M2S1 Corporate Governance 🏛️ 2 Flashcards
Voting rights and appointment of CEO etc falls under the concept of
Board Politics
- Not a part of the company but can be a director
- Have ownership but not a part of the institution
Independent Director
- Balance decision making and the minority group
- Non biased in terms of interest
Independent Director
- no affiliation to the company
- freedom from conflicts of interest
Independent Director
- Part of the BOD but not involved in management
- linked to the company in various capacities, like suppliers, family representatives, friends, advisers, or shareholders.
Non-Executive Director
- Decision making
- executive positions within the organization
- CEO or other senior roles like vice president.
Executive Director
Directors should have triple I
Integrity
Intellect
Independence
Core Competencies for Directors
Integrity
Intellect
Independence
Networking:Build useful professional relationships.
Communication: Convey ideas effectively.
Critical Thinking: Make informed decisions.
Financial Literacy:Understand financial statements.
Strategic Planning: Develop long-term goals.
Convey ideas effectively.
Communication
Understand financial statements.
Financial Literacy
Develop long-term goals.
Strategic Planning
Make informed decisions.
Critical Thinking
Build useful professional relationships.
Networking
5 things that constitutes an effective working board
- Unity
- Networking
- Independence
- Commitment
- Expertise
improve board efficiency by focusing on specific issues, saving time in general meetings.
Committees
The following committees are required by regulating bodies
Audit Committee
Remuneration Committee
Nomination Committee
Oversee accounting and financial reporting processes and results.
Audit Committee
Compensation and benefit plan through performance appraisals
Remuneration Committee
Election and appointment.
Nomination Committee
What are the four theoretical perspective of corporate governance?
Resource Dependency Theory
Agency Theory
Stewardship Theory
Stakeholder Theory
- Assumes conflict between managers (agents) and owners (principals)
Agency Theory
- Suggests managers may prioritize their interests over the owners’
Agency Theory
- Views managers as responsible stewards of the company
Stewardship Theory
- Assumes managers act in the best interest of the owners
Stewardship Theory
- Views corporate governance from a strategic management perspective
Resource Dependency Theory
- External resources influence the organization
Resource Dependency Theory
- Encourages considering the concerns of all stakeholders, not just shareholders
Stakeholder Theory
- Defines organizational success by the satisfaction of all stakeholders
Stakeholder Theory
PESTLE
Political
Environment
Social
Technological
Legal
Economic
Four Types of Resources
Human Resources
Financial Resources
Physical Resources
Technological Resources
Boards are evaluated to improve practices and ensure they function effectively. Evaluations can be internal or by a third party to ensure compliance.
Board Evaluation
corporations with an emotional aspect. Good governance aims to sustain economic value (revenues) and emotional value (well-being). Managing emotions is essential for effective governance.
Family corporations
Membership of the Board
Independent Directorr
Non Executive Director
Executive Director
