Corporate Governance
What is the board of directors?
- "The board acts as a fulcrum between the owners and the controllers of a corporation. They are the middlemen (and a few middle‐women) who provide balance and mediate the conflicts of interest between (...) the small powerful group that runs the company, and a huge, diffuse, and relatively powerless group that simply wishes to see the company run well" (Monks &Minow, 2008: 224) - The board is a crucial part of the corporate structure that joints representatives of powerful external actors and powerful internal actors within the board the executive power and the influence power are put together -"Put together a group of strong‐minded people. Arrange for them to meet six times a year. Have ambiguous performance targets for them. Recruit a number of outsiders ‐ sometimes with limited knowledge of the industry or the company ‐ into the group. Would they function as a team? We doubt it. Yet, this is how we organise corporate boards. They are brought together half a dozen times annually, with vague ‐ sometimes non‐existent - performance objectives and expected to provide decisive leadership and deliver corporate performance to increasingly exacting governance standards.
CG actors are
- Internal actors: Those who make decisions - execution power (managers, some employees) - External actors: Those who influence the decision making process - influence power (owner, customers, regulators) - The members of the board (directors)
What tells CG us?
- Who are the relevant ones in a company´s life - What is considered as relevant for the company´s servival
"The company is more than its shareholders, and the board must think holistically"
. In both cases, other stakeholders were referred to rather than shareholders. "Who or what really counts" was a main question in both cases along with the claim that the shareholders did not necessarily work in the company's best interest. The objective of this paper is to explore stakeholder expectations, the "who and what really counts" question, in relation to boards of directors
What is a board of director?
A board of directors is a group of individuals that are elected as, or elected to act as, representatives of the stockholders to establish corporate management related policies and to make decisions on major company issues. Every public company must have a board of directors. Some private and nonprofit companies have a board of directors as well.
What is a stockholder
A shareholder is any person, company or other institution that owns at least one share of a company's stock. Because shareholders are a company's owners, they reap the benefits of the company's successes in the form of increased stock valuation. If the company does poorly, however, shareholders can lose money if the price of its stock declines. Det är shareholder som röstar in board of directors. Directors behöver inte äga share, om de inte äger share så kallas de independet directors. Directors are member of the board. Vanligtvis är CEO:n också en medeldem i the board och kanske då "stolmannen"
CG actor and stakeholder are not synonyms
CG actors can influence the company strategic decisions - via proxy and/or execution - while stakeholders do not always have that power
CG
CG deals with "the ways in which suppliers of finance to corporation assure themselves of getting a return on their investment" (Shleifer and Vishny, 1997) • CG is "the process by which corporations are made responsive to rights and wishes of stakeholders" (Demb and Neubauer, 1992) • CG is the interactions between various internal and external actors and the board members in directing the firm for value creation (Huse, 2007) • CG is a system by which companies are strategically directed, integrativelly managed and holistically controlled in an entrepreneurial and ethical way and in a manner appropriate to each particular context" (Hilb, 2012)
What remind CG us?
CG reminds us that the meaning of a company's ownership goes much beyond the purely financial property. Stockholders own shares but their ownership rights cannot be exerted on the company's assets
What is the difference between a shareholder and a stakeholder?
Shareholders are stakeholders in a corporation, but stakeholders are not always shareholders. A shareholder owns part of a company through stock ownership, while a stakeholder is interested in the performance of a company for reasons other than just stock appreciation. Stakeholders could be: employees who, without the company, would not have jobs bondholders who would like a solid performance from the company and, therefore, a reduced risk of default customers who may rely on the company to provide a particular good or service suppliers who may rely on the company to provide a consistent revenue stream
"The largest owners are not wanted on the board"
The board of Storebrand, a large Scandinavian insurance company argued this point when it claimed that the two largest owners of the company would not act in the company's best interest, and thus were not wanted as board members? The arguments from the board chairman of Fokus Bank in Norway were similar when defending his actions and attitudes against a takeover.
What should the board of directors do?
They should take the best decision for the shareholders. Sometimes can the shareholders sue board of directors because they dont think that the board of directors are doing the best for them. Important to know, you could be a shareholder when you are a board of director.
