Agency Cost Caused by the Board's Dual Responsibilities Tension between the dual responsibilities Another Agency Cost Why it exists? It is caused by the tension between Strategy-setting the dual responsibilities of BOD,as & the two responsibilities mentioned monitoring before are incompatible. ● ●
Agency Cost Caused by the Board’s Dual Responsibilities Tension between the dual responsibilities Another Agency Cost Why it exists? It is caused by the tension between the dual responsibilities of BOD, as the two responsibilities mentioned before are incompatible. Strategy-setting & monitoring
Comparison of the Board's two Responsibilities Responsibility strategy-setting monitoring Role advisory role (sounding board for management non-advisory role sometimes Relationship friendly (supportive and unpleasant (request with mutually favorable accountability managers opinions) transparency from the management) Legal Rules duty of care (business duty of loyalty- judgment rule) conflict of interests ●
Comparison of the Board’s two Responsibilities Responsibility strategy-setting monitoring Role advisory role (sounding board for management) non-advisory role Relationship with managers friendly (supportive and mutually favorable opinions) sometimes unpleasant (request accountability & transparency from the management) Legal Rules duty of care (business judgment rule) duty of loyaltyconflict of interests
。Sounding board: 0 BOD contributes its opinions as to general policy and their judgment whenever a problem comes up.BOD can do no more than that. Unpleasant relationship between BOD and managers: 0 A closely-monitored CEO may prefer to keep his views to himself,avoid bringing up problems or difficulties in the boardroom.However,the monitoring responsibility of BOD requests accountability and transparency from the management,which is incompatible. ● ●
• Sounding board： • BOD contributes its opinions as to general policy and their judgment whenever a problem comes up. BOD can do no more than that. • Unpleasant relationship between BOD and managers: • A closely-monitored CEO may prefer to keep his views to himself, avoid bringing up problems or difEiculties in the boardroom. However, the monitoring responsibility of BOD requests accountability and transparency from the management, which is incompatible