Module 1, Chapter 1 - Managing An Organisation; The Board Flashcards
What are many organisations managed by?
Many organisations are managed by a board of directors, often appointed or elected by the shareholders to run the business on their behalf.
What does organisation success depend on? Relate this to the board of the organisation.
Organisational success depends on effective decision-making.
Who is responsible for high-level decision-making in organisations?
Responsibility for high-level decision-making in organisations rests with the board of directors.
Why do some boards vary in sizes, composition, and structure? What factors determine the variations?
The size and composition of a board will vary between different types and sizes of organisation and approaches to how a board should be structured or function differs between countries.
Why should a board have a balance of different members?
To prevent the risk of power and information being concentrated in one or a few individuals.
How do some organisations balance the board?
In some jurisdictions, there is a specific minimum and/or maximum number of directors for different types of organisation. In UK entities, this is explained in the Articles of Association.
In general, how many board members does a large organisation have?
More than 10.
In general, how many board members does a smaller organisation have?
Typically six to eight.
What is the Financial Reporting Councils advice on the amount of members an organisation should have?
Financial Reporting Council (FRC) advises that the board ‘should be of sufficient size that the requirements of the business can be met’ and there should be a 50% split of executive and non-executive directors to ensure that one group does not dominate board discussions and decisions.
Who delegates the day-to-day business within a one-tier or unitary board?
In an organisation with a one-tier or unitary board, day-to-day business is delegated by the board to the CEO and senior management team who run the business on behalf of the owners (usually the shareholders).
The board itself comprises both executive and non-executive members and the board makes decisions as one unitary group. The model is used in the UK and is popular in the USA, Australia and South Africa.
How are two-tier or dual board systems run? Which continent is this most seen in?
A two-tier system separates those responsible for supervision from those responsible for operations (the executive board).
The supervisory board (usually consisting of NEDs representing the shareholders) oversees the executive board.
This board structure can be seen in many countries in continental Europe.
