Board of Directors Continuum (degree of involvement)
-Phantom: confused, no involvement
-Rubber stamp: conforming min. sign papers
-Minimal review: signs what is brought to them
-Normal partic: ltd degree of involvement
-Active: moreee activeee
-Catalyst: leading role of committee
Function of the Board
They monitor & advise
-hire & compensate CEO
-Approve proposals, decisions
-ensure activities of firm is reported to stakeholders
-offers expert advice to mgt
Fidiciary Duty - Boards
to act in the best interest of the corporation
(must disclose conflict fully & solve it)
Diff standards of best interest US vs Canada
US: corporate law is set at state level
Cad: - Fiduciary duty req. directors to act in best interests
-Judicially interpreted - consider shareholder interests but may consider stakeholders
Board Stat
Avg size - 11 directors
Avg age - 63 yrs
85% are indpendent
avg size and age
11 directors & 63 yrs old
lvl of independency & CEO chair
85% are indep. , 47% have a CEO who is a chair
median compensation, monthly hours spent, meeting times ?
203,031, 20 hrs/mth, 8 times a yr for 7 hr meet.
Chairman duties
-leader of the board
-in charge for board agenda & plan
-principal link between board & CEO mgt team
-
Board is made up of
-Insiders: exec of corp
-Outsiders: exec of other corp, professional directors, retired CEO, lawyers, academia
-Affiliated: banks, investors
-Employees: in Germany labour rep is to be on supervisory board.
Pros & Cons of separating CEO/Chair positions
-Pros
clear separation of responsibility, clear authority to one director, more time for CEO to focus on strategy, good when a coy has a new CEO
-Cons
artificial separation, difficult to recruit new CEO, duplication of leadership, leads to inefficient decision making
Pros & Cons of Active CEOs as directors
-Pros
Experienced, sharp skills, stock mkt responds well to appointment of CEO, can build trust with CEO, not dep. on board for income
-Cons
busy hence low quality of governance, bossy; bad listener, poor collaborators, can’t attend meetings on short notice, leads to higher CEO salary (conflict of interest)
Pros & Cons of Retired CEO
-Pros
experienced, more time on their hands
-Cons
network and skills not as fresh, lack of up to date mkt landscape.
Pros & Cons of Professional Directors
-Pros
more time, vast network, experienced
-cons
dependence on board for income/prestige, may be serving on multiple boards hence busy
Other sub committees of Board
Executive, finance, community relations, corporate governance, stock options, risk and investment committee
Audit, Compensation, nomination committee
financial reporting, internal audit
sets compensation of the CEO focus on CEO
Identifying & hiring qualified indiv. to serve.
Models of Corporate Governance
-Shareholders primacy- shareholders interest should be 1st priority. court says consider interests of non shareholders but don’t compromise shareholders e.g US
-Stakeholders- owes responsibility to wider group & rights (Shareholders, employees, vendors, customers, society)
