Purpose – This paper aims to explain a new idea for the corporate board's main agenda, which should dramatically increase the scale of problems with which the board deals. This agenda also changes the board's interaction with the management providing a new approach to the agency problem. Design/methodology/approach – The paper is based on the normative method. The authors rely on cases (only a few are presented here) to illustrate uses of the real option analysis in the approach to the board activities. The paper shows that, on one hand, it is impossible to avoid managerial fraud and misconduct by means of the board's (and authorities’) traditional monitoring, even under the maximum possible toughening of the criminal and civil law, but, on the other hand, it is possible to change the content of the board‐management interaction to prevent fateful events. Findings – The paper shows how “the duty to say no” approach can prevent corporate failure and, at the same time, facilitate growth and innovation. The underlying basic idea is to use the real options analysis (ROA), which gives an approach to designing strategies under uncertainty. The paper illustrates this technique on different real‐life cases. Research limitations/implications – The paper's strategic approach does not ignore such traditional issues as remuneration and executives and board turnover. It just shifts the priorities of the board. Obviously, further research is needed to articulate the appropriate approach for various circumstances. Originality/value – The paper proposes and justifies a dramatic change in the board's duties. It suggests an approach to finding the most important business problems, which require strategic rather than technical decisions; a substitution of the existing “forensic” approach with a “large‐scale” one, turning the board from a policeman into a leader; a change to the style of the board's interaction with the top management of the company.
Corporate Governance – Emerald Publishing
Published: Oct 18, 2011
Keywords: Boards of directors; Strategy; Real options; Option to abandon; Corporate strategy
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera