The board of directors of Megacorp Berhad, a public listed company comprises of executive directors as well as independent and non-executive directors. The Chief Executive Officer (CEO) is also the chairperson of the board of directors. A study shows that the lack of separation of the CEO and the chairmanship of the board of directors has led to the board being aligned to the management rather than the shareholders despite the presence of the independent non-executive directors. In addition, the study also shows that companies which have CEO duality are likely to have lower shareholder returns. The independent non-executive directors of the company subscribe to the view that directors have a legally mandated fiduciary duty to their shareholders to maximize the profit of the company. Thus, to them, ethical standards are less important than legal standards in the pursuit of making profit. (a) Describe the specific contributions that independent non-executive directors could make to improve the governance of Megacorp’s Board of directors. (b) Explain the role of the chairman in relation to corporate governance. (c) Explain the implications of CEO duality on organizational performances and corporate governance. (D) Discuss the importance of corporate governance and the main principles and practices of corporate governance which you consider relevant and advisable for companies to adopt.
The board of directors of Megacorp Berhad, a public listed company comprises of executive directors as well as independent and non-executive directors. The Chief Executive Officer (CEO) is also the chairperson of the board of directors. A study shows that the lack of separation of the CEO and the chairmanship of the board of directors has led to the board being aligned to the management rather than the shareholders despite the presence of the independent non-executive directors. In addition, the study also shows that companies which have CEO duality are likely to have lower shareholder returns. The independent non-executive directors of the company subscribe to the view that directors have a legally mandated fiduciary duty to their shareholders to maximize the profit of the company. Thus, to them, ethical standards are less important than legal standards in the pursuit of making profit.
(a) Describe the specific contributions that independent non-executive directors could make to improve the governance of Megacorp’s Board of directors.
(b) Explain the role of the chairman in relation to corporate governance.
(c) Explain the implications of CEO duality on organizational performances and corporate governance.
(D) Discuss the importance of corporate governance and the main principles and practices of corporate governance which you consider relevant and advisable for companies to adopt.
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