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Accountability processes in boardrooms: A conceptual model of manager-non-executive director information asymmetry

Niamh M. Brennan (Lochlann Quinn School of Business, University College Dublin, Ireland)
Collette E. Kirwan (Lochlann Quinn School of Business, University College Dublin, Dublin, Ireland)
John Redmond (Electricity Supply Board, Dublin, Ireland)

Accounting, Auditing & Accountability Journal

ISSN: 0951-3574

Article publication date: 18 January 2016

Abstract

Purpose

The purpose of this paper is to understand the influence of information and knowledge exchange and sharing between managers and non-executive directors is important in assessing the dynamic processes of accountability in boardrooms. By analysing information/knowledge at multiple levels, invoking the literature on implicit/tacit and explicit information/knowledge, the authors show that information asymmetry is a necessary condition for effective boards. The authors introduce a conceptual model of manager-non-executive director information asymmetry as an outcome of the interpretation of information/knowledge-sharing processes amongst board members. The model provides a more nuanced agenda of the management-board information asymmetry problem to enable a better understanding of the role of different types of information in practice.

Design/methodology/approach

The analysis of information/knowledge exchange, sharing and creation and the resultant conceptual model are based on the following elements: manager-non-executive director information/knowledge, management-board information/knowledge and board dynamics and reciprocal processes converting implicit/tacit into explicit information/knowledge.

Findings

The paper provides new insights into the dynamics of information/knowledge exchange, sharing and creation between managers and non-executive directors (individual level)/between management and boards (group level). The authors characterise this as a two-way process, back-and-forth between managers/executive directors and non-executive directors. The importance of relative/experienced “ignorance” of non-executive directors is revealed, which the authors term the “information asymmetry paradox”.

Research limitations/implications

The authors set out key opportunities for developing a research agenda from the model based on prior research of knowledge conversion processes and how these may be applied in a boardroom setting.

Practical implications

The model may assist directors in better understanding their roles and the division of labour between managers and non-executive directors from an information/knowledge perspective.

Originality/value

The authors apply Ikujiro Nonaka’s knowledge conversion framework to consider the transitioning from individual implicit personal to explicit shared information/knowledge, to understand the subtle processes at play in boardrooms influencing information/knowledge exchange, sharing and creation between managers and non-executive directors.

Keywords

Acknowledgements

The authors gratefully acknowledge helpful comments on earlier drafts of the paper from Shahzad Uddin, Theresa Libby and from participants at the following conferences/seminars: Asia Pacific Interdisciplinary Perspectives on Accounting (APIRA) Conference; Griffith University, Australia, Bond University, Australia, Durham University, UK and the University of Waterloo, Canada. The authors are grateful to the three reviewers who repeatedly constructively challenged the ideas in the paper, as a result of which it has much improved.

Citation

Brennan, N.M., Kirwan, C.E. and Redmond, J. (2016), "Accountability processes in boardrooms: A conceptual model of manager-non-executive director information asymmetry", Accounting, Auditing & Accountability Journal, Vol. 29 No. 1, pp. 135-164. https://doi.org/10.1108/AAAJ-10-2013-1505

Publisher

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Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited