Clubby ties between U.S. CEOs and board audit committees: study

Almost 40 percent of U.S. corporate directors with responsibility for monitoring the profit-and-loss ledger have social ties to the chief executive, a study says, making them look more like lapdogs than watchdogs. Conducted by two accounting professors at Tilburg University in The Netherlands, the study reinforces long-held perceptions of a clubby culture on U.S. corporate boards, where members seldom challenge the executives they are meant to police. The study looked at about 2,000 U.S. companies and their board audit committees, which are responsible for overseeing outside auditors and making sure financial reports are accurate. It found that personal friends of senior managers were often appointed to these committees, making the directors more likely to go along with the company’s reporting practices.


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