Critics advocate reforms to ensure that independent outside directors represent a significant majority of the total membership of the board.But outsider-dominated boards may emphasize the use of financial as opposed to strategic controls.The risk of reliance on financial controls is that they may encourage managers to make decisions to maximize their interests and reduce their employment risk.

Question

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Outsider-dominated boards may focus on financial controls, which can lead managers to prioritize short-term financial performance over long-term strategic goals, potentially aligning with their personal interests and job security rather than the company's strategic objectives.

Critics Advocate Reforms to Ensure That Independent Outside Directors Represent