The Movement Toward Independent Directors on Boards:
A Comparative Analysis of Sweden and the UK
AC6PO4 Current Issues in
Accounting and Finance
BA (Hons) Accounting and Finance
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This review will look at an article by Johanson and Østergren that compares between the UK and Sweden in Corporate Governance and the necessity of Independent Directors. This article was chosen as corporate governance structure is an important aspect in the post-Enron/WorldCom epoch and by analysing the difference between different approaches, greater understanding can be understood for competent director behaviour. Background
Both authors of the article (Daniel Johanson and Katarina Østergren) are both professors at the Norwegian School of Economics and Business Administration as assistant and associate respectively in the department of accounting, auditing and law as well as holding doctorate degrees in Sweden. Katarina specializes in management accounting, the medical sector and corporate governance with eight published articles whilst Daniel has two published articles but also shows strong confidence into corporate governance focusing more into information relating to the board of directors and government regulation. Although they both share strong knowledge into corporate governance their previous work creates the assumption of cultural bias favouring the Nordic governance structure. From their academic background it can be assumed that the board structure and agency theory will be important topics to be understood from the article. Daniel is also known to use a vast amount of background research and supportive information to defend his statements. Article
The article related to contemporary issues as it was written in November 2010 so it seems relevant to modern research. From the clarity of language used, the targeted demographic appeared to be for the generic public so it could be assumed that this articles purpose was to give insight to shareholders and other stakeholders of organisations. The sources used was secondary research which were predominantly journal articles but also included textbook references and governance reports from the financial reporting council built on a lot of theoretical foundations mostly on post millennia research. The article can be found in the 2010 journal ‘Corporate Governance: An International Review’ in Volume 18 part 6 from pages 527-539. Analysis
The preamble was straight to the point in explaining the purpose of the article as well as being clear to highlight the abbreviations of key topics in addition to later defining in simple language Board Independence Norm (BIN), Varieties of Capitalism (VoC) and New Institutional Theory (NIT). The authors also did this with common abbreviations and terminology; EU, NED’s, FRC, SID, unitary and dual boards. Following on to the introduction, effective recognition was given to previous assumptions with clear understanding which were heavily defended by multiple sources such as the example on line 5 paragraph 1 page 527: ‘Mainstream corporate governance research and codes of best practice are often based on the assumption that independent boards are vital for ensuring sound financial reporting and preventing fraud (Beasley, Carcello, Hermanson, & Lapides, 2000; Cadbury, 1992; Cohen, Krisnamoorthy, & Wright, 2002; Higgs, 2003)’ Not only did the authors reassure their aim of the article on focusing on the ‘norm of board independence’ they elucidated the necessity of the article as there were ‘few comparative analyses of governance mechanisms across different countries and institutional settings’ (p528l1) and also highlighted the complexity of previous studies due to various...