In recent times the size of the board of directors have changed slightly from what it used to be in the past where there were a higher number of directors than necessary it may even be better to have less number of directors so as to reduce remuneration expenses.
The size of the board will vary from one company to another. The siz of the board is an A common board structure in the US is for the board to consist of NEDs, with only the CEO and the chairman representing executive management. The Financial Times suggested that this structure is potentially vulnerable to manipulation by the chairman and CEO, who are able, if they wish, to control the flow of information to their fellow directors.
A better structure would therefore be a board with more executive management representation, but with a majority of NEDs led by a senior independent director. This structure should improve the knowledge NEDs have about the company. Another example is that of Enron in which help to illustrate failures of the board of directors, both collectively and as individuals. The company collapsed without warning in October After the company collapsed, Mr Nadir fled to Northern Cyprus, where he lives in exile outside the Individual directors should be suitable to hold their position on the board of a public company.
Taken as a group, the board should possess a breadth of experience, skills and knowledge, and each individual should be able to contribute to the decision-making capabilities of the board. There would be little value in having two individuals on the board with a similar background.
Importance of Corporate Governance
It almost goes without saying that an individual appointed to the board of a public company should possess personal qualities such that investors should trust his or her honesty and integrity. Individual directors should have a sense of what is right and wrong, and act in an ethical way in business. In practice, this is often overlooked.
Investigations following the collapse of Enron revealed examples of poor governance by the directors. The board is supported by the company secretary. This should seem common sense, but it is also included as a supporting principle in the Combined Code. It is important that the directors should contribute constructively to board decisions, and in doing so should give their well-considered views.
Although the board should aim to reach agreement on all issues, there might be some on which the directors disagree. A director should have the strength of character to back what he or she believes in, and should certainly not agree with the rest of the board simply to avoid argument. Where necessary, individuals should be prepared to disagree with the majority of the board, and let their views be known. This is supported by the Combined Code, which states that if directors have concerns about a matter that cannot be resolved, they should ensure that those concerns are recorded in the minutes of the board meetings at which the matter is discussed.
If a NED resigns as a result of any concern, he or she should provide a written statement to the chairman, for circulation to the board. Principle A. It also introduces the idea that independent board members independent NEDs are important to prevent the domination of a board by one individual or clique.
Remuneration of directors became a cause for concern in the early in th uk and in the us when some top executives were critizised for being paid higher than their merit and especially during periods when their companies performed badly. According to monks and minnow these pay schemes rarely relate to the performance of the company or that of the individual director and in addition to retainers, meeting fees,chairmanship fees,and stocks or option grants most companies also give huge discounts on whatever they produce.
A rather intresting example is general motors where directors received a new car every 90 days. It can be particularly damaging to the capital markets when public anger is stirred against directors who continue to pay themselves more when their companies are performing badly The trouble emerged in the UK, largely as a consequence of the privatisation of state-owned industries, like water and electricity supply companies.
The same people who had run the former state-owned enterprises were selected as directors of newly established companies, with an improved pay. Financial Times 31 July into the pay-outs to the directors of the 25 largest US corporations that had gone bankrupt since January The executives concerned were reaping the benefit of remuneration packages that had been agreed when the economy was booming and there was no foreseeable end in sight to the good times. To the investment community, it appeared that the executives were being rewarded for failure.
An individual who decides the remuneration of another will inevitably have an influence conscious or not over that person. This means lower borrowing costs for well governed firms. Good corporate governance is needed for following reasons. For example, to monitor managers' behavior, an independent third party the auditor attests the accuracy of information provided by management to investors. An ideal control system should regulate both motivation and ability.
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Top managers are also members of the board.
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These are found in small companies, family companies and start-up business. The majority of members of the board is the executive director. In this structure there is a non-executive directors in the board but the number was small minority. The majority is a non-executive director. Most of the non-executive directors are independent directors. All non-executive director is a member of the board. Many are found in non-profit organizations. This structure is almost similar to the structure of the two-tier Europe.
The two-tier system is widely used in mainland European countries such as Germany, the Netherlands. In the two-tier system, the role of commissioners and board of directors are clearly separated. Board of commissioners will oversee the board of directors.http://tf.nn.threadsol.com/revuf-app-to-locate.php
Essays on corporate governance and corporate finance - CentAUR
Supervisory board. It consists of a non-executive directors and independent non-executive directors are not independent connected. Implementing Council executive board. It consists of all such executive director. Indonesia adopts two-tier system of governance.