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Full-Text Articles in Business Organizations Law
Do Independent Directors Curb Financial Fraud? The Evidence And Proposals For Further Reform†, S. Burcu Avci, Cindy A. Schipani, Nejat Seyhun
Do Independent Directors Curb Financial Fraud? The Evidence And Proposals For Further Reform†, S. Burcu Avci, Cindy A. Schipani, Nejat Seyhun
Indiana Law Journal
In this Article, we argue that the U.S. corporate governance rules put too much faith in the independent board members and insufficient emphasis on the shareholders to control and monitor top management. Given the agency problem between the board of directors and the shareholders, outside directors can be captured by management, thereby leading to inadequate checks on management. The evidence presented in this Article shows that outside board members do not exercise sufficient controls on management even when management has gone awry. To solve this agency problem, we propose increasing the power of the principals: make shareholder resolutions binding on …