CIL report: Corporate governance in Web 3
Historically, a board of directors is a group of people elected by a company’s shareholders to represent their interests.
From a behavioural perspective, a board is a collection of individuals trying to operate as a group. Functioning as a group is something many people are not comfortable with. Thus, each board evolves with its own culture. Each culture is dictated by the backgrounds of the individuals on the board. Therefore, we might assume that there is a certain decision bias programmed here by definition.
Generally speaking, the board has the responsibility of developing a governance system for the business, defining strategic directions, controlling and incentivizing company management.
Rationale
On the contrary, decentralized autonomous organizations (DAOs) rely on a set of smart contracts and do not have a physical address or people in formal management roles. The target architecture is that the DAO removes delegated power from the board of directors and places it directly in the hands of owners. By doing this, the DAO removes the ability of board directors and fund managers to misdirect and waste investor funds.
Thus, DAOs are just the digital version of the above-mentioned Board of Directors where all rules and regulations are written in the source code, rather than on a piece of paper.
