Shareholder Proposals, Board Composition, and Leadership Structure
Journal of Managerial Issues, Volume 22, Issue 2, 152-165.
Separation of ownership and control epitomizes the corporate form of business. Shareowners invest while forfeiting the right to directly manage resources, creating an agency relationship between owners and managers. Managers may act in their self-interest to the detriment of shareowner value, a situation referred to as an agency problem. The Board of Directors is responsible for representing the owners through oversight of the corporation and prevention of self-dealing by the managers who control the invested capital. Two corporate governance factors, board composition (more independent directors) and leadership structure (split CEO and Chairman of the Board), may further serve to reduce the agency problem.