Information costs and the role of the independent corporate director

This study examines the perceptions of directors in Australian public listed companies about their access to information for their role as directors. We focus on information costs and information asymmetry. Directors' perceptions of the relationship between the composition of Boards, the perceived roles of Boards and the information requirements to fulfil those roles were explored in interviews with 45 directors from public listed companies. Implicit in Agency Theory is the assumption that independent directors have free access to the information required to fulfil their role in monitoring and control. We found, however, demonstrable evidence of information asymmetry. The central finding was that directors perceive that the CEO and Executive have the controlling power over information. The provision of appropriate information for Board decisions is perceived to hinge on the "integrity" of the CEO and Executive. This emphasis on integrity and "good companies" does appear consistent with the Stewardship Theory of governance. It raises as a question for future research the possible alternative relationships between Boards and management. The directors interviewed discussed a range of strategies they used to keep themselves informed and made observations of additions to information that they believed should be available as a matter of course.