Role of Planning, Plans and Planners in Mintzbergs Five Configurations
Role of Planning, Planners, and Plans The previous article discussed the five configurations of organizational structure that Mintzberg proposed as part of his theory. This article examines the role of planning, plans, and planners in each of the configuration. To start with planning is an important element of strategy whenever there is excessive standardization and […]
Market Segmentation – Meaning, Basis and Types of Segmentation
What is Segmentation? Segmentation refers to a process of bifurcating or dividing a large unit into various small units which have more or less similar or related characteristics. Market Segmentation Market segmentation is a marketing concept which divides the complete market set up into smaller subsets comprising of consumers with a similar taste, demand and […]
Steps in Building a Brand Name Product or Service
At times, organizations are often inspired by a variety of ideas to create products and services which can be offered locally or globally. Generally, such products or services require the establishment of a brand or company name. Often these brands include both logo and lettering and can do a long way in advertising such products […]
What is Social Media Marketing ? – Meaning and Important Concepts
We Humans are essentially social animals. Communication and interaction is vital for the Human society. People love to socialize and interact with one another. Internet technology has changed the way the people communicate. Gone are the days when one had to write a letter or book a telephone call to speak to a friend or […]
Role of User-Generated Content in Social Media Strategies
When it comes to social media strategy, user-generated content is one of the most impactful techniques you can use to connect with your audience. In general, people hate feeling like they are being sold to. However, if a friend or trusted source tells them about a new product they’re obsessed with, people are much more […]
With the explosion of scandals pertaining to corporates due to mismanagement and fraud in recent years, the regulators all over the world have been implementing a series of policies aimed at improving corporate governance and ensuring that companies follow ethical and normative rules of business. A part of this initiative has been to goad the companies to nominate a certain percentage of their board to persons who are not affiliated to the company. These are the so-called independent directors who sit on the boards of companies in a purely professional manner without having a hand in the day to day running or other activities of the company.
The point about the independent directors is that they are drawn from a pool of professional who have had wide industry experience and are qualified to sit on the boards of the companies. What makes this process appealing to the regulators is that these independent directors can bring the much needed perspective that is objective and balanced since they are not connected to the company nor its management and hence do not have hidden agendas.
In India, SEBI and the Corporate Affairs Ministry have decreed that between 10-15 percent of the composition of the board must be made up of independent directors. This move is aimed to bring in more objectivity to the art of corporate governance and introduce transparency and accountability from the directors who are drawn from the ranks of the management. This rule has been enforced given the spate of corporate scandals like Satyam where the top management itself indulged in fraud and dubious business practices. So, the line of thinking goes that bringing in independent directors would usher in greater oversight over the functioning of these companies. Since the Satyam Scandal was because of the board looking the other way when its founder was indulging in defrauding the company, the Ministry of Corporate Affairs is implementing this rule to introduce greater oversight.
In the US, independent directors have been known to bring in a fresh perspective as well as check the runaway business behavior dictated by profits and personal benefit. In many companies in the US, the independent directors are the ones who often thwart the management from taking decisions that are based on personal benefit as opposed to the interests of the shareholders. Further, independent directors are tasked with investigating cases of corporate malfeasance and unethical behavior because of their supposed objectivity. However, there have been instances where the independent directors themselves acquiesced in the wrongdoings of the companies and their boards. The solution to this has been the initiative to make the independent directors responsible for the actions of the board so that they have a stake in ensuring that the board does not tread on the wrong side.
Finally, independent directors also bring in the much needed professional expertise since they are individuals with wide experience in running companies as well as the fact that they sit on the boards of other companies which means that they are abreast of the latest happenings. There has been a move by the regulators in many countries to ensure that independent directors do not have conflicts of interest and these have been codified into rules governing how many companies they can associate themselves with and the sectors and industries that they represent.
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