We live in times that have been called the Era of Post Truth and the Age of Fake News where facts are facts only in the sense that they are believed by individuals alone and it does not matter whether such facts are made up, debunked by others, proved to be lies, and are downright fake.

In other words, what one believes is the truth is the only thing that matters and there is no scope for objective evaluation and fact checking aspects. one can seen this from the numerous WhatsApp forwards world over and what more, even the President of the United States, Donald Trump, regularly tweets what he believes are facts and not what can be objectively verified.

In this context, it is challenging for anyone, whether they are celebrities, corporates, business leaders, or for that matter, professionals who are generally not in the limelight to protect their reputations since a single Tweet or Facebook Post or WhatsApp forward which is patently misleading and false and which goes viral can destroy their hard earned reputation in a matter of minutes and hours.

Why Corporates Must Protect Their Reputations from Fake News

The fact that corporates care about their reputation to the extent that they sometimes employ professionals communications experts as well as have dedicated Corporate Communications Functions to interface with the external world means that fake news can affect them to a degree that does not affect other entities.

Such effects can be seen in the way their products and services often rely on branding strategies for sales and marketing and their success depends on their brand image and how much their brand equity is manifest among consumers.

Indeed, if a fake Tweet or Facebook post goes viral and which targets their brands, corporates can be at the receiving end of such attacks and lose customers and the trust of other stakeholders.

Given the fact that we now live in a 24/7 world where instantaneous communications from anywhere and everywhere can affect anyone and everyone anytime and all the time means that their brand image can be shredded in a matter of hours and their reputations tarnished.

Thus, the central challenge of our times as far as corporates and their reputation management aspects are concerned is to ensure that they have the means to rebut and respond to Fake News and Post Truth Trends.

How Corporates Can Protect Themselves from Fake News

This can be done by employing dedicated PR or Public Relations firms whose mandate is to constantly scour the web for both news and fake news about them and react and respond as soon as possible in cases where the latter is the problem.

Further, their internal corporate communications staff can also develop extensive media contacts so that they can put out press statements and press releases either debunking the Fake News or rebutting it.

Indeed, this aspect of reacting and responding to Fake News must be a real time and full time job since with dedicated 24/7 news outlets, there is always the possibility of fake news spreading outside of working hours as well.

Moreover, corporates also need to look out for misleading news about their CSR (Corporate Social Responsibility) activities since there is always the possibility that their societal outreach can be twisted into patently false allegations.

The reason why this is so important is that unlike Fake News about their brands or operations, their CSR activities involve multiple stakeholders who need to be contacted and made parties to the press releases and statements debunking the false allegations.

Why Corporates Must Shed Their Complacency about the Effects of Fake News

Having said that, it is also the case that many leading corporates are often complacent about Fake News not impacting them.

The reason for this belief is that all of them are often well poised and well positioned with the leading media outlets since they do provide the latter with much needed advertising revenues and hence, they are unlikely to carry fake news about them.

However, as can be seen in recent months in the United States, even leading corporates such as Nike which enjoys relatively positive media coverage despite the allegations of CSR violations, has been at the receiving end of Fake News once it took a stand against the Presidential Administration.

In addition, even if the mainstream media does not disappoint them, corporates need to worry about the many Millions of ways in which Fake News goes viral in times when anyone with a Smartphone can quickly make such news go viral.

How Fake News Represents a New Form of Risk

Indeed, the risks from the aspects discussed so far is the topic of a book by the former Secretary of State, Condoleezza Rice, who lists out the ways in which corporate reputations can be shredded and their brand image tarnished in a matter of hours if they are not alert to such risks.

Further, she goes on to provide real world examples of how all corporates wherever they are based and whatever their operations are to be victims of fake news from malicious individuals. Note that we used the term individuals as for a long time, corporates used to worry about the threat of fake news from their competitors and it is only now that they are realizing how they can be impacted by anonymous entities.

These entities might not have the financial muscle of competitors of corporates but nonetheless have the power to damage their reputations. To conclude, it is time corporates took note of the repercussions of Fake News and do their bit to protect their reputations.

The recent months have seen a spate of scandals involving corporates pertaining to corporate governance.

From the Indian IT (Information Technology) bellwether, Infosys, to the hottest startup and Unicorn (startups that are valued at more than a Billion Dollars) and the TATA group to name a few, the corporate world is agog with governance and ethical and normative codes of conduct being talked about openly.

Indeed, if there is a single thread running across these and other scandals involving corporates, it is that effective corporate governance has become a bone of contention with the leaders of these organizations and other stakeholders.

Cultural Mismatch leading to Questionable Corporate Governance

For instance, in the case of Infosys, the founders who relinquished control to a new board and handed over the reins of the company to an outsider, Vishal Sikka, have been having run-ins with the latter over issues related to executive compensation and severance pay.

Indeed, many commentators and experts are pointing to the mismatch between the cultural mores of the founders and the new team since the former have built the company from scratch and imbued Infosys with a unique work ethic and culture and the latter want the firm to be more aligned with the challenges of the future.

Thus, in this case, corporate governance issues have cropped up mainly over the business practices and the vision for the future as exemplified by the gap between the founders and the new board.

The Perils of Fast Paced Growth

On the other hand, the ride-sharing firm, Uber, which is a giant in its own right and which has revolutionized the way in which transport is organized, finds itself in soup because the board members who include the founder, Travis Kalanick, have been accused of gross ethical violations as well as serious charges of sexual harassment and the improper way in which Uber has dealt with violations regarding ethical and gender based discrimination.

Thus, here is firm that prides itself on being the disruptive force shaking up the world of personal transportation finding itself in hot water mainly because there is perceived to be a rot at all levels of the organizational hierarchy related to ethical and normative rules of conduct.

Vision Not Percolating Down the Hierarchy

Further, firms such as Fidelity and the TATA group have similarly been accused of flouting and violating corporate governance norms mainly because the vision from the top is not shared down the hierarchy and being behemoths, the executive management can only take things to a certain point after which bad Apples and stray instances of bad behavior need to be taken both at a systemic and organizational level as well as at an individual level.

Indeed, the problem with these firms is that being dispersed across the world and being large organizations, the employees down the hierarchy have a tendency to misinterpret and misjudge the norms and rules.

This also applies to firms such as Volkswagen wherein in the pursuit of profits and being the first to reach the market, gross violations in the way in which the automobiles have been made have come to light.

Thus, as can be seen from the examples cited so far, corporate governance cannot be left to the top tier alone, and at the same time, the top tier too is not exempt from being unethical and flouting normative rules of conduct.

Indeed, if there is a lesson to be learnt from all these disparate and different organizations, it is that corporate governance is something that has to be incubated at the top, imbued at all levels of the hierarchy, and infused into the corporate DNA or in other words, ensuring that there is an organizational wide culture of ethical and normative conduct.

Everyone on the Same Page Is What Is Needed

It is clear that the executive management has to come up with a vision and mission policy and then, ensure that it percolates down the hierarchy wherein all employees at all levels are “on the same page” as far as mutual agreements and codes of conduct are concerned.

At the same time, the executive management too has their task cut out as they need to “walk the talk” and ensure that their vision and mission are not meaningless statements and instead, carry weight when they start “leading by example”.

Indeed, both Infosys and the TATA group have had some exemplary individuals as leaders, and often it was said that the “halo” surrounding them was enough to make the employees accept them as their leaders.

However, it was also said that sometimes, there was a misalignment between the top and middle layers since the pursuit of bottom-lines and cutting costs meant that the vision and mission were being paid “lip service” and not really practiced or followed.

Thus, the other lesson that one can learn is that a pragmatic approach to corporate governance might do wonders rather than one single star or leader attempting to mold the organization in their own way. Having said that, it must also be noted that a pragmatic approach to corporate governance does not mean a “Wink and Nod” attitude towards ethical and normative rules of conduct. Instead, what is needed is an approach that combines the lofty vision with that of Earthly realities and on the ground exigencies so that corporate governance is practiced at all levels of the organizational hierarchy.

To conclude, there is not one right approach to corporate governance, and the way in which it is practiced differs from organization to organization and depends as much on the leaders as it is on the middle and lower tiers.

The relevance of corporate governance has increased several times since the concept was introduced. With the introduction of globalization and competition, managing shareholder expectations is no longer the mantra for success. The current economic crisis is often blamed at poor regulatory and check mechanisms for the business, which has led to ramifications which are far reaching both geographically and socially.

A corporation is created to address objectives which are much more than creating products and services, it has to serve the larger purpose of satisfying multilevel needs of the society. Healthy corporate governance practices are no longer the need of the law but have become essential for the very survival of the organizations, the current economic crisis has proven that beyond doubts.

The corporations have always faced the tug of war of protecting the interests of the shareholders (the legal owners) or the stakeholders which includes suppliers, creditors, government and communities.

It would be interesting to note that the definition of corporate governance changes in different cultural contexts, for e.g. let us study a definition provided by the Center of European Policy Studies or CEPS as it is called.

CEPS defines corporate governance as the whole system of rights, processes and controls established internally and externally over the management of the business entity with the objective of protecting the interests of the stakeholders. Contrasting to this, the Anglo American defines it with an emphasis on creating the shareholder value.

Let us also look at the definition provided by OECD or Organization for Economic Corporation and Development, which brings together different democratic governments which are committed to sustainable growth and improving the living standards of the communities.

OECD defines corporate governance as Corporate Governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants of the corporation such as the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance.

The biggest incident which shook the world and questioned the existing corporate governance practices was the Enron debacle in the USA. The doctored accounts which flouted all the established norms of the accountancy practices, false financial statements and the executives who pocketed millions of dollars by selling their share of stocks while laying-off the 20% of the organization’s workforce, painted a grim picture for the investors all across the world.

The fundamental question posed by the Enron crisis was the morality of corporate decisions, embezzlement of funds and the larger interest of all the stakeholders right from employees to society in general.

The disturbing aspect was the inability of the external agencies like auditors, credit rating agencies and security analysts to see the real picture. A more recent example is the involvement of Satyam Computers Services Ltd, a reputed software firm of India in multimillion dollar accounting fraud which ultimately led to a huge face loss for the entire Indian IT industry.

The involvement of the reputed external agency like PricewaterCoopers (PWC) in the scandal made the entire episode a nightmare for the regulatory bodies, the government and the employees of the organization.

The objective of the corporate governance is hence the prevention of such scams in the business which have a huge bearing not only on the immediate shareholders but also on the morale of the larger stakeholder groups.

In this article, we look at the ways in corporate governance is practiced in the developed economies of the West and in the developing economies in the rest of the world. To start with, the ongoing global economic crisis has dispelled the notion that companies in the West are governed better.

Given the rather unending charade of CEO’s, Bankers and other corporate leaders being summoned by the SEC (Securities and Exchange Commission) in recent months over several irregularities, it would be a long shot to say that the companies in the west practice good corporate governance. Of course, there was a time when the companies in the West were looked upon as role models for good corporate governance and this was before the infamous Enron, WorldCom era.

On the other hand, companies in the rest of the world are governed in no better or no worse ways which means that effectively corporate governance across the world seems to be suffering from a crisis of trust and credibility.

If we take the former Tiger economies of South East Asia or the emerging economies of China and India and examine the way in which corporates in these countries are governed, it would be fair to say that most companies owe their growth to crony capitalism and quid pro-pro favors done with a desire to enrich one another at the expense of the average investor. This has been proved right in the aftermath of the Asian Financial Crisis in the late 1990’s and in recent months in India and China where several corporates were charged with duping the regulators.

Of course, one cannot paint all the companies with the same brush and there are exemplary examples of companies that have practiced good corporate governance in the West as well as the rest of the world.

The point here is that there are bad apples in the system everywhere and hence one cannot tar the entire system. However, it also needs to be noted that going by the present trends, there is a serious lack of credibility and accountability as well as issues related to transparency which need to be addressed if we are to have good corporate governance. Unfortunately, most companies seem to be aping each other in the way they dupe the regulators and this is a bad trend indeed.

Hence, the need of the hour is a voluntary mindset change as well as some form of regulatory control and oversight which would restore the art of corporate governance to its pristine status.

In other words, it is time for the corporate entities in all countries to take a hard look at what they are doing and change course.

It is also time for the regulators to enforce the existing laws and regulations so that malfeasance and deviance from established norms are punished and effective corporate governance is 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.

Studies have shown that the CEO’s of some companies like Wal-Mart and GM along with Wall Street Banks take home pay that is 100 to 150 times the average pay of the working class. This is indeed a fact that speaks volumes about the blatant disregard for fair compensation and reflects the skewed priorities of the corporate leaders. After all, what can possibly justify this huge imbalance even after taking into consideration the fact that CEO’s and Bankers are engaged in activities that are cerebral and visionary in nature?

The answer from corporate chieftains is that while these levels of gap between the CEO pay and the average pay are indeed troubling, there is no need to panic since the trickle down economics that they rely on means that the wealth eventually finds its way to the bottom. It is another fact that this has not happened so far in practice and what we have instead is a rising inequality gap. The reason for pointing this aspect is to highlight the kind of corporate governance practices that have seeped into corporates around the world.

The point here is that one reason why the global financial crisis happened was because of the failure of the very vision and direction as well as misplaced faith in markets for which these CEO’s and Bankers were being paid such humungous amounts. Hence, the notion that this aspect reflects good corporate governance has fallen flat on the face.

Another aspect of corporate governance that underlines the ongoing financial crisis is that there were serious issues of transparency and accountability concerning the behavior of the corporate leaders. When they overwhelmingly make the rules that benefit them at the expense of the shareholders and the stakeholders, then there is something wrong with the kind of corporate governance being performed. The fact that the employees in these companies and banks along with the shareholders had to pay the price for the mismanagement of the corporate leaders indicates that there is an urgent need to clean up the stables of corporate governance before it is too late.

Finally, the issues related to pursuit of profits at the expense of social and environmental concerns points to another malaise of the current systems of corporate governance. Hence, taken together these aspects reflect the fact that the current models of corporate governance need a rethink especially when one considers the fact that the global financial crisis was brought about due to excessive greed and reckless risk taking. The bottom line is that corporate leaders must be answerable to the regulators and the shareholders along with the stakeholders and only when there are effective checks and balances to keep the corporate governance on track can we avoid crises like the ongoing global financial crisis.

When we talk about negative externalities, what we mean are the social and environmental costs that corporations impose on society and which are not factored into the costs incurred by them. Since these affect society without the corporations paying for them, there is a need for the corporations to be socially and environmentally conscious and responsible so as to minimize inconveniencing society at large.

This is the paradigm of corporate social responsibility or CSR which indicates the need for corporations to follow sustainable business practices.

In the context of corporate governance, CSR means that corporations have to take into account society and the environment as stakeholders and cater to their needs instead of just pursuing profits at the expense of everything else.

The point here is that corporate governance must include aspects of social and environmental responsibility and this is where CSR comes into the picture.

By including CSR within the ambit of corporate governance, it is hoped that corporates would govern themselves and be accountable for their social and environmental costs. Thus, by broadening the ambit of corporate governance by embracing CSR, it is hoped that corporates would be responsible towards society and the environment.

To take examples of how corporate governance has been impacted by CSR, there are many cases of corporates like Samsung, Hyundai, Unilever and P&G (to name a few) that are publishing their CSR reports along with their annual reports. This is a direct consequence of the push to broaden the corporate governance agenda by including CSR within its ambit.

Further, many corporates now routinely report how much cost they are imposing on society (the negative externalities) and their efforts towards minimizing them.

Moreover, corporate governance is no longer just about transparency and accountability within the business framework. Instead, it has been broadened to include the whole gamut of social and environmental concerns that make up the corporate governance agenda.

In recent years, multilateral bodies like the United Nations and WTO have established normative rules of conduct under classifications like the UN Global Compact that bind organizations to social and environmental responsibility and formulate a set of guidelines that these corporations can follow.

There are many corporates who are signatories to the UN Global Compact and it is expected that the guidelines, though voluntary, would be followed by the corporates as part of their sustainability drives.

Finally, it is indeed the case that there needs to be a combination of voluntary and enforced rules of conduct and behavior that corporates are expected to follow as part of their social responsibility related to corporate governance. Hence, we have reached a stage where if the voluntary guidelines do not work, multilateral bodies like the UN has a duty to enforce them so that society as a whole is better off.

Including social and environmental concerns as part of a corporate governance agenda is a good thing. However, there needs to be a mechanism that tracks compliance with these principles as well.

In conclusion, corporate governance is no longer just about ethical practices pertaining to business processes alone. Instead, the corporate governance agenda has been broadened to include social and environmental norms as well.

What is Book Building?

Book building is a price discovery mechanism that is used in the stock markets while pricing securities for the first time. When shares are being offered for sale in an IPO, it can either be done at a fixed price. However, if the company is not sure about the exact price at which to market its shares, it can decide a price range instead of an exact figure.

This process of discovering the price by providing the investors with a price range and then asking them to bid on it is called the book building process. It is considered to be one of the most efficient mechanisms of pricing securities in the primary market. This is the preferred method which is recommended by all major stock exchanges and as a result is followed in all major developed countries in the world.

Book Building Process

The detailed process of book building is as follows:

1. Appointment of Investment Banker: The first step starts with appointing the lead investment banker. The lead investment banker conducts due diligence. They propose the size of the capital issue that must be conducted by the company. Then they also propose a price band for the shares to be sold.

   If the management agrees with the propositions of the investment banker, the prospectus is issued with the price range as suggested by the investment banker. The lower end of the price range is known as the floor price whereas the higher end is known as the ceiling price. The final price at which securities are indeed offered for sale after the entire book building process is called the cut-off price.

2. Collecting Bids: Investors in the market are requested to bid to buy the shares. They are requested to bid the number of shares that they are willing to buy at varying price levels. These bids along with the application money are supposed to be submitted to the investment bankers.

   It must be noted that it is not a single investment banker who is engaged in the collection of bids. Rather, the lead investment banker can appoint sub-agents to tap into their network especially for receiving the bids from a larger group of individuals.

3. Price Discovery: Once all the bids have been aggregated by the lead investment banker, they begin the process of price discovery. The final price chosen in simply the weighted average of all the bids that have been received by the investment banker. This price is declared as the cut-off price. For any issue which has received substantial publicity and which is being anticipated by the public, the ceiling price is usually the cut-off price.

4. Publicizing: In the interest of transparency, stock exchanges all over the world require that companies make public the details of the bids that were received by them. It is the lead investment banker’s duty to run advertisements containing the details of the bids received for the purchase of shares for a given period of time (let’s say a week). The regulators in many markets are also entitled to physically verify the bid applications if they wish to.

5. Settlement: Lastly, the application amount received from the various bidders has to be adjusted and shares have to be allotted. For instance, if a bidder has bid a lower price than the cut-off price then a call letter has to be sent asking for the balance money to be paid. On the other hand, if a bidder has bid a higher price than the cut-off, a refund cheque needs to be processed for them. The settlement process ensures that only the cut-off amount is collected from the investors in lieu of the shares sold to them.

Partial Book Building

Partial book building is another variation of the book building process. In this process, instead of inviting bids from the general population, investment bankers invite bids from certain leading institutions. Based on their bids, a weighted average of the prices is created and cut-off price is decided. This cut-off price is then offered to the retail investors as a fixed price. Therefore, the bidding only happens at an institutional level and not at a retail level.

This is also an efficient mechanism to discover prices. Also the cost and complications involved in conducting a partial book building are substantially low.

How is Book Building Better Than the Fixed Price Mechanism ?

First of all, the book building process brings flexibility to the pricing of IPO’s. Prior to the introduction of book building, a lot of IPO’s were either underpriced or overpriced. This created problems because if the issue was underpriced, the company was losing possible capital.

On the other hand, if the issue was overpriced it would not be fully subscribed. In fact, if it was subscribed below a given percentage, the issue of securities had to be cancelled and the substantial costs incurred over the issue would simply have to be written off. With the introduction of book building process, such events no longer happen and the primary market functions more efficiently.

For instance, the board of directors is responsible for the actions of the management and hence not only does the board need to monitor the management, the management needs to take the board into confidence about its decisions. Hence, the relationship can be described as being symbiotic with each with each serving in an ecosystem called the organization.

The point here is that neither the management nor the board can exist without each other and hence both need each other to survive and flourish.

Another aspect to the relationship between the board and the management is that more often than not, there is a significant representation of the management in the board. This means that the other board members have to study the decisions taken by these members carefully so that there are no agency problems, conflicts of interest and asymmetries of information.

Only when the board and the management coexist together in a harmonious manner can there be true progress for the organization. For this to happen, there must be a provision for having independent directors and those directors that are not affiliated to the management.

The point here is that unless there is objectivity and separation of the directors belonging to the management and those from outside can there is a semblance of avoidance of conflict of interest.

The third aspect of the relationship between the board and the management is the role played by institutional investors or directors from large equity houses and mutual fund companies. These directors bring to the table rich and varied expertise and experience in running companies and hence their input is crucial to the working of the company. It is for this reason that many regulators insist on having a certain percentage of the board as independent directors and another percentage from institutional shareholders. The reason for this is the fact that unless there is a process of due diligence and oversight over the actions of the management, the management can take unilateral decisions that are not always in the best interests of the company.

Finally, the relationship between the board and management is somewhat strained whenever the company is not doing well. This happens because the board has a top view of the organization and the management has a deeper insight.

Hence, to be fair to the management, they are the ones who have to run the organization and so they cannot be constrained by what the board dictates sitting on its perch. This is the classic problem that many companies face especially when they are not doing well and the remedy for this is to take the board into confidence about the complexities of the day to day operations and apprise them of the nuances and subtleties of running the organization.

The reason for the existence of the board of directors is that there needs to be a body that is above the management and which can be accountable to the regulators and shareholders for the decisions taken by the management of the company.

Hence, it is common to find many members of the management sitting on the board as executive directors. Again, it is for this very purpose that the regulators deem the company to have a certain percentage of directors in the non-executive capacity and those who are independent.

In recent years, the concept of the board has become crucial for corporate governance because of the incidence of several corporate scandals involving unethical conduct by the management.

In some of these cases like the Enron scandal and the Satyam scandal in India, the board was found to have played a major role in facilitating the scandal. This has led to the regulators asking for greater oversight from the board and to make the board accountable to its shareholders.

Of course, there are many instances that prove the contrary where the board has stepped in to stem the rot that the management has through its actions engendered. Prominent among these are the actions of Reebok in recent months where the board asked the top leadership to resign in the wake of corporate scandals involving them.

The concept of the board has been introduced explicitly to ensure that ethical and normative rules of conduct of corporate governance are followed.

The point here is that since the buck stops with the board of directors, shareholders and regulators know who to turn to in case they have queries or doubts about the decisions taken by the company. In many cases, the board of directors acts as the ombudsman as well for shareholder complaints and grievance redressal.

Further, the board of directors is comprised of individuals with exemplary records of managing companies and hence it is expected that the board of directors would provide technical and managerial guidance to the way in which the company is run.

Finally, the concept of the board of directors is also important for the way in which it is deemed to play a pivotal role in providing good corporate governance. In most cases, the way in which the company is governed depends on the way in which the board directs the management in its operation of the company. This is relevant to the contemporary times where the managerial class has been found to enrich itself at the expense of the company and its shareholders.

It is for this reason that the board of directors is expected to steer the company away from agency problems, conflicts of interest and asymmetries of information in the way shareholders are briefed about the decisions taken by the company.