The Relationship Between Board Composition And The Likelihood Of Corporate Fraud

Another central feature of the board of directors is the question of whether the CEO is also the chairman of the board. When the CEO is also the chairman this is often referred to as “CEO duality”. In the US the CEO is often the chairman of the board. Studies have shown that the board in most cases

There are three internal and one external governance mechanisms used for owners to govern managers to ensure they comply with their responsibility to satisfy stakeholders and shareholder’s needs. First, ownership concentration is stated as the number of large-block shareholders and the total percentage of the shares they own (Hitt, Ireland, Hoskisson, 2017, p. 317). Second, the board of directors which are elected by the shareholders. Their primary duty is to act in the owner’s best interest and to monitor and control the businesses top-level managers (Hitt, Ireland, Hoskisson, 2017, p. 319). Third, is the

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

As Canadian Coalition for Good Corporate Governance indicates that the good governance of a corporation is essential to creating long-term sustainable value and reducing investment risk. In other words, the high quality performance of board directors plays a key role in the success of a corporation. We evaluate it based

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”.

2. Are the roles of the chairperson and chief executive officer (CEO) exercised by different individuals? This clear division of responsibility would help to counterbalance the power and influence of the CEO in the decision making of the company’s directors. Furthermore, this would enhance the supporting role that may be assumed by the chairman in being the CEO’s confidante.

To the extent of prevention of corporate failure, I argue that three ASX principles and recommendations could halt the demise of Dick Smith. Firstly, the 2nd principle which is “Structure the board to add value” by structuring the board with a majority of independent directors would prevent CEO dominance because some suggest that independent outside directors can reduce the influence of dominant individuals (ASX, 2014, p. 17). In accordance with Gallagher and Bennie (2015, p. 20), the independent directors are likely to focus on the company’s objectives and not to make decision relying on others. Furthermore, an addressing of independent directors would reduce the reliance on management, and create the effectiveness on monitoring (Dechow et al. 1996 cited in Christensen, Kent, and Stewart (2010)), as well as capability to lessen the conflict of interest between managers and shareholders (Hardjo & Alireza, 2012, p. 4). Thus, DSE’s board would be more active to monitor the CEO’s performances because independent directors pay attentions to the interest of company (Gallagher & Bennie, 2015, p. 20) and shareholders (Hardjo & Alireza, 2012, p. 4)

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

It is the board's responsibility to consider and authorize a suitable remuneration package for the company's chief executive officer (CEO), make recommendations with respect to the attractiveness of dividends and dividends pay out, approve stock splits, form the audit committees, approve the company's financial statements, oversee management’s involvement in the shareholders and other stakeholders long-term interests and recommend or discourage major decisions such as acquisitions and mergers.

Hanesbrands Inc. implemented strategy to have Richard A. Noll to hold the Chairman and CEO position. Considering that the Board of Director acts as an advisor and counselor to the CEO and senior management and oversees their activities and performance, this policy has a disadvantage for the company because it can lead to conflict interests. It is still a weakness of this policy, although this weakness is minimized by the rule that the non-management directors will undertake a formal evaluation of the CEO annually and the Compensation Committee along with other independent directors should be responsible for reviewing and approving the compensation program for the CEO (Hanesbrands Inc. Corporate Governance Guidelines, 2016).

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.

The CEO in the organization can work as both the chairperson of the board of directors and CEO; this refers in corporate governance to CEO duality (Revistadestatistica.ro, 2017). "Based on the data of Iranian Banking Sector and using panel data methodology over a four-year period from years 2008 to 2011, has proved the hypothesis that the results reveal a not meaningful relationship between Board's size and CEO duality, and a significant positive relationship between the Board's Independence and CEO duality and there is no relationship between Power and CEO Duality" (Abbasi et al, 2012). Also, another study in the Middle East specifically in Egyptian shows that the CEO duality has a negative impact in the large board's companies and less performance on corporate management ownership and positive impact on institutional ownership (Kholeif, 2008).

Like most multinational corporations, the shareholders own the company and they may also be the board of directors. A Chief Executive Officer (CEO) will be appointed to nominate and manage the operation of the company as a whole. A Chief Operating Officer (COO) will be managing the company’s day-to-day operations and reports them to CEO. The Chief Financial Officer (CFO) will be managing the finance and account together with the

The precise legal details of the corporation’s differ across countries. The company law of the U.K is similar to the company law of the U.K because they share a common origin. The managers in both countries have a fiduciary duty to the shareholders. In other words, they have a strong requirement to act in the interests of shareholders. The channel through which shareholders exercises control of company affairs is the board of directors. The board is elected by shareholders and typically on a one-share vote basis. Sometimes multiple classes of shares exits, the main difference between classes being the number of votes each share has attached to it. The board of directors consists of a mix outside directors and inside directors, the latter being the top executives of the firm. It is rare that the Chief Executive Officer (CEO) is not on the board. In both U.S and U.K the CEO often acts as chairman as well. Once elected the board of directors of directors specifies the business policies to be pursued by the firm. The role of management is to implement the policies determined by the board. Shareholders have very little say in the affairs of the company beyond electing directors. For example, it is the directors who decide on their own compensation, without any input from shareholders. A committee of outside directors determines the senior management’ compensation. Except in unusual circumstances, such as a proxy fight, the outside

* The company faces a vertical challenge in its corporate governance. The chairman of the board is also an executive. Also the board consists of several members of the promoter family who own substantial part of the company. The promoter family members all occupy key positions in the company and on the board. This may pose significant challenges for effective corporate governance as the owners and management are the same, it may result in conflict of interest situations where the resulting action would benefit the promoter family more than the company and other company stakeholders.