BOARD OF DIRECTORS, STRUCTURES AND FUNCTIONS 1

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BOARD OF DIRECTORS, STRUCTURES AND FUNCTIONS:

BOARD OF DIRECTORS, STRUCTURES AND FUNCTIONS PRESENTED BY- SAUMYA CHANDRA

WHAT IS CORPORATE GOVERNANCE?:

WHAT IS CORPORATE GOVERNANCE? Corporate Governance refers to the structures and processes for the efficient & proper direction & control of companies (both private and public) in the interest of all stakeholders .

WHY CORPORATE GOVERNANCE MATTERS:

WHY CORPORATE GOVERNANCE MATTERS Enhances performance of companies Enhances access to capital Enhances long term prosperity. Provides a barrier to corrupt dealings- limiting discretionary decision making, increasing oversight, introducing Codes of Ethics etc Impacts on the society as a whole: Better companies, Better societies .

BOARD OF DIRECTORS:

BOARD OF DIRECTORS A legal body of appointed members who join hands to supervise the activities of an organization is termed as board of directors. They carry different names in different areas like board of managers, board of regents, board of trustees, board of governors’ etc. Mostly it is simply termed as the board. The major shareholders and stakeholders comprise the board.

BOARD OF DIRECTORS CORPORATE HIERARCHY:

BOARD OF DIRECTORS CORPORATE HIERARCHY

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CHAIRMAN The highest officer rank in the board director corporate hierarchy is chairman .  The chairman leads and influences the board of the directors and chief officers to manage the financial, human, technical and environmental working of a corporation. A chairman is appointed by the mutual consent of the members of the board or he is the person with maximum shares of the company.

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EXECUTIVE DIRECTORS(ED) These directors are also referred as Inside directors, the professionals responsible to develop, design and implement strategies and plans for the company in a time efficient and cost effective environment. They are affiliated to company by any mean and handling the day to day operation of the company, managing staff and committees, developing and enhancing business plans with other board members for the future growth of the company. They are the shareholders of the company.  

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NON-EXECUTIVE DIRECTORS(NED) A non-executive director is also referred as an Outside director, a member of the board of directors in the company but not a part of the company’s executive management team. He is neither an employee of the company nor associated with the company in any other way. They may or may not possess shares of the company but contribute efficiently to the constructive development of the strategy for the company’s benefit. They provide an independent view on standards of conduct and resources of the company.

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CHIEF EXECUTIVE OFFICERS(CEO) The CEO is also referred as an executive chairman and takes the command in hand in absence of the chairman. Some corporate allow CEO to be a part of board member meetings while some not. Sometimes a CEO himself is a board director acquiring this position by the board director’s votes and mutual consent or if he possesses some shares of the company. This is the highest rank in the management of the organization.

BOARD MODELS:

BOARD MODELS

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One-Tier Board Model - consists of both inside (executive) directors and outside (nonexecutive) directors. Inside directors are perceived as the decision managers and outside directors are assumed to have the power and duty to monitor those decisions. Two-Tier Board Model - The two-tier board system, consisting of a supervisory board and a management board, better known as the German board model, establishes different authorities and responsibilities for members of each board. Modern Board Model - the structure of the modern board based on the two components of strategic board and oversight board is the natural offshoot of the emerging corporate governance reforms.

BOARD SELECTION:

BOARD SELECTION Traditionally Have been using a plural voting system to elect corporate directors. It has been argued that a plurality vote system gives too much power to executive directors and management to influence the election of outside directors. Now There have been moves toward requiring majority vote election procedures for corporate directors. For example, the California Public Employees’ Retirement System (CalPERs) board adopted a three-pronged plan to advocate majority vote requirements.

ROLES AND RESPONSIBILITIES OF BOARD OF DIRECTORS:

ROLES AND RESPONSIBILITIES OF BOARD OF DIRECTORS Represent shareholders and create shareholder value. Align the interests of management with those of shareholders while protecting the interests of other stakeholders (customers, creditors, suppliers). Define the company’s mission and goals. Establish or approve strategic plans and decisions to achieve these goals. Appoint senior executives to manage the company in accordance with the established strategies, plans, policies, and procedures. Oversee the company’s performance by setting objectives, establishing short-term and long-term strategies to achieve these objectives, and assessing the performance of senior executives in fulfilling their responsibilities without micromanaging. Approve major business transactions and corporate plans, decisions, and actions according to the bylaws. Develop and approve executive compensation, pension, post-retirement benefits plan, and other long-term benefits, including stock ownership and stock options.

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Review financial reports, including audited annual financial statements, quarterly reviewed financial statements, and other important financial disclosures such as management discussion and analysis (MD&A) earnings releases and reports filed with regulators (SEC) or disseminated to the public. Review management’s report on the effectiveness of internal control over financial reporting. Provide counsel to the company’s senior executives , especially the CEO, on material strategic decisions and risk management. Ensure the company’s compliance with applicable laws, rules, and regulations. Approve the company’s major operating, investing, and financial activities. Set the tone at the top by promoting legal and ethical conduct throughout the company.

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Evaluate the performance of the board, its committees (e.g., audit, compensation, and nominating), and the members of each committee. Hold the board, its committees, and directors accountable for the fulfillment of the assigned fiduciary duties and oversight functions. Approve dividends, financing, capital changes, and other extraordinary corporate matters. Oversee the sustainability of the company in creating long-term shareholder value and protecting interests of other stakeholders.

FIDUCIARY DUTIES OF BOARD OF DIRECTORS:

FIDUCIARY DUTIES OF BOARD OF DIRECTORS

CONCLUSION:

CONCLUSION Corporate governance best practices suggest that companies designate one director to take the lead at executive sessions that do not include management. Investors, in general, are in favor of the separation of the positions of the CEO and the chairperson of the board of directors. The business judgment rule provides directors with broad discretion to make good faith business decisions and implies that directors, when making business decisions, must be reasonably informed. To be independent, a director should not have any other relationships with the company other than his or her directorship that may compromise the director’s objectivity and loyalty to the company’s shareholders.

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THANK YOU…. !!!!

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