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Corporate Governance – Questions

In: Business and Management

Submitted By samioa
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1. When does a corporation need a board of directors?
A board of directors (BOD) is very critical for a corporation that would need to:
• Establish a corporate governance structure that will regulate the relationship between its BOD, top management and shareholders which would lead to a better control over its strategic direction and short-term and long-term performance.
• Have a higher management team that shall act as an advisory and governing team over CEO and his management team which will help to protect the shareholders’ interests, prevent conflict of interests and manage risks as well as protecting the corporation’s image and integrity in front of other stakeholders such as creditors, investors and the country’s government.

2. Who should and should not serve on a board of directors?

Obviously, there is no one definite answer to this generic question as it depends on the nature and size of company’s business, whether it is public-sector or private-sector corporation, country’s laws and regulations and other factors. Generally, there has to be a balance between inside and outside directors that could come from external stakeholders, and also affiliated directors as well as experienced and retired executives. At the same time, there should not be large number of directors that could affect negatively BOD meetings progress and outcomes.

3. Should a CEO be allowed to serve on another company’s board of directors?
This is the concept of interlocking directors who could serve on other company’s BOD’s in addition to being a CEO for their original companies. The concept has some advantages of gaining useful information and expertise that could help in managing better the corporation strategies and operational plans as well as establishing strong relations with other corporation’s executives. However, serving on other BOD’s should not make the CEO spend…...

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