Answers 1) There are different kinds of directors in a company; they are:
Non-executive Director:
The role of the Non Executive directors in a company can be elaborated as follows:
The Non-Executive Directors should play a contributory and constructive role in the development of strategy. Thus they should provide meaningful contribution and constructive criticisms to enhance the process of development of strategy
The Non Executive Directors should constantly scrutinize the performance of the management in achieving the desired goals and constantly monitoring the performance of the senior management taking necessary actions in case of failure of senior management .They also play an active part in choosing senior management.
The Non
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He shall act in good faith to promote the benefits of the company as a whole and the interests of the stakeholders of the company in particular.
A director of a company shall exercise his duties with due and reasonable care sill and diligence and shall exercise independent judgment.
A director of a Company shall not assign his office and any such assignment shall be void.
A director shall not involve in a situation in which he may have a direct or indirect interest that conflicts or possibly may conflict with the interests of the Company.
A director shall not achieve or attempt to achieve any undue advantage either to himself or to his relatives partners or associates.
If a director of a company contravenes the provisions of Section 166 of the Companies Act 2013 such director shall be punishable with fine which shall not be less than one Lakh Rupees but which may extend to five Lakh Rupees.
Rights of the directors
The rights of the directors can be of the following two
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There are also huge costs involved with combined role.
The Chairman-cum-Managing Director cannot independently exercise the task of ultimate supervision of persons entrusted with management.
There is also lower shareholders value associated with such companies.
In such situations if something happens to the Chairman-cum-Managing Director the company would take a disproportionate hit .If this person fails in his performance and decision making then the Company will take a disproportionate hit.
A single person may not posses both sets of unique skills required to perform the two separate roles effectively.
In such cases there is no scope of Audit Committee independence as the Audit Committee requires that employers and other connected individuals can fraud and other abuse directly to the Committee without any reprisal. However if the Board is led by management employees may less likely to report such incidents and the Audit Committee may be less likely to act on these
... his actions were conducted in the best interest of the company. Further, by appointing Helen as director, no substantial injustice was done to any other parties. Thus, I am of the opinion that it is fair for s1322(4)(a) to apply in this situation.
Ralph Nader, Mark Green and Joel Seligman, in an excerpt from Taming the Giant Corporation (1976, found in Honest Work by Ciulla, Martin and Solomon), take the current role of the company board of directors and suggest changes that should be made to make the board to be efficient. They claim the current makeup of the board does not necessarily do justice to the company because “in nearly every large American business…there exists a management autocracy” (Nader, Green and Seligman, 1976, p.570). The main resolution they present is to make the board more democratic with the betterment of the company as its first priority. Currently the board no longer oversees operations, or elects top company executives and they are no longer involved in the business operations to the extent they should be. Nadar, Green and Seligman argue that that all of these things need to be changed. For a corporation so large to be successful there must be separation of powers just as there is in any current government system ( p.571). They claim this is the only and best way to success (Nader, Green and Seligman, 1976, p.570-571).
This case study then outlines the governing body with 14 individuals including the executive directors, five senior managers,
Finally, I will discuss which type of corporation I prefer. A Review of Corporate Roles and Duties The Role of the Board of Directors. The corporation’s business is carried out by its management, under the direction of the Board of Directors. The Board, and each committee of the Board, has complete access to management. Also, the Board and committee member’s have access to independent advisors as each considers necessary or appropriate.
Corporate governance implies governing a company/organization by a set of rules, principles, systems and processes. It guides the company about how to achieve its vision in a way that benefits the company and provides long-term benefits to its stakeholders. In the corporate business context, stake-holders comprise board of directors, management, employees and with the rising awareness about Corporate Social Responsibility; it includes shareholders and society as well. The principles which...
As a consequence of the separate legal entity and limited liability doctrines within the UK’s unitary based system, company law had to develop responses to the ‘agency costs’ that arose. The central response is directors’ duties; these are owed by the directors to the company and operate as a counterbalance to the vast scope of powers given to the board. The benefit of the unitary board system is reflected in the efficiency gains it brings, however the disadvantage is clear, the directors may act to further their own interests to the detriment of the company. It is evident within executive remuneration that directors are placed in a stark conflict of interest position in that they may disproportionately reward themselves. The counterbalance to this concern is S175 Companies Act 2006 (CA 2006) this acts to prevent certain conflicts arising and punishes directors who find themselves in this position. Furthermore, there are specific provisions within the CA 2006 that empower third parties such as shareholders to influence directors’ remuneration.
This Code also contains guidelines to assist employees and directors in acting and making decisions on behalf of Knox consistent with these standards and avoiding conflicts of interests. No guidelines can be all-inclusive, however, responsibility for proper conduct rests with each Employee and Director. If you are faced with making a difficult decision or have questions about the applicability of the Code, you are encouraged to discuss the matter with your supervisor.
Organizations that only have top management as the board members are more susceptible to accounting malpractices. Members of the board should preferably own shares in the company to ensure diligence when it comes to the interests of the company. Apart from the Board of Governors, there should also be an audit committee in place to oversee the financial dealings of the bank. Members of the board and the audit committee should have basic financial knowledge. Some of the members should also be experts in finances so that they can detect any anomaly that may take place in terms of financial reporting. An overhaul of the regulatory framework is required to empower authorities to intervene immediately, and make improvements. New technology is required. Manual antiquated processes should be eliminated because this causes greater human error and poor
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
To succeed also requires, we believe, the highest standards of corporate behaviour towards everyone we work with, the communities we touch, and the environment on which we have an impact.
Although primary objective for managers is to maximise shareholders’ wealth, but many firms are started to focus on other stakeholders’ interests in recent years. Company can prevent transfer the damage of stakeholders’ wealth to shareholders when focus on stakeholders’ interests. In other words, “social responsibility” for the companies is to maintenance stakeholders’ relations in order to provide long-term interests to shareholders. By this way, conflict, turnover and litigation of stakeholders can be minimise. Obviously, company can achieve their primary objective by cooperation with stakeholders instead of conflict with stakeholders (Smart, Megginson, Gitman, 2002).
He goes on to explain how they are treated as completely separate from the companies in which they hold shares and receive dividends yet they are not responsible for the company’s debts or liabilities. Furthermore, the companies in which the hold shares must be run in their best interests. Therefore, the interests of the company, which is a separate legal entity, is directly linked with those of the shareholders. “The law treats separate legal personality very seriously in some contexts (shareholders liabilities) while ignoring it in others (shareholder primacy, shareholder control rights).
Secondly, companies have a duty to “seek balanced representation of each sex on their boards” . While the legal committee of the ANSA considers this to be a general principle without any legal force, for others, the provision is imperative. Every time a company appoints a new director, it has the obligation to show that it fulfilled its obligation (“Obligation de moyen”) to seek a balanced representation of its board.
According to Carol Padgett (2012, 1), “companies are important part of our daily lives…in today’s economy, we are bound together through a myriad of relationships with companies”. The board of directors remain the highest echelon of management in any company. It is the “group of executive and non-executive directors which forms corporate strategy and is responsible for monitoring performance on the behalf of shareholders” (Padgett, 2012:1). Boards are clearly critical to the operation of companies and they are endowed with substantial power in the statute (Companies Act, 2014). The board is responsible for directing and steering the company. The board accomplishes this by business planning and risk management through proper corporate governance.
Overall, the company is having ineffective controls regarding different departments and in the whole organization. An effective internal audit department should be established within the organization which should test the effectiveness of these controls on regular basis and make it sure that all controls are working effectively and efficiently with the different departments of the organization. Also the Internal auditor should implement the most effective processes and measures to prevent and detect the fraud, corruption and non compliance with the laws and regulations in the organization. Establishment of internal audit committee would be helpful in this regard which comprises of executive and non executive directors.