The World without Bankruptcy Laws
Bankruptcy is one of the natural states which a company may find itself in. Entrepreneurship is primarily about taking risks. When companies take risks, some of them succeed, whereas others fail. Hence failure is a natural part of the business. However, many critics of bankruptcy laws believe that there isn’t a need for an elaborate […]
The Wirecard and Infosys Scandals are a Lesson on How NOT to Treat Whistleblowers
What is the Wirecard Scandal all about and Why it is a Wakeup Call for Whistleblowers Anyone who has been following financial and business news over the last couple of years would have heard about Wirecard, the embattled German payments firm that had to file for bankruptcy after serious and humungous frauds were uncovered leading […]
Why the Digital Age Demands Decision Makers to be Like Elite Marines and Zen Monks
How Modern Decision Makers Have to Confront Present Shock and Information Overload We live in times when Information Overload is getting the better of cognitive abilities to absorb and process the needed data and information to make informed decisions. In addition, the Digital Age has also engendered the Present Shock of Virality and Instant Gratification […]
Why Indian Firms Must Strive for Strategic Autonomy in Their Geoeconomic Strategies
Geopolitics, Economics, and Geoeconomics In the evolving global trading and economic system, firms and corporates are impacted as much by the economic policies of nations as they are by the geopolitical and foreign policies. In other words, any global firm wishing to do business in the international sphere has to be cognizant of both the […]
Why Government Should Not Invest Public Money in Sports Stadiums Used by Professional Franchises
In the previous article, we have already come across some of the reasons why the government should not encourage funding of stadiums that are to be used by private franchises. We have already seen that the entire mechanism of government funding ends up being a regressive tax on the citizens of a particular city who […]
Any public limited or private company needs to have a board of directors constituted for the purpose of oversight and accountability to the company. The concept of the board of directors is that it provides an umbrella for the company to operate in and ensures that the decisions and actions taken by its management are reviewed and held to the mirror.
The reason for the existence of the board of directors is that there needs to be a body that is above the management and which can be accountable to the regulators and shareholders for the decisions taken by the management of the company.
Hence, it is common to find many members of the management sitting on the board as executive directors. Again, it is for this very purpose that the regulators deem the company to have a certain percentage of directors in the non-executive capacity and those who are independent.
In recent years, the concept of the board has become crucial for corporate governance because of the incidence of several corporate scandals involving unethical conduct by the management.
In some of these cases like the Enron scandal and the Satyam scandal in India, the board was found to have played a major role in facilitating the scandal. This has led to the regulators asking for greater oversight from the board and to make the board accountable to its shareholders.
Of course, there are many instances that prove the contrary where the board has stepped in to stem the rot that the management has through its actions engendered. Prominent among these are the actions of Reebok in recent months where the board asked the top leadership to resign in the wake of corporate scandals involving them.
The concept of the board has been introduced explicitly to ensure that ethical and normative rules of conduct of corporate governance are followed.
The point here is that since the buck stops with the board of directors, shareholders and regulators know who to turn to in case they have queries or doubts about the decisions taken by the company. In many cases, the board of directors acts as the ombudsman as well for shareholder complaints and grievance redressal.
Further, the board of directors is comprised of individuals with exemplary records of managing companies and hence it is expected that the board of directors would provide technical and managerial guidance to the way in which the company is run.
Finally, the concept of the board of directors is also important for the way in which it is deemed to play a pivotal role in providing good corporate governance. In most cases, the way in which the company is governed depends on the way in which the board directs the management in its operation of the company. This is relevant to the contemporary times where the managerial class has been found to enrich itself at the expense of the company and its shareholders.
It is for this reason that the board of directors is expected to steer the company away from agency problems, conflicts of interest and asymmetries of information in the way shareholders are briefed about the decisions taken by the company.
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Why Indian Firms Must Strive for Strategic Autonomy in Their Geoeconomic Strategies
February 7, 2025
The Wirecard and Infosys Scandals are a Lesson on How NOT to Treat Whistleblowers
February 7, 2025
Post Product Launch
February 7, 2025
