Final answer:
Exceptional boards ensure alignment between decisions and core values, but the board member selection can be heavily influenced by top executives. Corporate governance includes multiple oversight mechanisms, yet failures like in Lehman Brothers' case can occur, leading to misinformation and adverse outcomes for shareholders.
Step-by-step explanation:
According to Boardsource, exceptional boards shape and uphold their organization’s mission, articulate a compelling vision, and ensure the congruence between decisions and core values. This means that the board of directors plays a critical role in aligning the company’s strategic decisions with its foundational principles, to operate in the best interest of shareholders. However, in practice, the selection process for board members can be influenced by top executives, who often have a significant say in nominating board candidates. Despite being elected by shareholders, the board’s independence can be compromised if these executives exert too much influence.
Furthermore, corporate governance involves various institutions including auditing firms and large outside investors like mutual funds or pension funds, which are meant to provide additional layers of oversight. These groups are essential in fostering transparency and accountability within the company. Unfortunately, there are cases like that of Lehman Brothers where corporate governance failed to provide accurate financial information, leading to severe consequences for the firm and its investors.