Financial knowledge for corporate boards: what should board members know?
Although there is a vast body of research on corporate governance and corporate boards, no one seems to have addressed yet the following question: What should corporate board members know of financial theory and practice to properly discharge their fiduciary responsibilities? The lack of reflection...
| Autor: | |
|---|---|
| Tipo de recurso: | artículo |
| Estado: | Versión publicada |
| Fecha de publicación: | 2021 |
| País: | Brasil |
| Institución: | Instituto Federal de Educação, Ciência e Tecnologia de São Paulo (IFSP) |
| Repositorio: | Independent Journal of Management & Production |
| Idioma: | inglés |
| OAI Identifier: | oai:www.ijmp.jor.br:article/1339 |
| Acceso en línea: | http://www.ijmp.jor.br/index.php/ijmp/article/view/1339 |
| Access Level: | acceso abierto |
| Palabra clave: | financial knowledge agency theory stakeholder theory Board of Directors corporate governance |
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Financial knowledge for corporate boards: what should board members know?financial knowledgeagency theorystakeholder theoryBoard of Directorscorporate governanceAlthough there is a vast body of research on corporate governance and corporate boards, no one seems to have addressed yet the following question: What should corporate board members know of financial theory and practice to properly discharge their fiduciary responsibilities? The lack of reflection on this issue is somewhat surprising given the central role financial matters are supposed to play in board’s discussions and decision making. The objective of this study is to offer a first reflection on this question. Different views of what a corporation is and who “owns” it, whether it is only shareholders or also a broader set of other stakeholders, result in different requirements concerning the financial knowledge board members should have. One such view is agency theory which considers that the main role of management is to create value for shareholders. From this perspective it will follow that board members should understand primarily the dynamics of value creation, with the concomitant focus on long-term strategy formulation. Another view is stakeholder theory which stresses the importance of the survival of the corporation. In this case the board should be conversant primarily with short term financial management, specially cash or liquidity management. The counterintuitive result is that when the board gives priority to the interests of shareholders, in opposition to the interests of other stakeholders beyond what law and good commercial and management practice recommends, it should focus primarily on long time value creation, while the more inclusive stakeholder view requires more attention on short-term cash management.Independent2021-02-01info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionapplication/pdftext/htmlhttp://www.ijmp.jor.br/index.php/ijmp/article/view/133910.14807/ijmp.v12i1.1339Independent Journal of Management & Production; Vol. 12 No. 1 (2021): Independent Journal of Management & Production; 265-2812236-269X2236-269Xreponame:Independent Journal of Management & Productioninstname:Instituto Federal de Educação, Ciência e Tecnologia de São Paulo (IFSP)instacron:IJM&Penghttp://www.ijmp.jor.br/index.php/ijmp/article/view/1339/1717http://www.ijmp.jor.br/index.php/ijmp/article/view/1339/1718Copyright (c) 2021 José Miguel Pinto dos Santoshttp://creativecommons.org/licenses/by-nc-sa/4.0info:eu-repo/semantics/openAccessPinto dos Santos, José Miguel2021-02-01T16:00:25Zoai:www.ijmp.jor.br:article/1339Revistahttp://www.ijmp.jor.br/PUBhttp://www.ijmp.jor.br/index.php/ijmp/oaiijmp@ijmp.jor.br||paulo@paulorodrigues.pro.br||2236-269X2236-269Xopendoar:2021-02-01T16:00:25Independent Journal of Management & Production - Instituto Federal de Educação, Ciência e Tecnologia de São Paulo (IFSP)false |
| dc.title.none.fl_str_mv |
Financial knowledge for corporate boards: what should board members know? |
| title |
Financial knowledge for corporate boards: what should board members know? |
| spellingShingle |
Financial knowledge for corporate boards: what should board members know? Pinto dos Santos, José Miguel financial knowledge agency theory stakeholder theory Board of Directors corporate governance |
| title_short |
Financial knowledge for corporate boards: what should board members know? |
| title_full |
Financial knowledge for corporate boards: what should board members know? |
| title_fullStr |
Financial knowledge for corporate boards: what should board members know? |
| title_full_unstemmed |
Financial knowledge for corporate boards: what should board members know? |
| title_sort |
Financial knowledge for corporate boards: what should board members know? |
| dc.creator.none.fl_str_mv |
Pinto dos Santos, José Miguel |
| author |
Pinto dos Santos, José Miguel |
| author_facet |
Pinto dos Santos, José Miguel |
| author_role |
author |
| dc.subject.por.fl_str_mv |
financial knowledge agency theory stakeholder theory Board of Directors corporate governance |
| topic |
financial knowledge agency theory stakeholder theory Board of Directors corporate governance |
| description |
Although there is a vast body of research on corporate governance and corporate boards, no one seems to have addressed yet the following question: What should corporate board members know of financial theory and practice to properly discharge their fiduciary responsibilities? The lack of reflection on this issue is somewhat surprising given the central role financial matters are supposed to play in board’s discussions and decision making. The objective of this study is to offer a first reflection on this question. Different views of what a corporation is and who “owns” it, whether it is only shareholders or also a broader set of other stakeholders, result in different requirements concerning the financial knowledge board members should have. One such view is agency theory which considers that the main role of management is to create value for shareholders. From this perspective it will follow that board members should understand primarily the dynamics of value creation, with the concomitant focus on long-term strategy formulation. Another view is stakeholder theory which stresses the importance of the survival of the corporation. In this case the board should be conversant primarily with short term financial management, specially cash or liquidity management. The counterintuitive result is that when the board gives priority to the interests of shareholders, in opposition to the interests of other stakeholders beyond what law and good commercial and management practice recommends, it should focus primarily on long time value creation, while the more inclusive stakeholder view requires more attention on short-term cash management. |
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2021 |
| dc.date.none.fl_str_mv |
2021-02-01 |
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info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion |
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article |
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publishedVersion |
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http://www.ijmp.jor.br/index.php/ijmp/article/view/1339 10.14807/ijmp.v12i1.1339 |
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http://www.ijmp.jor.br/index.php/ijmp/article/view/1339 |
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10.14807/ijmp.v12i1.1339 |
| dc.language.iso.fl_str_mv |
eng |
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eng |
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http://www.ijmp.jor.br/index.php/ijmp/article/view/1339/1717 http://www.ijmp.jor.br/index.php/ijmp/article/view/1339/1718 |
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Copyright (c) 2021 José Miguel Pinto dos Santos http://creativecommons.org/licenses/by-nc-sa/4.0 info:eu-repo/semantics/openAccess |
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Copyright (c) 2021 José Miguel Pinto dos Santos http://creativecommons.org/licenses/by-nc-sa/4.0 |
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openAccess |
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application/pdf text/html |
| dc.publisher.none.fl_str_mv |
Independent |
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Independent |
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Independent Journal of Management & Production; Vol. 12 No. 1 (2021): Independent Journal of Management & Production; 265-281 2236-269X 2236-269X reponame:Independent Journal of Management & Production instname:Instituto Federal de Educação, Ciência e Tecnologia de São Paulo (IFSP) instacron:IJM&P |
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Instituto Federal de Educação, Ciência e Tecnologia de São Paulo (IFSP) |
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IJM&P |
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IJM&P |
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Independent Journal of Management & Production |
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Independent Journal of Management & Production |
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Independent Journal of Management & Production - Instituto Federal de Educação, Ciência e Tecnologia de São Paulo (IFSP) |
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ijmp@ijmp.jor.br||paulo@paulorodrigues.pro.br|| |
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15.301603 |