Why we Need more Emotionally Intelligent Leaders and Managers in Chaotic Times
What is Emotional Intelligence and Why we need more High EQ Leaders and Managers Emotional Intelligence is defined as the art and science of managing one’s emotion and that of the others. Emotionally Intelligent individuals are those who are good at controlling their emotions and learning to defer gratification till the work is done, empathise […]
How Silicon Valley Firms are Implementing Innovative Human Resources Policies
In recent years, many Information Technology and Software firms in the Silicon Valley area have been implementing innovative Human Resources (HR) policies that are aimed at creating an engaging workplace culture and actualizing a work environment that is fulfilling and rewarding. Starting with flexible work and employment arrangements and including, among other measures such as […]
Benefits of Buy Now Pay Later (BNPL)
Buy Now Pay Later (BNPL) is the latest buzzword in the retail industry. The media has been full of debates about the benefits and drawbacks of Buy Now Pay Later (BNPL) from the consumers point of view. However, when it comes to the point of view of the merchant or the seller, there has not […]
Adjustment Mechanisms in Publich-Private Partnership (PPP) Contracts
A contract is said to be well formed if it is able to cover all the possibilities and provide guidance about what will happen in each and every situation. However, this benchmark cannot really be applied to PPP contracts used for building infrastructure projects. This is because infrastructure projects are extremely long term in nature. […]
Personal Finance Lessons from Rich Dad Poor Dad
Most of the lessons taught in the “Rich Dad Poor Dad” book series are somewhat unique. This is because the book provides a new perspective of looking at finances. In this article, we will have a look at some of those lessons in order to explain the rich dad philosophy. High Incomes do not Equate […]
Any public limited or private company needs to have a board of directors constituted for the purpose of oversight and accountability to the company. The concept of the board of directors is that it provides an umbrella for the company to operate in and ensures that the decisions and actions taken by its management are reviewed and held to the mirror.
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.
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