Corporate Governance Myths: Comments on Armstrong, Guay, and Weber

28 Pages Posted: 23 Sep 2010  

James A. Brickley

University of Rochester - Simon Business School

Jerold L. Zimmerman

University of Rochester - Simon Business School

Date Written: September 1, 2010

Abstract

This paper argues that academics, politicians, and the media have six commonly held but misguided beliefs about corporate governance. While Armstrong, Guay, and Weber (2010) discuss some of these misconceptions, a wider recognition that these beliefs are actually “myths” is important. They include: (1) a common definition of “corporate governance” exists; (2) a useful distinction is “internal” versus “external” governance mechanisms; (3) outside directors perform two separable roles: to advise and monitor managers; (4) research has identified “good” and “bad” governance practices; (5) a “good” governance index can be constructed; and (6) corporate governance “best practices” can be deduced from peer data.

Keywords: corporate governance, financial accounting, agency costs, contracting, debt contracts

JEL Classification: D21, D23, J33, K22, L14, L20, M40, M41

Suggested Citation

Brickley, James A. and Zimmerman, Jerold L., Corporate Governance Myths: Comments on Armstrong, Guay, and Weber (September 1, 2010). Simon School Working Paper No. FR 10-29. Available at SSRN: https://ssrn.com/abstract=1681030 or http://dx.doi.org/10.2139/ssrn.1681030

James A. Brickley

University of Rochester - Simon Business School ( email )

Carol Simon Hall 3-160L
Rochester, NY 14627
United States
585-275-3433 (Phone)
585-442-6323 (Fax)

Jerold L. Zimmerman (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States
585-275-3397 (Phone)
585-442-6323 (Fax)

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