Blackwell Reference Online

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Organizational governance concerns “how a corporation is structured, what policies and objectives it seeks to fulfill, how it is managed, and which stakeholder interests it serves” ( Wood, 1994 ). The term “includes specific issues arising from interactions among senior management, shareholders, boards of directors, and other corporate stakeholders” ( Cochran and Wartick, 1988 ). The basic questions of governance are of power, benefit, and accountability: Who controls the actions of an organization? For what purposes, and to whose benefit, does the organization act? Who is accountable for the consequences of an organization's actions? Governance issues are particularly salient in many large business organizations because the separation of ownership from management control ( Berle and Means, 1932 ) changes the agent–principal relationship, granting much autonomy to managers and little voice to owners. Managers can often avoid accountability for organizational actions, making it difficult for stakeholders (including owners/stockholders) or society at large to insure that their legitimate interests are being met. Reviewing the governance literature, Cochran and Wartick (1988: 22–3, paraphrased) offer this list of board responsibilities: • Strategic planning: establishing long‐range objectives and policies. • Board renewal: nominating and orienting new board members. • Supervision ... log in or subscribe to read full text