The Importance of Corporate Governance Essay

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

Independence means procedures and structures are in place so as to minimize, or avoid completely conflicts of interest. In Sarbanes-Oxley Act, “independent” director is the one who does not accept any advisory, consulting and other compensation from the issuer and not an affiliated person of the issuer or its subsidiaries, except that he or she as a member of the audit committee based on their capacity.

Independent Corporations are usually agencies that effect daily activities. Most of these directors are appointed by the President with Senate confirmation. These agencies will contain experts in their field of service of designed purpose. Many agencies have powers to issue fines conduct hearings.

In terms of increasing independent directors in corporate governance, SOX directed the Securities and Exchange Commission (SEC) to adopt rules that prohibit listings of companies that did not have an audit committee. The audit committee must consist of independent directors, and if the committee is in place but did not have enough independent directors, it must add more independent directors to the board. In addition, at least one of the directors must be a financial expert as defined by the SEC.

Companies hire directors to act on their behalf and manage the corporation based on their values and organisational culture. Directors are individuals who are appointed to act in the corporation’s best interest. They are given the responsibility to manage the company and also the authority to exercise power in order to run the organisation efficiently and effectively. There are some cases where shareholders may revoke

A director is obligated to place himself or herself to manage the company . The director must understand the business of the company and the effect that the decisions of the board has on the company. Where the decisions of the company rely on expert or professional advice, then the directors of the company can reply on such advice. There has been a series of cases, which examine

This paper will be a literature review that discusses the notion that, the board of directors (the collective) as a self-regulating social system. This will be achieved by a systematic review of a collection of works in the area of corporate governance spanning the birth of the industrial revolution to the modern day. The areas of emphasis will be a view to identifying the key concepts, issues and laws created to better focus the actions of boards. In addition to identifying the locations for each of these developments and how this has led to divergent practices across the globe. Following the review of the literature the author of this paper will seek to discern the current direction and nature of corporate governance in the future. The

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.

I-2) The role of the board of directors in a publicly traded company is to represent the stockholders and make decisions on major company issues.

News Corporation's Board of Directors establishes the company's broad policies for the Company and its controlled entities, called the Group (News Corporation 2012). It steers the direction of the Group and manages it according to the interests of the stockholders. Corporate governance is the responsibility of the Board. Its Directors are elected annually by the majority and hold office for a year or when succeeded. They are independent directors," as required by the Securities and Exchange Act of 1943. Based on relevant facts and circumstances, the Board makes an independence determination and reviews all determinations at least once a year. The Board establishes and maintains the most effective leadership structure. Qualifications of candidates for Board directorship include education and background, leadership ability, general business experience and familiarity with

At Paramount the unitary board exists, where according to the textbook, a unitary board is when a company has a single governing body (Tricker 2009). A non- executive director is defined as a person who is not involved in the day to day management of an organisation but rather in business tasks such as strategic planning, and monitoring of executive directors. An executive director tends to be more involved in the managerial aspects of the company.

The concept of independent directors can be traced to the developed economies of the West with the United Kingdom and the U.S.A. sharing credit for its evolution during the 1950s even before legislation mandated the induction of independent directors to ensure that corporate entities did not make depredations into the public interest driven by the profit motive alone at the cost of other values. This is what gave rise to the concept of Good Corporate Governance which again owes its origin to the developed economies of the Western Hemisphere .

The concept of “independence” has become very important in corporate governance. The meaning of independence has been defined in detail by regulations. These rules have become viewed as “best practice” in MTSB. For example, MTSB must have an audit committee consisting of at least three directors, all of whom are independent. Executive compensation and director nominations must be approved by either a committee of independent directors or a majority of the independent directors serving on the board. The independent directors must have regularly scheduled executive sessions at which only independent directors are present.