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Monitoring, Corporate Performance: The Role of Objectivity, Proximity and Adaptability in Corporate Governance
Macey, Jonathan Boot, Arnoud
Macey, Jonathan
Boot, Arnoud
Abstract
This Article identifies the fundamental tradeoff faced by individuals, firms and institutions that monitor corporate management's performance. This tradeoff, between objectivity in monitoring and proximity in monitoring, is central to the corporate governance debate. Proximity exists when monitors maintain close contact with management and participate in important decisions on a real-time basis. Objectivity exists when monitors, such as hostile acquirers, analysts, credit rating agencies, accounting firms, and outside lenders, remain distant from management and evaluate management's performance without influence by management.