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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 bylooking at it? Not really, but an analysis by a Canadian researcherfound that the boards of businesses prosecuted for financial fraudshare some characteristics. Comparing 113 convicted companies with113 with a clean record, Paul Dunn, assistant professor ofaccounting at Ontario's Brock University, noticed corruptcompanies were more likely to have large, all-male boards servingshort tenures.

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

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