Keeping up with new research in corporate governance is hard. Unfortunately, ignoring industry journals means missing out on opportunities to strengthen your board’s communication and increase its decision-making effectiveness. Our series, Research Recap, aims to change that. We give boards a snapshot of the latest findings and best practices, cutting straight to the chase and giving you only what you need to know. Without further ado, let’s get started!
Listing directors who have surpassed a threshold of absences is a more effective accountability measure than publishing a full roll call of directors at every meeting.
Journal of Corporate Law Studies
‘Name and Shame’ – Director Attendance Disclosure and Practice
Empirical: This study draws conclusions from the existing attendance data of from a large sample of boards, though no data is collected through formal experimentation.
The primary goal of this study is to compare two “disclosure regimes” — models for recording and publicizing director attendance — to determine which is more effective in encouraging director attendance. The secondary goal is to speculate on the impact of director attendance on a board’s performance.
The “Roll-Call” Model, popular in Australia, requires full disclosure regarding the attendance of all directors. The “Brightline” or “Name and Shame” Model (used in the United States) requires a director’s attendance to be made public only when it has fallen below 75% (or some similar threshold).
The study found that 7.09% of Australian board members attend less than 75% of meetings. Meanwhile, in the United States, only 0.91% of directors had attendance rates below 75%.
The success of the Brightline Model is attributed, in part, to providing a limited but fair amount of leniency. Under this attendance regime, directors don’t have to worry about being “shamed” should they be unable to get out of a scheduling conflict. Shame comes into play when their attendance rate reaches a point where they no longer have a reasonable excuse (thus magnifying its impact).
Because the Roll-Call Model publicizes the attendance of every director at every meeting, board members are more easily able to get away with skipping meetings as it’s harder to identify those who are consistently absent.
Researchers didn’t do much to draw the line between director attendance and its outcome on board performance. However, it emphasized that attendance is often a factor weighing heavily on shareholders perceptions of an individual director’s performance.
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51 minutes, 21 seconds
Estimated reading time of our article = 1 minute, 48 seconds.
Estimated reading time of the research = 53 minutes, 9 seconds.
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Chapple, L. (Ellie)1, larelle. chapple@qut. edu. a., Gray, S., Nowland, J., & Sadiq, K. (2018). ‘Name and shame’ – director attendance disclosure and practice. Journal of Corporate Law Studies, 18(2), 311–337. https://doi.org/10.1080/14735970.2017.1412674