Report to the Chairman on the Roles, Responsibilities, and Duties of Board of
Directors and the CEO
of the Student:
prevailing culture wars that exist between regulatory bodies, the government,
as well as the Board of Directors of most companies across the company are a
clear indicator that indeed, there is need to define both the responsibilities
and the roles of these stakeholders in the company. Based on the ANZ Banking
Group and the Westpac Banking Corp case, accusations were made against the
regulators that they had been turned into a “culture police”. The major
objective of this report is thus to ensure that separate responsibilities,
duties, and roles are actually assigned to both the directors and the Chief
Executive Officer or CEO of the company. This is quite essential since it will
ensure that the business is functioning well and its culture maintained and thus
depicting a good company image to the stakeholders associated with the company.
An Analysis to Define and
delineate Separate Responsibilities and Roles of the Board Directors from that
of the Chief Executive Officer of the Company
disputes that emanate as a result of both assigning as well as performing or
executing the roles and responsibilities for the management professional,
company shares, and the directors have led to the creation of disorderliness in
the overall success of the company. Based on the Australian Securities
Commission Chairman Greg Medcraft, it was asserted that there was no need for
the company directors to be held criminally responsible due to any disobedient
culture associated with the company (Rao & Tilt, 2016).
It was argued that the creation of a healthy organizational business culture was
actually the responsibility of the Company’s CEO because that is the individual
who is tasked with being directly responsible or accountable for any vital
matters that were associated with the company. It is prudent for all and sundry
to note that the effective functioning of an organization’s corporate
governance is highly dependent on the roles, responsibilities, methods,
techniques, and structure of the board of directors. This implies that an
organization’s board of directors is actually regarded as being an important
part and parcel of corporate governance. It is also important to note that the
appointment of most organizational directors is actually done by its
shareholders who are deemed its policy makers and decision makers.
on the information contained in the case, it was quite apparent that the
companies’ directors depicted concerns regarding their roles and
responsibilities. As a result, they were not willing to have any changes
implemented that will make them (directors) accountable for charting the
company’s wayward culture (Garg & Eisenhardt, 2017).
It is important to note that the roles associated with the board of directors
ought to be based on three major areas. The first one is policy-making in which
the company’s directors ought to make policies that will differentiate the
roles and responsibilities of the board of directors and other management
professionals in the company. The second area is policy-making through which
directors should make decisions about the agreements that they have made with
other organizations and therefore delegate powers associated with maintenance
of prosperity to other parties. The third and last one is oversight and this
implies that directors should be tasked with the role of supervision instead of
the company’s management.
essence, directors of the company ought to be tasked with the responsibility of
endorsing the business success, exercise and emancipate the company’s power,
and ultimately show carefulness for their company. On the other hand, the responsibilities
associated with the company directors include monitoring the affairs and the
performance of the company, effective and proper management of the company,
description of the delegation authority to the management, and ensuring that
the company upholds good or effective corporate governance. It is a common
assertion that the “defiant culture” of any organization ought to be dealt with
by the CEO as opposed to its directors. Considering the case, it is apparent
that the separate responsibilities and roles of the CEO are to not only manage
the company but to also ensure that the CEO performs the strategies and the
power that has been given by the directors in order to enhance decision-making
policies in the organization (Mullins & Schoar, 2016).
The CEO should also be held with the responsibility of ensuring that they face
consequences that emanate from the legal and moral act of the organization and
takes accountability and responsibility for any organizational decisions. Just
like asserted by the IBIS World director and founder, the making of the right
strategies of assigning the responsibilities and roles for the CEO would sort
out the problem of passing on matters as an excuse to those higher authorities.
Recommendations Regarding the Roles of the Company Directors and the Chief
order to ensure that there is effective functioning of the company, it is
important to ensure that the CEO and the directors have a similar comprehension
of the business strategies. It is important to note that despite the fact that
both the CEO and the directors should work towards ensuring the success of the
organization, there is need to ensure that their responsibilities and roles are
well defined and separated. The directors’ roles should thus not only be
limited to leading meetings but also ensure that they develop good
communication with their CEOs. It is also important for the directors to ensure
that the progress and the performance of their CEOs are monitored continuously
so as to create an effective strategic plan for their organization. It is
important for the company directors to ensure that they do not over indulge
themselves with issues of management. Instead, these roles should be passed on
to the CEO whose responsibility is to manage the company. Based on the scenario
presented in the case study, it is the responsibility of the directors to
develop an organizational structure that will effectively limit the decline
liability that matches the cultural harmony of the company’s CEO. The active
involvement of the company’s directors will be beneficial in ensuring the
smooth flow of information in the company (Perrault, 2015).
CEO, on the other hand, plays a crucial role in the general business operations
of the company. In order to make to make effective organizational decisions, it
is important for the CEO to be given the autonomy and independence in authority
and also ensure that their roles are separated in order to achieve corporate
governance. The CEO should be given room to give suggestions to the company
directors and also refuse to implement any unviable decisions that are imposed on
him or her. The directors and the CEO should be linked together through
effective communication. The CEO should also ensure that the company objectives
are given more preferences as opposed to the personal interests (Suh et al, 2016).
The effective management of any salvo and conflicts in the company should also
be managed by the CEO who is tasked with the responsibility of creating an “ethical
working environment”. Since the directors of the company are its “ultimate
entity of governing”, the CEO should never in any way depict any form of
waywardness to its top management. It is also recommended that both the CEO and
the directors of the company work together smoothly towards easy realization of
the company’s set goals and objectives.
Interests and Shareholders’ Interests
It is a common belief that an
effective and viable corporate strategy has a significant contribution towards
the enhancement of organizational returns. This is quite true since the
prevalence of a poor governance strategy is an indicator that organizational
managers can easily exploit their powers in order to fulfill their selfish and personal
interests at the expenses of their companies and investors. A common argument
has, therefore, been that the existence of both the cash flows as well as
investment opportunities in the organization can result in payout ratios which will
ultimately result in the gearing up of the share price (Al_Sufy et al, 2011).
It is a common trait that most of the organizational managers who are
growth-oriented highly tend to make over-investments while ensuring that they
pay fewer dividends.
Research indicated that in countries
where the law did not protect the shareholders’ interests’ then such
shareholders actually saw it better to make their investments in companies or organizations,
which had robust corporate governance. In some other economies, which are
advanced, corporate governance strategies usually involved effective funding of
companies right from investors while ensuring that there was the return of
profits to the investors. Contracts that are made between the investors and the
managers usually ensures that the manner in which such funds are actually
invested are compatible or in line with the profit allocations between both the
investors and the management. In order to avoid problems associated with events
that are unanticipated, specific “residual control rights” are normally
alienated among the investors and the organizational managers, which give rights
associated with decision-making rights in the company.
During the funding period, investors
usually possess all the rights of control but due to the fact that they are not
normally well equipped to take appropriate decision-making processes like the
organizational managers, a specific percentage of the residual rights are
ultimately presented to the managers. Ultimately, the main role of corporate
governance is known to lie with the investors, tasking them with the
responsibility of setting limits to the managers’ “residual control rights”.
That apart, the “Australian Institute of Company Directors” or AICD is capable
of making investors comprehend the importance of having an effective “corporate
governance strategy” that will guarantee the protection of their own interest
(Aina, 2013). However, in most cases, many investors have not been fully
willing to consider the importance attached to corporate governance especially
in the “investment decisions” since they may be pondering that the companies’
governance will always give room for the managerial exploitation.
It always seems that most of the
investors have a belief that higher growths in the sales of the company are not
normally possible because of corporate governance. However, it is important to
note that there is a need for the investors to be made aware of the fact that
the implementation of an effective governance strategy will result in increased
values and profits for the organization (Waller, 2012). This is quite true
since companies, which have good or effective corporate governance, are also
capable of paying out higher rates of money to their shareholders. It is also
important to note that “good corporate governance” is usually associated with
the effective compensations of both directors and executives of the company in
form of “options in the stock”. Investors and more specifically small investors
may have an opinion that the use of governance strategies may actually give
benefits to both executives and directors of a company in one way or another.
It is therefore important that they are made aware of the positive impacts that
investors can gain as a result of having sound or good governance.
It is important for all and sundry to
note that having a good and effective corporate governance strategy is quite
essential for an organization since not only is it capable of helping in
achievement of long-term international investments, but it is also capable of
enhancing the country’s economic performance. That apart, it is also prudent to
note that having effective corporate governance is quite helpful because it
aids in having effective and equal sharing or division of such shares among
both the internal and external investors. Outside investors are capable of
gaining much control over the activities that are done by the inside investors
as well as the management of the company (Ferrell & Ferrell, 2011). That
apart, it also grants stakeholders with rights of interfering in top-level
decision-making processes of the company due to the governance strategy that
have already been laid out. The core “corporate governance” is known to address
two major tribulations, first being vertical governance in the midst of
secluded managers and shareholders while the second one deal with horizontal
governance in the midst of a controlling shareholder and secluded shareholder.
The challenge that requires to be
addressed by the relevant policy-makers in the development of the governance
structure in a manner in which both the controlling as well as the other
relevant stakeholders becomes held in a “win-win” situation. The current
conflicts that exist between shareholders and managers seem to be another
significant reason as to why most of the investors do not give consideration to
the issue of corporate governance as being a vital aspect in the decision
making processes of the organization. An increase in the scandal trends has
also led to rising of questions in regard to the effectiveness associated with
the issue of corporate governance.
Based on available theories as well
as examples, the aspect of good corporate governance is indeed quite helpful in
the attainment of effective functioning of any given company. Indeed, investors
can only have their rights well protected through having sound or good
governance strategies. That part, it is important that investors are made aware
that the chances for organizational managers to become diluted or reduced can
only be achieved through having a sound “organizational governance strategy”.
However, it is important to note that corporate scandals are the ones that have
led to many investors losing trust in governance strategies (Wei et al, 2009).
The reduced sales growth coupled with an increase in the amount of
compensations that are made to the organization’s executives and directors are
some of the few governance strategy features, which have been made the belief
in corporate governance to fade away. It is therefore important for the AICD to
carry on campaigns that are aimed at educating investors regarding the need of
having “sound corporate governance”. The major emphasis should be in giving
actual examples of organizations that have experienced high profits as well as
shareholder returns due to good corporate governance.
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