The assumption that better governance means more information flowing to board members gets the relationship backward. Liu and Waring (2013) show that information asymmetry is not a deficiency to be eliminated but a structural condition that effective boards learn to manage rather than resolve. The question is not how to close the information gap entirely -- impossible in any organizational structure where agents act on behalf of principals -- but how to design information systems that serve governance functions without overwhelming the board or distorting what management chooses to share.
This distinction matters because boards across sectors operate under the same fundamental constraint: the chief executive controls the organizational information environment, and directors must navigate that environment to fulfill their monitoring and advisory responsibilities. Whether the organization is a hospital, a nonprofit foundation, a public agency, or a higher education institution, the information architecture that governs what gets communicated, when, and in what form shapes board effectiveness as directly as any structural choice about committee composition or board size. Elbannan and Elbannan (2010) demonstrate that stronger board governance mechanisms, particularly greater board independence, are associated with lower information asymmetry. Their mechanism is that independent directors have greater bargaining power to demand and obtain better information from management, while more active engagement creates ongoing information flows that reduce informational gaps over time. This empirical relationship establishes that information flow is not a secondary concern that management handles. It is a core governance capability that boards must actively design rather than passively receive.
Elbannan and Elbannan (2010) found that stronger board governance mechanisms, particularly greater board independence and board activeness, are associated with lower information asymmetry in capital markets. Their finding suggests that governance structure influences information quality: boards that structure themselves to be more independent and more actively engaged produce better information environments. However, this correlation could reflect reverse causality -- firms with better information environments may attract more independent directors -- or confounding by unobserved firm characteristics.
Salkind and Borgia (2015) demonstrated that firms facing greater asymmetric information rely less on intensive board monitoring and more on market discipline and CEO pay-for-performance alignment. Their finding reveals that when information asymmetry is high, boards effectively cede monitoring authority to external mechanisms. This may occur because high asymmetry makes internal monitoring less effective, prompting firms to rely on market-based governance mechanisms instead. A choice that may work in publicly traded markets but has no direct equivalent in nonprofit, public, or higher education sectors where market discipline does not operate. For boards in those contexts, there is no comparable external mechanism that substitutes for effective internal information systems, because no external mechanism will compensate for their failure. Other forms of external accountability exist in these sectors -- regulatory oversight, public scrutiny, donor pressure -- but they do not function as direct substitutes for well-designed board information systems.
Adams, Hermalin, and Weisbach (2010) provided the theoretical foundation for understanding why this relationship exists. Their comprehensive review established that boards face a fundamental tradeoff between monitoring and advisory functions, and that information flow is central to both. The quality of board-management communication mediates whether a board can effectively fulfill either function. When information systems are designed for one function, typically monitoring through compliance-oriented reporting, they systematically undermine the board's advisory capacity. When designed for advisory engagement, they often fail to provide the monitoring discipline that governance requires. However, a well-designed system can serve both functions through different data streams or presentation layers -- monitoring data in standardized compliance formats, advisory data in strategic analysis formats -- though optimizing both simultaneously remains difficult.
The monitoring-advisory tradeoff manifests in concrete governance decisions about what information boards receive and how they receive it. Monitoring-oriented information systems emphasize compliance data, financial metrics, and exception reporting designed to surface problems that require board attention. Advisory-oriented systems emphasize contextual information, strategic analysis, and forward-looking scenario data designed to support board contribution to organizational strategy. These are not complementary. They compete for the same board attention.
For example, a school board in a mid-sized district that prioritizes monitoring receives extensive financial variance reports and compliance documentation but lacks systematic information about student outcomes or curriculum effectiveness. A board that prioritizes advisory function receives strategic enrollment projections and program evaluation data but may have less visibility into day-to-day operational compliance. The monitoring-focused board example illustrates that monitoring-oriented boards need better outcome metrics -- not that they should abandon monitoring for advisory work.
Liu and Waring (2013) argued explicitly that governance design must balance oversight with the need to preserve information flows between managers and directors. Their point is that excessive monitoring emphasis can degrade the quality of information directors receive by creating incentives for management to filter, delay, or obscure information that might trigger board intervention. The board that demands comprehensive monitoring information may paradoxically receive less useful information as management responds to oversight pressure by controlling the informational environment more aggressively.
This dynamic plays out differently across sectors but follows the same structural logic. In higher education, boards that emphasize compliance monitoring receive extensive reporting on regulatory matters but little strategic context about enrollment trends or academic program viability. In nonprofit organizations, boards that focus on financial monitoring receive detailed budget variance reports but limited information about program effectiveness or donor engagement dynamics. In public agencies, monitoring emphasis produces extensive documentation of procedural compliance while strategic information about service delivery outcomes remains scarce. The pattern is consistent: information systems designed around monitoring needs systematically underprovide the information that boards need for advisory effectiveness.
The practical governance levers available to boards are well-documented in institutional guidance and apply across sectors. The core insight from both practitioner-oriented sources is that boards need timely, tailored, decision-relevant information rather than volume.
Board packet design is the most immediate lever. Effective packet design requires distinguishing between information that supports board decisions and information that supports board awareness. The former deserves careful curation, executive summary treatment, and clear articulation of the decision the board is asked to make. The latter can be consolidated, abbreviated, or moved to appendices that directors access as needed rather than review as routine. Board guidance for higher education boards emphasizes that packet design is not a clerical matter but a governance design decision that reflects the board's priorities and shapes what management prepares.
Digital access has transformed what is possible but not necessarily what boards practice. Real-time access to organizational performance data, board-level dashboards that update between meetings, and secure digital channels for director questions all represent infrastructure that effective boards deploy. Resource-constrained districts can begin with low-cost approaches: shared document repositories using free cloud storage, structured email updates following a consistent template, or monthly summary dashboards using basic spreadsheet tools. Implementation requires identifying a staff member responsible for maintaining the repository, establishing a simple folder structure, and training directors to access materials. Even these minimal approaches require some capacity-building, such as designating a point person to organize information and orienting board members to the system.
Meeting schedules deserve more attention than they typically receive. Boards that meet quarterly receive information aggregated over three-month periods, which may serve monitoring needs but systematically undermines advisory effectiveness by removing the board from ongoing strategic conversations. Boards that meet monthly can operate with more current information but face tradeoffs in meeting efficiency and management burden. The choice is governance design, not administrative convenience.
The evidence points toward four design principles that boards should apply to their information systems regardless of sector.
First, boards should consciously prioritize monitoring or advisory function based on their organizational context and design information systems to support that emphasis. The research does not support the assumption that boards can optimize for both simultaneously. The monitoring-advisory tradeoff is structural (Adams, Hermalin, & Weisbach, 2010). A board that has not considered which function takes priority is likely receiving information that serves neither effectively. This does not mean abandoning the secondary function -- rather, the information architecture should be tailored to support the chosen emphasis while still providing baseline information for the other. However, boards face real-world constraints that may prevent them from freely choosing their information priorities. Regulatory pressures, stakeholder demands, and organizational culture can force boards to focus on compliance even when it undermines advisory effectiveness. Boards should recognize these constraints and work incrementally toward their chosen emphasis where possible.
Second, many boards may lack the capacity to design information systems, especially those with limited resources or governance experience. Building this capability may require partnering with governance professionals, such as governance consultants or experienced board members, or starting with simpler, incremental improvements rather than comprehensive system redesign.
Third, boards should treat information architecture as a governance design decision, not a management administrative matter. Elbannan and Elbannan (2010) demonstrate that stronger governance mechanisms produce lower information asymmetry, meaning boards must actively shape what information they receive rather than accepting whatever management provides. This requires board-level specification of information needs, not merely approval of management-designed reporting systems. Boards may need training or access to governance professionals who can help translate board information needs into practical reporting systems. Implementing these design principles may require significant resources and investment in technology, which can be a challenge for smaller organizations.
Fourth, boards should invest in the infrastructure of information access -- packet design, digital tools, meeting schedules -- as governance capabilities rather than logistical details. The difference between a board that receives information reactively and one that accesses information proactively is the difference between governance that responds to problems and governance that shapes organizational direction. Adams, Hermalin, and Weisbach (2010) establish that information flow determines whether boards monitor effectively, advise meaningfully, or do neither well. To optimize information systems without overburdening management, boards should focus on strategic alignment of reporting -- requesting information that directly supports governance decisions rather than comprehensive operational data -- and establish clear priorities so management knows which requests require immediate attention versus which can be consolidated or streamlined.
The boards that govern best are not those with the most information but those that have designed their information systems to serve their specific governance function. That design work is the board's responsibility, and it is a responsibility that most boards have ceded to management by default. Taking it back is the single highest-leverage governance improvement available. For instance, the board of a mid-sized nonprofit organization implemented a tailored information system with separate monitoring and advisory reporting streams, resulting in improved governance effectiveness in both functions.