The purpose of this paper is to present competing theories that argue: that boards of directors of locally incorporated subsidiaries of trans‐national entities contribute positively to local operations; and that locally constituted boards are an unnecessary expense and can confound the governance efforts of the trans‐national entities' boards of directors.
The relative merits of the competing theories are considered by examining whether a small sample of trans‐national entities choose to limit the role of their boards to the local regulator's minimum requirements, or to voluntarily exceed them.
The paper finds that in all cases board construction meets the local regulator's requirements, but in some cases, trans‐national entities have chosen to exceed minimum requirements, suggesting that in some cases a well constructed local board can make a positive contribution to local operations.
This research is limited by the fact that it considers one sector (banking) in one jurisdiction (New Zealand). Future research could consider other sectors and locations.
The results in this paper suggest that there is latitude for regulators to expect more of local boards than is currently the case. Moreover, there is no conclusive empirical support for the argument that a local board is an unnecessary expense and might confound the governance initiatives of a parent company.
To the best of the authors' knowledge, this is the first paper to empirically examine the two competing theories of locally constructed boards of directors set out above. It is of interest to regulators and others considering the role of local boards of directors.
McIntyre, M. and Tripe, D. (2009), "A specific role for boards in a regulatory framework: the New Zealand banking case", Corporate Governance, Vol. 9 No. 5, pp. 586-599. https://doi.org/10.1108/14720700910998157Download as .RIS
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