Information asymmetry is good for effective boards
Commentators often complain that non-executives need more information. But recent research suggests that it is information asymmetry that actually makes non-executives effective.
Image: danleap, Shutterstock
Why do most boards work well, notwithstanding the information gap between managers and non-executive directors?
Information asymmetry—the difference between the company-specific information available to management and what is presented to boards—is often considered an impediment to board effectiveness.
Information asymmetry paradox
Admittedly, in some cases, governance failure arises because information is deliberately withheld from boards.
However, we argue that, paradoxically, it is by virtue of information asymmetry that non-executive directors can contribute to board meetings.
Information asymmetry creates the context in wh
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