Clear Delegation or Residual Accountability in Swedish Corporate Governance

This paper investigates distribution of decision rights and responsibilities between boards of directors and CEOs with a particular focus on allocation of residual control rights. In the studied firms, the board reserves residual control rights, stating that all major decisions are to reach the board. However, the CEO is authorized to make decisions on urgent matters if the board cannot be heard without significant inconvenience for the firm. Yet, the constitution of “major”, “urgent”, and “significant inconvenience” remains vague and leaves room for interpretation. For such instances, when the CEO makes a judgement call regarding their own decision rights, the concept of residual accountability is proposed. Residual accountability refers to instances when agents act outside of their clearly specified decision rights, making themselves accountable for their decisions until the principal approves them, thereby absorbing the residual accountability from the agent. The concept of residual accountability adds to our understanding of accountability by bridging the gap between rule-based and negotiated forms of accountability.