Board Accountability and the Entity Maximization and Sustainability Approach
Forthcoming, Understanding the Company: Corporate Governance and Theory, edited by Barnali Choudhury and Martin Petrin, Cambridge University Press
17 Pages Posted: 14 Mar 2016
Date Written: March 14, 2016
Abstract
Accountability operates expressly and implicitly in the field of corporate governance to the point where it is regarded as one of its most critical elements. The accountability of the board of directors is an important part of the accountability element of corporate governance and it has been said that good corporate governance is able to be best achieved by holding directors accountable for their behaviour and decisions. This paper examines how board accountability would work if an entity maximisation and sustainability approach to the company was taken. In essence this approach takes the view that the ultimate objective of the company should be that the overall long-run market value of the company as a whole is increased, taking into account the investment made by various people and groups, and that the company will be managed so that it has long-term survival. The paper focuses particularly on the following question: to whom is the board accountable?
Keywords: accountability, boards, entity maximisation, directors
JEL Classification: K22, L21
Suggested Citation: Suggested Citation