Board of Directors' role in the US and UK

1368 Words6 Pages
There are many similarities and differences in the way that companies, in both the United States and the United Kingdom, are owned and operated. One of the main issues to look at between companies in these two countries is the roles and responsibilities of their board of directors. The board of directors of any business plays a crucial role in the success of the company. Although there are many similarities in the board of directors in these two countries, a few key differences can change the aspect of the company’s oversight.
The board of directors is a group of individuals, mostly non-executives, who are elected to become the highest governing authority of any publicly traded company. Because of this power it is their primary responsibility to do whatever is in the best interest of the company and the owners of the company, or in other words, the shareholders. It is their responsibility to protect the shareholders’ assets and ensure that they receive a return on their investment. Within this responsibility it is the board of directors’ role to make decisions on major issues that a company would face. In order for the board of directors to effectively solve these issues they must act both as an advisory board, and an oversight board. The board of directors’ role as an advisory board would be to consult with management regarding strategic and operational direction of the company, and the role of an oversight board would be to monitor the company’s performance and reduce agency costs. (Stanford CITE) Some of the issues that would fall under the responsibility of the board of directors in the US and the UK would be to: select, evaluate, and approve compensation for top executives of the company, approve the corporate strate...

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...mpany was performing at that time. If the firm was having problems they believed that by separating these duties the CEO would bring better checks and balances that my help turn the company around, but if the company was performing well and running smoothly then this is clearly not needed. They concluded the study by saying, “CEO-chairman separation tends to reverse a company’s performance: Low-performing firms benefit from a separation event, while high-performing firms suffer.” (Semadeni, Krause)
Differences exist in the role of the board of directors in the United States and the United Kingdom, but overall they are in place to provide the same oversight for their companies. Each country has differences that may be seen as better or worse when compared, but in the end these exist because the laws, regulations, and culture of each country also has differences.
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