First of all, I would like to describe outsider dominated governance system which is mainly being used in the United States, United Kingdom, Australia, Canada and New Zealand.
Outsider dominated governance system is associated with the peculiarities of the national stock ownership. The market is characterized by very dispersed corporate capital. Population saves their money by investing in stocks and bonds of companies. Firms sell their securities to the investors to obtain additional funds for business expansion. The main owners of the companies’ capital are private and institutional investors. They are ready to take risks and focus on short-term goals of receiving income thanks to exchange rate differences. To make people invest in a
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“(Whincop, n.d.)
The primary responsibility of the Board of Directors is to protect the interests of shareholders and maximize their wealth, guaranteeing the growth of the value of the corporation. Members of the Board of Directors are responsible for all affairs of the corporation and, in case of its bankruptcy, they may be involved in administrative and criminal proceedings. The Board of Directors dimension shall be determined by the needs of effective management, but the minimum number in accordance with the laws of each state can be from one to three members.
The Board of Directors establishes a corporate policy and strategy (especially in the financial sector), appoints officials of the corporation, exercises financial control, evaluates the general manager activity, follows compliance with laws, and maintains corporate ethics.
The US corporate governance model is aimed at increasing the value of the company and its profitability in the short term. This model requires a highly flexible management system, which can enable companies to adapt quickly to the greater mobility of the market and to effectively implement innovative and risky projects.
“Basic principles of corporate governance in the US are 1) accountability, 2) transparency, 3) equally fair treatment of all shareholders, including foreign ones, 4) clear and fair voting procedure, 5) existence of the codex of relationships with shareholders, which
The role of the board of directors is to oversee their operations that consists of community-based volunteers. They work with other community members that are composed of youths and graduates of their shelter programs. Also, to provide resources, allocate funds, monitors the activities of management, as well as electing outside individuals to serve as officers of the organization.
Corporate governance in itself has no single definition but common principles which it should follow. For example in 1994 the most agreed term for corporate governance was “the process of supervision and control intended to ensure that the company’s management acts in accordance with the interest of shareholders” (Parkinson, 1994)1. Corporate governance code is not a direct set of rules but a self-regulated framework which businesses choose to follow. This code has continued to change in the past 20 years in accordance with what is happening in the business world. For example the Enron scandal caused reform in corporate governance with the Higgs Report which corrected the issues which were necessary. Although it does not quickly fix problems, it gives a better framework to
Common stockholders are the basic owners of a corporation, but few stockholders of large corporations take an active role in management. Instead, they elect the corporation’s board of directors to represent their interests. Board members seldom get involved in the day-to-day management of the company. They establish the basic mission and goals of the corporation and appoint
It is essential that the role, duties and responsibilities of directors are clearly defined. The Combined Code (2006) states that “the board’s role is to provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed”.
In large corporations the success or failure of the company is the responsibility of the board of directors. According to Richard DeGeorge, “The members of the board are responsible to the shareholders for the selection of honest, effective managers, and especially for the selection for the CEO and of the president of the corporation.” (p. 202). The board members have a moral responsibility to ensure the corporation is run honestly, in respect to its major policies, and to ensure the interests of the shareholders are satisfied. The next responsibility within a corporation is the responsibility management has to its board of directors. DeGeorge writes, “It must inform the board of its actions, the decisions it makes or the decisions to be made, the financial condition of the firm, its successes and failures, and the like.” (p. 202). The management of the corporation is morally obligated to
* The roles and responsibilities of the board of directors in corporate governance and the way the board affects a company’s operation.
Although each member has specific role, they all are strategically aligned. The CEO role is to manage the entire company. With this function, the CEO is much involved in succession planning for the company. The board of director’s role is assist with any decision making for the company. Mlot and Sorensen (2013) mentions that five board members provide practical advice to HR organizations regarding succession planning. Human resource role is recruiting and developing talent. With this function, human resource plays a critical role in selecting and developing talent for succession
In my review of A Primer on Corporate Governance by Cornelis A. de Kluyver I intend to examine, evaluate, and break down his key points. The book provides a general view on how corporations govern themselves, and the internal and external forces that effect and constrain them. The biggest external force is of course the US Government and the variety of laws and regulations imposed upon corporations. Internally, they are managed by the CEO and board of directors along with a set group of committees and corporate guidelines.
Board of Directors – are responsible for overseeing the activities of Innovative Widgets so that the company meets the expectations of our founder.
Boards of directors are elected by the stockholders of the corporation to represent their interest. Board of directors relies on the board to oversee the operation of their company to protect their interest.
Joshua Kennon (2007), stated that “The board of directors is the highest governing authority within the management structure at any publicly traded company and is usually made up of the directors who are elected for a specific number of years by the shareholders”. According to Wikipedia,” A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization”.
The Directors and officers shall perform the duties enjoined on them by law and the by-laws of the corporation. They act as agents or representatives of the Corporation in carrying out its rights and obligations provided by law. Directors who directed the affairs of the Corporation in bad faith, gross negligence, and those involving a conflict of interest with their duty to the Corporation shall be liable to the Corporation, its stockholders & other persons. The Board of Directors are not justified to purchase the stocks.
The Board of Directors are in charge of determining the corporation’s leadership structure on an annual basis and determine if the board will be led by an independent Chairperson or an independent Lead Director. The board has decided that Ronald Sargent, the CEO of Staples, will remain and the Chairman of the board. The Board of Directors is broken down into five committees made up of around three or four board members. Each committee has there own responsibilities and are in charge of making critical decisions that they must assure is communicated properly throughout the entire company. This leadership structure assures that the Board of Directors has a proper balance of leadership roles that allows for a system that prevents any conflict of interests that may come from having the CEO serving on the board.
2. Board of directors is elected by, and represents the interests of the shareholders of the corporation.
The board will help set strategies, direction, vision, hire/fire top management, monitor and supervise top management, oversee the use of resources, and care for shareholders' interests (Wheelen & Hunger, 2006, pp. 36-37).