2008). Loyola University Chicago Risk Management and Corporate Governance Monograph Series, Available at SSRN: https://ssrn.com/abstract=1151170 or http://dx.doi.org/10.2139/ssrn.1151170

Shann Turnbull (Contact Author)

International Institute for Self-Governance ( email )

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