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Board Games

Scared your board may be up to no good? Take a hard look at who's serving on it.

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This story appears in the February 2003 issue of Entrepreneur. Subscribe »

Can you tell how likely your board is to commit fraud just by looking at it? Not really, but an analysis by a Canadian researcher found that the boards of businesses prosecuted for financial fraud share some characteristics. Comparing 113 convicted companies with 113 with a clean record, Paul Dunn, assistant professor of accounting at Ontario's Brock University, noticed corrupt companies were more likely to have large, all-male boards serving short tenures.

These qualities may contribute to a board culture where power is concentrated in the hands of a few directors, usually members of senior management. In the case of short tenures, Dunn says, "it could be that senior management doesn't let directors stay long enough to control decision-making."

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