Cristina Vladu, Andrei Novac, Adrian Preda and Robert G. Bota
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Jim Rooney and Suresh Cuganesan
The purpose of this study is to examine how managers in financial institutions satisfy themselves of the effectiveness of risk mitigation strategy and management control. It…
Abstract
Purpose
The purpose of this study is to examine how managers in financial institutions satisfy themselves of the effectiveness of risk mitigation strategy and management control. It studies the co-opting of accounting tools within a single financial institution case study, examining the recursive and emergent characteristics of risk management practice.
Design/methodology/approach
Adopting a field study approach within the strategy-as-practice perspective, the paper provides insights into the role of actor perceptions of risk and accounting as a calculative practice in the adaptive enactment of risk strategy.
Findings
Results highlight the interactions between risk management strategy, management controls and actor interests at Lehman Brothers. The actions and reactions of risk management decision-makers such as Executive Committee and Board members are examined to better understand the role of accounting and leadership.
Research limitations/implications
Results of this study may not be generalised beyond this single case study.
Practical implications
The paper emphasises that concern for the social relations and the performative interests of actors in a risk management network needs to be understood and considered in accounting research. It is argued that the market prices of tradable financial asset will continue to be opaque without these insights.
Originality/value
This study explores an under-researched topic in the accounting literature in examining how management controls are affected by and, in turn, affect risk strategising.
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L.A.A. Van den Berghe and Tom Baelden
Throughout the world, reform initiatives have been set up to fix perceived and actual corporate governance shortcomings. One of the proposed remedies has been to improve the…
Abstract
Purpose
Throughout the world, reform initiatives have been set up to fix perceived and actual corporate governance shortcomings. One of the proposed remedies has been to improve the independence of the board of directors. The main purpose of this paper is to examine the issue of independence as one element to improve board effectiveness. In doing this, the focus is mainly on the monitoring role, and to a lesser extent on the strategic role of the board of directors.
Design/methodology/approach
A comparison of the definitions of independence provided by the corporate governance codes and recommendations reveals that they approach the concept of independence mainly from a formal point of view, where independence equals being in a position free of any possible conflicts of interest. It is stated that this approach does not capture all the aspects of independence and that independence cannot be an end in itself. Instead of emphasising independence, the paper hypothesises that, to ensure board effectiveness, a board of directors is needed which, among other things, vigilantly monitors the company and pursues an objective decision‐making process.
Findings
Without neglecting the importance of other elements in achieving this two‐fold goal, the paper highlights the need for directors to have the “right attitude”. To achieve this, three conditions have to be jointly fulfilled: each director should have the ability as well as the willingness to be a critical thinker, with an independent mind, however, the environment should also be such as to facilitate directors to display this attitude.
Originality/value
These three factors – ability, willingness and environment – are discussed in depth and integrated into a tentative framework for evaluating the chance that a given director will display this attitude. As such, this paper is of value both for practitioners as academics and will mostly affect their understanding of the concept of independence.