Governance

Question 1

What is the definition of Agency?

Answer 1

Is defined in relation to the principal.

An owner (principal) lets somebody run their business (manager)

Sometimes agents have their own agenda/interests which don’t align with the shareholders.

Question 2

The Mendelow Framework

… name all points on the map?

Answer 2

• Low interest/Low Power = Minimal effort (can largely be ignored)
• High Interest/Low Power = Keep informed (can increase overall influence by forming coalitions with other stakeholders)
• Low Interest/High Power = Keep Satisfied (all stakeholders have to do is reawaken interest and this will move them along to the key player category)
• High Interest/High Power = Key Players (have the highest influence, if there are several key players with high influence, likely to cause problems)

Question 3

What are the roles and responsibilities of the board of directors?

Answer 3

• Provide entrepreneurial leadership
• Represent company view and account to the public
• Determine the company’s mission and purpose
• Select and appoint the CEO, chairman and other board members
• Establish appropriate internal controls
• Ensure that its obligations to its shareholders and other stakeholders are understood and met.
• Set the companies strategic aims.

Question 4

What is the role of the CEO?

Answer 4

• To lead the company and protect shareholders interests above all others
• To develop and implement policies and strategies capable of delivering superior shareholder value
• To assume FULL responsibility for all aspects of the companies operations
• To manage the financial and physical resources of the company, monitor results, and ensure that effective operational and risk controls are in place.
• Communicating effectively with significant stakeholders (shareholders, suppliers, customers etc)

Question 5

What is the role of the chairman?

Answer 5

1. Provide leadership to the board.
2. Represents the company to investors
3. Effective communication with shareholders
4. Co-ordinating of NEDs, facilitating good relationships between NED and executives
5. Ensure board receives accurate and timely information.

Question 6

What are the BENEFITS of separating the Chairman &a CEO role?

Answer 6

• Frees up Chief Execs time to FULLY concentrate on the management of the organisation.
• Allows the chair to represent the shareholders interests
• removes risks of ‘unfettered power’ in ONE person
• Reduced risks of conflict of interest in a single person.
• Chairman provides a conduit for the concerns of NEDs
• Ensures the CEO is responsible to someone named directly

Question 7

What are the Roles & Responsibilities of NEDs?

Answer 7

1. Strategy Role - NEDs are full members and this should contribute to strategy, they should challenge ANY aspect they see fit & offer advice.
2. Scrutiny Role - NEDs should hold executive directors to account for decisions taken, they should represent the shareholders interest.
3. Risk Role - NEDs should ensure that the company has adequate internal controls and risk management systems.
4. People Role - NEDs should oversee issues on appointments, remuneration but might also involve contractual or disciplinary issues.