Corporate Watchdogs: Past, Present and Future?

17 Pages Posted: 9 Nov 2004

See all articles by Shann Turnbull

Shann Turnbull

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

Date Written: February 2002


This paper reviews past, present and proposed practices for protecting investors from self-dealing by a dominant shareholder and/or management. The origin of audit committees is reviewed and their efficacy analyzed when a dominant shareholder and/or management can control the composition of the board and the appointment of the auditor. Sliding scale voting and various approaches are considered for embedding into corporate constitutions the separation of powers introduced by a negative pledge lender, a shareholders agreement with a venture capitalist or the Associates of a LBO. These agreements typically perform some or all of the roles of supervisory board, watchdog board and/or a dominant shareholder. The proposal of the Auditing Practices Board in the UK for a "Shareholder Panel" and those of a US legal scholar for a "Conflicts Board" are considered. The paper concludes that a Watchdog board, separately elected on a democratic basis by shareholders, provides superior investor protection than a committee of directors to counter self-dealing by directors elected or appointed on a plutocratic basis.

Keywords: Audit committees, corporate governance, corporate senate, dual board, IPO, venture capital, voting, watchdog board

JEL Classification: D72, D74, G30, K29

Suggested Citation

Turnbull, Shann, Corporate Watchdogs: Past, Present and Future? (February 2002). Available at SSRN: or

Shann Turnbull (Contact Author)

International Institute for Self-Governance ( email )

PO Box 266 Woollahra
Cell: +61418222378
Sydney, New South Wales 1350
+61293278487 (Phone)
+61280655905 (Fax)

SKYPE: shann.turnbull

Sustainable Money Working Group ( email )

Holyoake House
Hanover Street
Manchester, M60 0AS
United Kingdom

New Garden City Alliance ( email )

113 Guinness Court
London, UK, SE1 3TA
United Kingdom
+44 207 378 1902 (Phone)


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