Differentiating control, monitoring and oversight

Abstract

TitleDifferentiating control, monitoring and oversight: Influence of power relations on boards of þÿ d i r e c t o r s i n s i g h t s f r o m i n v e s t m e n t f u n d b o a r d s Abstract Purpose -Boards of directors are assumed to exercise three key accountability rolescontrol, monitoring and oversight roles. By researching one board type -investment fund boards -and the power relations around those boards, the purpose of this paper is to show that such boards are not capable of operating the three key roles assumed of them. Authors(s)CullenDesign/methodology/approach -The authors conducted 25 in-depth interviews and a focus group session with investment fund directors applying a grounded theory methodology.Findings -Because of their unique position of power, the authors find that fund promoter organisations (that establish and attract investors to the funds) exercise control and monitoring roles. As a result, contrary to prior assumptions, oversight is the primary role of investment fund boards, rather than the control role or monitoring role associated with corporate boards. The findings can be extended to other board-of-director contexts in which boards (e.g. subsidiary boards, boards of state-owned entities) have legal responsibility but limited power because of power exercised by other parties such as large shareholders.Practical implications -Shareholders and regulators generally assume boards exercise control and monitoring roles. This can lead to an expectations gap on the part of shareholders and regulators who may not consider the practical realities in which boards operate. This expectations gap compromises the very objective of governance -investor protection.Originality/value -Based on interviews with investment fund directors, the authors challenge the control-role theory of investment fund boards of directors. Building on our findings, and following subsequent conceptual engagement with the literature, the authors differentiate control, monitoring and oversight roles, terms which are often used interchangeably in prior research. We distinguish between the three terms on the basis of the level of influence implied by each.

Artificial intelligence based decision-making in accounting and auditing: ethical challenges and normative thinking

“…Such an AI-governance committee could also develop ethical guidelines for the future of more autonomous AI and identify the related potential damage of AI-based algorithms a priori to come up with specific regulations. Future research on this would need to combine humanistic, legal/governance, accounting/auditing and information sciences perspectives to tackle questions such as the nature of fairness in AI, of good (model) governance of Big Data or the best practices concerning the development, training and use of AI-based accounting systems (Andreou et al, 2021;Brennan et al, 2019;Cullen and Brennan, 2017). Such endeavours would also connect well to ongoing research and practice on corporate sustainability accounting and reporting (Grisard et al, 2020;Mitnick et al, 2021) concerning environmental, social and governance (ESG) factors.…”

CEO‐TMT faultline and corporate green innovation: The contextual role of Confucian culture

“…Referring to Zhang, Ayoko, and Liang (2021) partially, this study adapts the degree of alignment between the executive's board membership, social network, and focal attributes (CEO/non‐CEO job classification) to measure the CEO‐TMT resource‐based faultline. Research has shown that TMT members usually use board membership to manage their organizational dependency and enhance their power (Cullen & Brennan, 2017). In addition, the greater the number of companies in which executives work part‐time, the richer the social resources the executives possess and the greater their prestige and voice in the company (Li, 2017).…”

Sources of accountability inside the boardroom

“…The board of directors is described as a “central governance mechanism” with oversight of the “complex system of moving parts” that makes up corporate governance (Cullen and Brennan, 2017, p. 1869). Corporate governance and accountability are intrinsically linked.…”

“…Non-executive board members play a vital role in not only enabling boards to be more effective but also in creating a balanced view and acting as a source of confidence to shareholders (Hambrick et al , 2015; Michelon et al , 2015; Roberts et al , 2005; Zattoni and Cuomo, 2010). Furthermore, non-executives are responsible for “control, monitoring and oversight roles” of accountability (Cullen and Brennan, 2017, p. 1869). As such, they provide an independent perspective on executive decisions.…”