Essay: Role of board of directors in corporate governance

19 Oct

Essay: Role of board of directors in corporate governance

Sample Essay

The board of directors most of the time plays a very important role in the corporate governance because it is their responsibility to accept the company’s strategy, chart the directional policy, hire, supervise and also remuneration of the top management as well as ensuring accountability of the company to its owners as well as the authorities. A company secretary usually is that very highly trained person whose training is on upholding the highest corporate governance standards possible to ensure stringent operations, administration, as well as compliance. The corporate governance has several commonly accepted principles. These principles include the rights and equitable treatment to all the shareholders and help them to exercise those rights (Clarke  2004).

This is done for example by helping and encouraging these shareholders to participate in those meetings. Another important principle is taking care of the interests of all the other legitimate stakeholders to ensure that they are not affected negatively by various business operations (Claessens 2000). The board of directors should be composed of people with the right skills and business understanding in order to deal with various business issues and hence possess the ability for reviewing and challenging the management performance (Cadbury 1992). Another principle of corporate governance is the one about integrity and ethical behavior whose importance is not only as a matter of public relations but it also helps in risk reduction and the avoidance of conflicts and lawsuits (Sapovadia 2007). Transparency and disclosure entails the fact that companies should have in the public domain responsibilities and roles of the management and the board in order to provide the company owners with a level of accountability (Feltus et al 2009).

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