Importance of Whistleblowers in Contemporary Times and How to Deal with Them
Whistleblowers and Whistle Blowing in Contemporary Times We often hear the terms, whistleblowers, and the practice of whistleblowing mentioned in the media and in assorted publications. Further, we also hear how whistleblowers have brought to light instances of wrongdoing and other aspects to do with violations of corporate governance. For instance, in 2017, the Indian […]
What are Successful Principles of Product Management
Companies that are responsible for the production and distribution of products have a lot on their plates. Every product has a particular lifecycle. In order for that lifecycle to last as long as possible, some considerations need to be made. A successful product manager is always vigilant in their efforts to do what’s best for […]
Principle of Serviceability in Retail Store Design
People love shopping at International Retail Malls and Stores. Weekends are often spent with family and friends shopping and spending entire day out at the malls. The Stores are designed to attract, entertain and engage the consumers. Therefore the Stores are designed, keeping in mind the visibility aspect as well as ease of use for […]
Relationship Management is not a Marketing Strategy Alone
Customer Relationship management is a two way interaction. The Organisation has got to devise ways and means to reach out to the customer and more importantly receive the feedback received from the customer. There are two important aspects to be considered in a Customer Relationship Management. First is the customer interaction in terms of quality […]
What is the Efficient Market Hypothesis and How it Works and Doesn’t Work in Practice
Are Markets Really Efficient in Delivering Optimal Outcomes for All Stakeholders? Are Free Markets really “free” in the real world? Are market forces allowed to deliver efficient outcomes or do governmental and private entities interfere in the workings of markets and distort the outcomes? Moreover, does Crony Capitalism introduce bias against the smaller players and […]
The field of corporate governance exists in a symbiotic relationship between the management and the board of directors. It is impossible to talk about corporate governance without taking into account the roles and duties of the board of directors and the expectations from the management. To explain this fully, it would be useful to consider the fact that unless the board of directors’ act as oversight authority effective corporate governance cannot be practiced.
In the same vein, unless the management sets their expectations from the board of directors, the latter would not be able to function. Hence, the expectations from the management ought to be articulated upfront for the board of directors to know and understand what they are supposed to do. This often manifests itself as a written or unwritten code of conduct for the board of directors to follow.
The expectations from the management can take many forms and they can be divided into oversight over their actions, guidance from professional directors on how to run the company and finally, a sharing of accountability and responsibility between the management and the board of directors.
If we take each of these by turn, we find that the board of directors is expected to perform the role of an oversight over the actions of the management and that the board should be accountable for its actions.
In recent months, in the AMR fire tragedy and the Satyam Scandal, the board was widely believed to have reneged on its oversight functions. Next, the board of directors is expected to provide professional advice and guidance to the management and the expectations of the management include sagacious and timely advice to the management from the professionals on the board on how to run the company.
The point here is that the expectations from the management cover these dimensions and a harmonious relationship between the board and the management can exist only when these dimensions are taken care of.
Further, the management cannot shirk its responsibility and hence apart from their expectations from the board, they are also deemed to behave in a manner that inspires confidence from the employees and other stakeholders.
In recent years, there has been much heartburn among investors and the stakeholders in the way in which the boards of several companies are acting as rubber stamps for the management. This trend is to be avoided and only when the board acts independently and as a custodian of shareholder and stakeholder interests can there be effective corporate governance.
Finally, the expectations from the management need to be reevaluated and reoriented periodically so that the management and the board of directors are on the same page and they have the employees and the stakeholders with them. The bottom line for effective corporate governance is a healthy balance between the expectations from the management and the functions of the board. They have to balance each others’ needs and responsibilities and have to coexist if meaningful corporate governance is desired.
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