AReport to the Chairman on the Roles, Responsibilities, and Duties of Board ofDirectors and the CEONameof the Student:AcademicAffiliation:Date: Part 1: Introduction Theprevailing culture wars that exist between regulatory bodies, the government,as well as the Board of Directors of most companies across the company are aclear indicator that indeed, there is need to define both the responsibilitiesand the roles of these stakeholders in the company. Based on the ANZ BankingGroup and the Westpac Banking Corp case, accusations were made against theregulators that they had been turned into a “culture police”. The majorobjective of this report is thus to ensure that separate responsibilities,duties, and roles are actually assigned to both the directors and the ChiefExecutive Officer or CEO of the company. This is quite essential since it willensure that the business is functioning well and its culture maintained and thusdepicting a good company image to the stakeholders associated with the company.
An Analysis to Define anddelineate Separate Responsibilities and Roles of the Board Directors from thatof the Chief Executive Officer of the Company Thedisputes that emanate as a result of both assigning as well as performing orexecuting the roles and responsibilities for the management professional,company shares, and the directors have led to the creation of disorderliness inthe overall success of the company. Based on the Australian SecuritiesCommission Chairman Greg Medcraft, it was asserted that there was no need forthe company directors to be held criminally responsible due to any disobedientculture associated with the company (Rao & Tilt, 2016).It was argued that the creation of a healthy organizational business culture wasactually the responsibility of the Company’s CEO because that is the individualwho is tasked with being directly responsible or accountable for any vitalmatters that were associated with the company. It is prudent for all and sundryto note that the effective functioning of an organization’s corporategovernance is highly dependent on the roles, responsibilities, methods,techniques, and structure of the board of directors. This implies that anorganization’s board of directors is actually regarded as being an importantpart and parcel of corporate governance. It is also important to note that theappointment of most organizational directors is actually done by itsshareholders who are deemed its policy makers and decision makers. Basedon the information contained in the case, it was quite apparent that thecompanies’ directors depicted concerns regarding their roles andresponsibilities.
As a result, they were not willing to have any changesimplemented that will make them (directors) accountable for charting thecompany’s wayward culture (Garg & Eisenhardt, 2017).It is important to note that the roles associated with the board of directorsought to be based on three major areas. The first one is policy-making in whichthe company’s directors ought to make policies that will differentiate theroles and responsibilities of the board of directors and other managementprofessionals in the company. The second area is policy-making through whichdirectors should make decisions about the agreements that they have made withother organizations and therefore delegate powers associated with maintenanceof prosperity to other parties.
The third and last one is oversight and thisimplies that directors should be tasked with the role of supervision instead ofthe company’s management. Inessence, directors of the company ought to be tasked with the responsibility ofendorsing the business success, exercise and emancipate the company’s power,and ultimately show carefulness for their company. On the other hand, the responsibilitiesassociated with the company directors include monitoring the affairs and theperformance of the company, effective and proper management of the company,description of the delegation authority to the management, and ensuring thatthe company upholds good or effective corporate governance.
It is a commonassertion that the “defiant culture” of any organization ought to be dealt withby the CEO as opposed to its directors. Considering the case, it is apparentthat the separate responsibilities and roles of the CEO are to not only managethe company but to also ensure that the CEO performs the strategies and thepower that has been given by the directors in order to enhance decision-makingpolicies in the organization (Mullins & Schoar, 2016).The CEO should also be held with the responsibility of ensuring that they faceconsequences that emanate from the legal and moral act of the organization andtakes accountability and responsibility for any organizational decisions. Justlike asserted by the IBIS World director and founder, the making of the rightstrategies of assigning the responsibilities and roles for the CEO would sortout the problem of passing on matters as an excuse to those higher authorities. The SpecificRecommendations Regarding the Roles of the Company Directors and the ChiefExecutive OfficerInorder to ensure that there is effective functioning of the company, it isimportant to ensure that the CEO and the directors have a similar comprehensionof the business strategies.
It is important to note that despite the fact thatboth the CEO and the directors should work towards ensuring the success of theorganization, there is need to ensure that their responsibilities and roles arewell defined and separated. The directors’ roles should thus not only belimited to leading meetings but also ensure that they develop goodcommunication with their CEOs. It is also important for the directors to ensurethat the progress and the performance of their CEOs are monitored continuouslyso as to create an effective strategic plan for their organization. It isimportant for the company directors to ensure that they do not over indulgethemselves with issues of management. Instead, these roles should be passed onto the CEO whose responsibility is to manage the company. Based on the scenariopresented in the case study, it is the responsibility of the directors todevelop an organizational structure that will effectively limit the declineliability that matches the cultural harmony of the company’s CEO. The activeinvolvement of the company’s directors will be beneficial in ensuring thesmooth flow of information in the company (Perrault, 2015).
TheCEO, on the other hand, plays a crucial role in the general business operationsof the company. In order to make to make effective organizational decisions, itis important for the CEO to be given the autonomy and independence in authorityand also ensure that their roles are separated in order to achieve corporategovernance. The CEO should be given room to give suggestions to the companydirectors and also refuse to implement any unviable decisions that are imposed onhim or her.
The directors and the CEO should be linked together througheffective communication. The CEO should also ensure that the company objectivesare 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 alsobe managed by the CEO who is tasked with the responsibility of creating an “ethicalworking environment”. Since the directors of the company are its “ultimateentity of governing”, the CEO should never in any way depict any form ofwaywardness to its top management. It is also recommended that both the CEO andthe directors of the company work together smoothly towards easy realization ofthe company’s set goals and objectives. Part2Stakeholders’Interests and Shareholders’ InterestsIt is a common belief that aneffective and viable corporate strategy has a significant contribution towardsthe enhancement of organizational returns.
This is quite true since theprevalence of a poor governance strategy is an indicator that organizationalmanagers can easily exploit their powers in order to fulfill their selfish and personalinterests at the expenses of their companies and investors. A common argumenthas, therefore, been that the existence of both the cash flows as well asinvestment opportunities in the organization can result in payout ratios which willultimately 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 aregrowth-oriented highly tend to make over-investments while ensuring that theypay fewer dividends. Research indicated that in countrieswhere the law did not protect the shareholders’ interests’ then suchshareholders actually saw it better to make their investments in companies or organizations,which had robust corporate governance. In some other economies, which areadvanced, corporate governance strategies usually involved effective funding ofcompanies right from investors while ensuring that there was the return ofprofits to the investors. Contracts that are made between the investors and themanagers usually ensures that the manner in which such funds are actuallyinvested are compatible or in line with the profit allocations between both theinvestors and the management. In order to avoid problems associated with eventsthat are unanticipated, specific “residual control rights” are normallyalienated among the investors and the organizational managers, which give rightsassociated with decision-making rights in the company.
During the funding period, investorsusually possess all the rights of control but due to the fact that they are notnormally well equipped to take appropriate decision-making processes like theorganizational managers, a specific percentage of the residual rights areultimately presented to the managers. Ultimately, the main role of corporategovernance is known to lie with the investors, tasking them with theresponsibility of setting limits to the managers’ “residual control rights”.That apart, the “Australian Institute of Company Directors” or AICD is capableof making investors comprehend the importance of having an effective “corporategovernance strategy” that will guarantee the protection of their own interest(Aina, 2013). However, in most cases, many investors have not been fullywilling to consider the importance attached to corporate governance especiallyin 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 theinvestors have a belief that higher growths in the sales of the company are notnormally possible because of corporate governance.
However, it is important tonote that there is a need for the investors to be made aware of the fact thatthe implementation of an effective governance strategy will result in increasedvalues and profits for the organization (Waller, 2012). This is quite truesince companies, which have good or effective corporate governance, are alsocapable of paying out higher rates of money to their shareholders. It is alsoimportant to note that “good corporate governance” is usually associated withthe effective compensations of both directors and executives of the company inform of “options in the stock”. Investors and more specifically small investorsmay have an opinion that the use of governance strategies may actually givebenefits 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 thatinvestors can gain as a result of having sound or good governance. It is important for all and sundry tonote that having a good and effective corporate governance strategy is quiteessential for an organization since not only is it capable of helping inachievement of long-term international investments, but it is also capable ofenhancing the country’s economic performance. That apart, it is also prudent tonote that having effective corporate governance is quite helpful because itaids in having effective and equal sharing or division of such shares amongboth the internal and external investors.
Outside investors are capable ofgaining much control over the activities that are done by the inside investorsas well as the management of the company (Ferrell & Ferrell, 2011). Thatapart, it also grants stakeholders with rights of interfering in top-leveldecision-making processes of the company due to the governance strategy thathave already been laid out. The core “corporate governance” is known to addresstwo major tribulations, first being vertical governance in the midst ofsecluded managers and shareholders while the second one deal with horizontalgovernance in the midst of a controlling shareholder and secluded shareholder. The challenge that requires to beaddressed by the relevant policy-makers in the development of the governancestructure in a manner in which both the controlling as well as the otherrelevant stakeholders becomes held in a “win-win” situation. The currentconflicts that exist between shareholders and managers seem to be anothersignificant reason as to why most of the investors do not give consideration tothe issue of corporate governance as being a vital aspect in the decisionmaking processes of the organization. An increase in the scandal trends hasalso led to rising of questions in regard to the effectiveness associated withthe issue of corporate governance. RecommendationsBased on available theories as wellas examples, the aspect of good corporate governance is indeed quite helpful inthe attainment of effective functioning of any given company. Indeed, investorscan only have their rights well protected through having sound or goodgovernance strategies.
That part, it is important that investors are made awarethat the chances for organizational managers to become diluted or reduced canonly be achieved through having a sound “organizational governance strategy”.However, it is important to note that corporate scandals are the ones that haveled to many investors losing trust in governance strategies (Wei et al, 2009).The reduced sales growth coupled with an increase in the amount ofcompensations that are made to the organization’s executives and directors aresome of the few governance strategy features, which have been made the beliefin corporate governance to fade away. It is therefore important for the AICD tocarry on campaigns that are aimed at educating investors regarding the need ofhaving “sound corporate governance”. The major emphasis should be in givingactual examples of organizations that have experienced high profits as well asshareholder returns due to good corporate governance. ReferencesAina, A 2013, ‘Board of directors andcorporate governance in Nigeria’, International Journal of Business and FinanceManagement Research, vol.
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