Are American corporate directors still ignoring the signals?

Abstract

Purpose

This research study focuses on two critical questions. First, to what extent are US corporate directors now taking independent steps to protect stakeholders from future corporate débâcles, such as Enron and Tyco? Second, how have these débâcles personally impacted US corporate directors in other companies?

Design/methodology/approach

A total of 114 corporate business directors replied to a mail questionnaire.

Findings

Respondents reported that: the number of board‐initiated voluntary changes being considered is very modest; managements are not doing a good job communicating changes in internal control procedures to boards; the recent corporate débâcles caused only about 9 percent of director respondents to become uneasy about their directorships; greater “due diligence” is needed currently before accepting a board position (it is still an “honor” to be asked to join a board); some senior managers are not being realistic about the significant time commitment needed to be a director in the twenty‐first century.

Research limitations/implications

Despite the modest sample size, the very broad range of the firms’ sales data suggests that the sample may be somewhat representative of US business boards. Other studies have been based similar size samples.

Originality/value

Recent changes in corporate governance have been less rigorous than reported, despite many press reports concluding that corporate America is in a period of accelerating change. Outside directors seem to be unwilling to confront management on critical issues. Consequently, US directors need to be more proactive in making changes, or stakeholders can look forward to continuing débâcless like Enron, Tyco, and WorldCom.

Citation

Fram, E.H. and Zoffer, H.J. (2005), "Are American corporate directors still ignoring the signals?", Corporate Governance, Vol. 5 No. 1, pp. 31-38. https://doi.org/10.1108/14720700510583449