How much should boards know?

When companies fail boards get blamed – either they knew and were complicit, or did not
know and were incompetent. At the heart of corporate governance is information asymmetry
between various parties. The UK Code of Governance sets a high standard for board
information governance, placing a particularly heavy burden on chairmen, stating that ‘the
chairman is responsible for ensuring that the directors receive accurate, timely and clear
information’. The Code goes on to state that ‘management has an obligation to provide such
information, but directors should seek clarification or amplification where necessary’.
Corporate governance failure is almost always accompanied by information asymmetry
whereby the non-executive directors were not aware of what was going on.