Does board structure facilitate corporate misconduct? A literature review and case study

Abstract

The purpose of this paper is to further develop existing research on facilitator of corporate misconduct by studying the board structure of European companies with board members involved in unethical behavior. To do so, existing literature on this topic was reviewed and provided the base to qualitatively analyze six European firms in terms of board independence, board size and the power of their CEO. To assess in dependence of supervising directors and the size of the board, a case study was conducted to find ratio’s and compare it to country’s averages. The power of CEO’s was examined in four dimensions: structural, charisma, shareholder and tenure power. Overall, The results reveal that a lack of independence, far from average sizes and powerful CEOs can be found at selected companies. This suggest that the dimensions seem to facilitate of corporate misconduct, as literature on this topic suggests. Overall, this paper highlights the importance of a board structure in contributing to the combat of unethical board behavior which enriches individuals on costs of stakeholders.