America’s Response to China’s Belt and Road Initiative
China ambitious Belt and Road Initiative has attracted the attention of many economists worldwide. Many of these economists believe that the Belt and Road Initiative is part of China’s vision of a world where America will no longer be the dominant superpower. It is possible that this may be true. China has committed a large […]
Getting Ready to Start Your MLM Business
Being young and with a growing family means having a ‘Wish List’ that is quite long. You have your dreams and the other’s in the family have theirs too. So when an opportunity to earn extra money besides your current income through your profession is certainly going look like a God sent opportunity. If you […]
Role of a Project Coach in a Six Sigma Project
The Project Coach is the person concerned who is responsible to make sure that the team understand Six Sigma tools and methodologies. Six Sigma is a complex methodology encompassing multiple stages. There will be different people who will be working at different stages of the Six Sigma project. All of them do not need to […]
How to Manage Star Performers and High Achievers
What do the Terms Star Performers and Fast Trackers Mean? In every organization, some employees are designated as Star Performers and Fast Trackers by the Managerial and the Human Resources Professionals. The term Fast Trackers refers to the internal classification of some employees who are expected to move faster up the hierarchy than other employees […]
The Sunk Cost Fallacy
In the previous article, we learned about how certain psychological factors make a huge impact on our decision-making about financial investment. We studied about what loss aversion is and how it impacts the decisions that we make. There is another psychological fallacy that is responsible for a lot of losses in the stock market. In […]
Any public limited or a private company needs to have a board of directors which would ratify the management decisions taken by the leadership. These decisions can be financial or operational that affects the day to day running of the company. Further, the board of directors is expected to give a direction to the company in terms of strategic and visionary terms as to how the company expects to grow without having to abandon the ethical and normative rules of conduct. Note the emphasis on the term ethical and normative rules as the board of directors is the final arbiter of decisions taken by the company and hence, they must only approve a certain decision only when they are convinced that it would be in the best interests of the company and its shareholders.
The board of directors is often held responsible for the decisions taken by the company and hence, it is answerable to the shareholders as well as the regulators. In this context, it becomes necessary for the board of directors to be composed of individuals of exceptional abilities and leadership traits as well as being visionary.
The role of the board of directors can be summed up in one single sentence: the buck stops with them and hence they are the final authority as far as the company is concerned. The duties of the board of directors are similarly to be the ones who would take the decisions that have the stamp of authority and hence become the yardstick by which the company is judged.
Apart from these roles and duties, the board of directors is also answerable to the shareholders and the regulators. So, this means that the board of directors must take decisions that are in the larger interests of the shareholders and they must protect the interests of the shareholders at all costs. Further, whenever there is a scandal in the company, the regulators write to the board of directors so as to elicit information on what happened. For instance, when the Satyam scandal broke, the regulators and the press turned to the board of directors for guidance and information. It is another matter that in this particular case, the board was compromised as well.
This brings us to the final aspect that the board of directors has to have a coherent approach towards managing the company and hence, must be consensual in its decision making. Unless the board of directors agrees on decisions either unanimously or through a majority vote, there cannot be movement for the company. Hence, it is clear that boardroom battles and directors with hidden agendas be avoided to the extent possible in the larger interests of good corporate governance. Since the board has the final say in matters concerning the company, the CEO and the leadership have to present the information truthfully and accurately. In the case of Satyam, there were allegations that the CEO and some of the compromised members of the board kept the other directors in the dark about some key decisions. This should not be allowed to happen.
Your email address will not be published. Required fields are marked *
