Improving Director Access to Corporate Information

A Proposal to Counterbalance CEO-Dominated Boards

Robert T. Kenagy, JD, and Mark A. Fox, PhD, MCom(Hons), BCom

During the last decade, both shareholders and the general public have become increasingly frustrated with recurring corporate scandals and mismanagement. The current era of concern over corporate misbehavior arose out of the accounting and fraud scandals at Enron, Tyco, WorldCom, and other companies early in the 2000s. Frustration dramatically increased with the reported corporate misdeeds at the heart of the current global financial crisis. These misdeeds included mortgage origination companies engaging in unethical and illegal conduct, financial institutions failing to disclose to investors the true risks of subprime mortgage-backed securities, credit-rating agencies failing to rate appropriately securities being sold to the public, and many other corporations ignoring basic risk assessment practices to the detriment of their shareholders and the general public. (see FBI Financial Crimes Report 2009, www.fbi.gov/stats-services/publications/fmancial-crimes-report-2009; and FBI 2010 Mortgage Fraud Report, fbi.gov/stats-services/publications/mortgage-fraud-2010.) public outrage peaked with news of the post-crash executive bonuses being paid to individuals who many considered to be at least partly responsible for the financial meltdown. In many cases, responsibility for the destructive corporate behaviors involved in the crisis must ultimately rest with poor decisions made by boards of directors.