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Role of Chairman:
1 Functioning the board by overseeing it
2 Setting agenda for meeting
3 Oversee board actions
4 Conducting the board meeting
5 Liaisons with EDs and NEDs
6 Communicate with key stakeholder ( SH , II )
Role of SH
1 Vote on the election of Director
2 Amendment in corporate charter (changes in nature in business and share, transfer to another jurisdiction)
3 Key corporate matter (sale of com assets,merger or ACQ, Liquidation)
Problem: problem of collective action, free rider, agenda control by manager.
Role of GOVT:
1 Company act in social responsibility. CSR
2 Employment level, monetary policies, market supply, demand of goods and service.
3 various accept of fiscal policies (capital allowance incentive, course of taxation raised)
Agency cost:
1 Agent monitoring expenditure (director’s fees, benefits, so on)
2 Agent bonding cost (meetings with II)
3 Remaining residual loss (MGT misuse their positions)
Stakeholder theory
NORMATIVE FORM of Stakeholder theory: accommodate all stakeholder concern not because of what the organization can get instrumentally “get out of it” for its own profit but doing so organization observes its moral duty to its
each stakeholder.
INSTRUMENTAL FORM of stakeholder theory adopts business cases rather than pure moral ethics cases. Good ethics is good business.
Classification of Stakeholder
Internal VS external: inside org vs outside org (employee vs competitor)
Narrow VS Wide: most affected vs less affected (based on com’s decision), (SH, Employee, MGT VS GOVT, Society)
Primary VS Secondary: continue participation VS not directly depend, (based on immediate survival)
Active VS Passive: seek participation in com’s activity VS do not seek participation on com’s policies making.
Voluntary VS involuntary: engage with org voluntarily (transferable) VS affected by com’s activity(non-transferable)
Legitimate VS illegitimate: Recognized by law VS unrecognized. Active economic relationship VS no possible cases to taking their views in action while taking decision.
Known VS Unknown: known by org by their claims. Unknown stakeholder claim.
Unitary Board
1 One single board
2 Ed’s + NED’s sit on a similar position.
3 Same responsibility and enjoy same rights
4 work for same objective
Advantage
1 close relationship between ED’s and NED’S
2 both work for a same goal
3 Effective communications between Directors
4 Information flow
5 diversified knowledge and experience
Rights of Directors:
1 Full and unrestricted access to any info that relate to the company
2 Right to indemnity from fallow director where there is an equal responsibility for breach of duty
3 Right to an induction program.
4 Access to an ongoing training and development program. Keep up to date.
Nomination Committee: Majority I.NEDs (The chairman of the board can be the chairman of the committee)
Promote Meritocracy in the requirement of the board, should not practice cronyism
Role:
1 Composition of the board, Balance board, equal NEDs and EDs or more NEDs than EDs
2 Consider skill, experience, knowledge, experience of current and prospective EDs in relation for future needs.
3 Make and review succession plan for EDs
4 Recruitment, removal, training
5 Equitable Performance, evaluate board performance at least once a year.
The Board role in Risk management, Role of NED’s, Chairman, ED’s in Risk management:
1 Identify the nature and extent of the risk facing by com.
2 The extent and categories of risk it regards as acceptable for the company to bear (risk apatite)
3 The likelihood of risk concern materializing.
4 Assess the com’s ability to reduce the likelihood and impact of the risk that do materializing.
5 Cost benefit Analyzing to mitigate the risk.
On Report
1 Regularly receives and reviews on IC system
2 Undertake an annual assessment for the purpose of making its statement on IC.
Role of Management:
1 Implement board policies on Risk and Control
2 Identify and evaluate the risk
3 Ensure effective communication process by regular reporting to the board about Risk.
The Board role in internal control , Role of NED’s, Chairman, ED’s in internal control:
1 Establish sound IC system to safe guarded com’s assets SH interest
2 Establish A. COM to review the prep of financial statement and reporting
3 Establish sound control environment
4 Publish com’s IC report in the com’s Annual report
5 Review the com’s IC system (3 E’s) robustness.
2 CONVENTIONAL:
Relativism. Concern about peer group and society.
Follow your peers: Developed behavior pattern based on family, friends, work colleagues etc.
Follow Society: expand into “norm” for society as a whole. Do not do anything which harm to society
3 POST CONVENTIONAL: they think their own sets of values are more superior so they want change.
Individual Rights: not satisfied with existing law, Challenge social norm, wanted to change in democratic manner.
Universal principles:Their challenge is very high, do not mind to create chaos in society, harm others, and regard the chaos as a price to pay to effect the change.
Ethics of rights and Justice: Rights of moral claim by human: Respected, rights of life freedom, property.
Justice:Respect equally and fairly. Fair treatment of individual in a given situation with a result that everybody gets what they deserved.