Controllership as an Internal Mechanism of Corporate Governance: Evidence from a Comparative Survey of Brazilian versus North American-Owned Firms

Abstract

This research aimed to identify whether the functional relationships between a controller of a companys business unit or subsidiary and his/her local general manager or equivalent allows him/her to perform his/her work with independence. Focus is on the process of reporting administrative and operational issues regarding the business unit they both work for. The controller reassures to owners or their direct representatives the transparency in the use of company resources by management, thus qualifying him/her as a complementary instrument of corporate governance. Field research was carried out through the administration of questionnaires to executives of 66 companies (35 Brazilian companies and 31 North American ones). Such data was collected and statistically analyzed, leading to the conclusion that the control department may be considered an internal mechanism of corporate governance because it reassures the disclosure of managerial acts and has the potential to reduce information asymmetry and to minimize agency conflicts.