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MASTERS IN BUSINESS ADMINISTRATION

CORPORATE GOVERNANCE AND SOCIAL


RESPONSIBILITY
(MPCS7103)
GROUP ASSIGNMENT 2
FUNCTIONS OF THE BOARD
PREPARED FOR
DR AHMAD BUDIMAN BIN HJ HUSAIN
PREPARED BY
1. Janagee Manikem / 201711040003

2. Theva Letchumanan / 201711040016

3. Theresa ann A/p v.r.birch / 201805040031

4. Remonica ann A/p v.r.birch / 201805040032

5. Sailejah Manikem / 201710040038

6. Nawen kumar rajan / 201709020019

SUBMISSION DATE
10 FEBRUARY 2022

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MPCS7103 – Group Assignment 2

You have to choose a topic related in Corporate Governance and Social


Responsibility according to syllabus (CANNOT BE SAME WITH OTHER
GROUP). Write a report by explain the topic according to:

1. Introduction
2. Definition (Conceptual and operational)
3. Content of topics
4. Problems or issues relating to the topic in term of Malaysia and global
contexts
5. Suggestion to handle the problems/ issues (with significant examples)
6. Summary of the topic
7. References

INSTRUCTIONS/WRITING FORMAT;

1. This assignment is to be completed in GROUP.


2. Essay form. This assignment must be TYPE. Use WORD.
3. Times New Roman/Arial . Font 12
4. A4 paper. About 13 pages.
5. Margin: Left 1” Right 1” Top 1” & Bottom 1”
6. Spacing between sentences 1.5
7. Reference in any recognized format. (APA, Harvard etc.)
8. NO PLAGIARISM.
9. Dateline 10.02.2022
10. Please instead of sending back by LMS, also e-mail the completed
assignment to me at: drbudiman@city.edu.my

REMINDER : TOTAL MARKS 30% will be given upon completion


and submission. 1% per day will be deducted for the
late submission after due date.

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TABLE OF CONTENTS

Contents Page

FRONT PAGE 1-2

TABLE OF CONTENTS 3

INTRODUCTION 4

DEFINITION 5-7

CONTENT OF TOPICS
8-9

PROBLEMS OR ISSUES RELATING TO THE TOPIC


10-13

SUGGESTION TO HANDLE THE PROBLEMS AND ISSUES


14-17

SUMMARY OF THE TOPIC


18-20

REFERENCES
21

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INTRODUCTION

The board of directors often referred to as "the board" is an executive committee which
monitors these same activities of the business, a non-profit organization, or a
government agency. Government legislation and the organization's own bylaws and
regulations control a board of directors' powers, tasks, and obligations. The number of
members of the board, how they will be elected, and how often they will meet may be
specified by these authorities. In an organization with voting members, the board is
responsible and may be subordinate to the full members of the organization, who
generally elect board members. In a public limited company, the non-executive
directors are elected by the shareholders, and the board of directors has final
responsibility for the management of the company.

The board of directors appoints the CEO of the corporation and establishes the overall
strategic direction. In corporations with scattered ownership, the identification and
appointment of directors (which shareholders vote for or against) are often made by the
board itself, leading to a high degree of self-perpetuation. In a public limited company
with no general participation with voting rights the board is the supreme governing
body of the institution and its members are sometimes elected by the board itself.

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DEFINITION

The function of the Board is to offer leadership to the company and to deliver
shareholder value over time. The Board establishes the company's principles and
standards ensuring that they are consistent with the company's strategic goals and
intended business culture. The management as well ensures the company obligations to
its shareholders and other stakeholders including colleagues, suppliers, customers and
the environment in which the firm operates are understood.

The Board has total control over the management and governance of a team and its
operations, to provide entrepreneurship within a control framework. It is in charge of
approving the group's strategic goals and ensure that the appropriate human and
financial resources are in place to achieve them. The Board's risk management and
internal control mechanisms are also reviewed on a regular basis by the audit
committee.

The company has designed a governance structure that allows the Board of Directors to
concentrate on the major roles and responsibilities that affect the company's long-term
success:

• Board of directors
• Audit Committee
• Nomination Committee
• Remuneration Committee
• Group Chief Executive
• Executive Management Team
• Management Committees

Regular Board and Committee meetings are held every year, and the Directors ensure
that they have enough time to successfully carry out their responsibilities. When
Board-level decisions of a time-sensitive nature must be made, Board meetings may be
called on short notice.

The Board maintains and annually reviews a schedule of matters reserved for its
decision which include but are not limited.

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The functions of Chairman and Chief Executive of the Group are exercised by separate
persons and have clearly defined responsibilities. The division of responsibilities
between the Chairman, the Executive Director of the Group, the Independent Chief
Executive Officer and the Non-Executive Directors is established in writing and is
periodically reviewed by the Governing Council.

Chair

• Leads the Board and sets the tone and agenda, promoting a culture of openness
and debate
• Ensures Board effectiveness and that Directors receive accurate, timely and
clear information
• Ensures effective communication with Shareholders
• It acts on the results of the Board performance evaluation and leads the
implementation of necessary changes
• As Chair of the Nominating Committee, he leads the consideration of any
changes to the Board of Directors
• Holds regular meetings with Non-Executive Directors without the presence of
Executive Directors

Group Executive Director

• He runs the Company and is in direct charge of the Group Day by day
• Responsible to the Board of Directors for the Group's operational performance
• Responsible for implementing the Company's strategy, including driving
performance and optimizing Group resources
• Primary responsibility for managing the Group's risk profile, identifying and
executing new business opportunities, developing management and
remuneration

Group Finance Director

• Responsible to the Board of Directors for the financial performance of the


Group
• Responsible for raising the necessary funds to finance the Group's strategy,
servicing the Group's funding and maintaining compliance with its agreements

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• Maintains a financial control environment capable of providing sound financial
information to indicate the financial position of the Group
• Directs Finance functions and has daily responsibility for Finance, Tax,
Treasury and Internal Audit
• Chairs key internal committees, such as the Risk Committee and the Treasury
Committee

Senior Independent Director

• Available to meet with shareholders on request


• Ensures that the Board is aware of any concerns from shareholders
• Help when shareholder issues are not resolved through existing mechanisms for
investor communications
• Acts as a sounding board for the President and, where appropriate, serves as an
intermediary for the other Directors
• Leads the annual performance evaluation of the Chair

Company secretary

• Responsible for advising the Board, through the President, on all governance
issues
• All Directors have access to the advice and service of the Company Secretary

Non-Executive Directors

• Constructively challenge and help develop strategy proposals


• Review the performance of the Executive Management Team in meeting agreed
goals and objectives
• Monitor performance reports
• Ensure the integrity of financial information
• Ensure that financial controls and risk management systems are robust and
defensible
• Play a leading role in succession planning and the appointment and, where
necessary, dismissal of executive directors
• Meet without the presence of Executive Directors
• Attend meetings with key stakeholders to discuss governance and strategy.

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CONTENT OF TOPICS

• The structure and composition of the board


The cornerstone for effective and efficient governance is a streamlined board and
committee structure with clear delegations of authority. The competence, diversity, and
community representation of your trustees can all be improved with a well-functioning
organization in place.

• Leadership
The choice of a board chair is one of the most important decisions a board and CEO can
make. A thorough understanding of the company, a desire to devote significant time
and effort, and the capacity to lead in both crisis and calm situations are more vital than
ever.

• Responsibilities and roles


For high-functioning boards and leadership teams, distinguishing between the duties of
management and the governing body is critical. Fiduciary and strategic oversight, as
well as operational management, are all balanced by clearly defined roles.

• Relationships
High-performing governance necessitates time and intentionality, as well as a
trustworthy and honest relationship between the board and senior management team.

• Development of the board of directors


The majority of trustees join the board without having a thorough understanding of the
industry or the company. Management teams must ensure that all members have access
to the knowledge and resources they need to carry out their fiduciary responsibilities
successfully. Trustees, on the other hand, have a responsibility to participate in growth
opportunities and to seek additional information or clarity as needed.

• Optimization of meetings
Time is a valuable commodity for volunteer board members, and it must be used wisely
to optimize board and committee meetings. This will necessitate the management
team's as well as the trustees' attention and work.

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Support that is strong. Investing in backstage support is critical for the other six factors
of board effectiveness to succeed. Strong administrative support and well-defined
protocols are essential for high-functioning boards.

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PROBLEMS OR ISSUES RELATING TO THE TOPIC

The number of training programmers, consulting practices, research studies, and


guidebooks focused at improving the performance of nonprofit boards has significantly
expanded in recent years. Despite this, many individuals feel that poor board
performance is the norm rather than the exception. According to the authors, there are
three most typical board-performance concerns. First, dysfunctional group dynamics
inhibit collective debate and decision-making. These include rivalries, a few's
domination over the many, and so on. Second, many board members are disinterested
and uninformed about what is going on in their organization.

Finally, and perhaps most crucially, the roles and obligations of board members are
usually unclear. The board's five main responsibilities should be to establish the
organization's mission and overall strategy, as well as to modify both as needed monitor
management and hold it accountable for performance select, support, evaluate, and, if
necessary, replace the executive director or CEO develop and conserve the
organization's resources and finally, advocate for the organization and build
community support.

• Talent Alignment: Close the gaps between strategy and talent


Because of the quick pace of change and the changing nature of trade, as our
society potentially evolves from an exchange of products to a thinking
interchange, this is a major topic. Any transformational breakthrough usually
takes a long time to take hold, but once it does, it tends to grow exponentially. In
order to anticipate adequately, boards must be able to see around hairpin corners
and fly at a high enough level. Boards must take a new approach and think with
a new level of expansiveness, involvement, and opportunity creation. It's no
longer adequate for boards to evaluate solely on what's going on right now;
those outcomes take years to develop. It's not just about spotting issues; it's also
about raising awareness. Boards must ask the correct questions not just
regulatory ones to aid in leadership development. Boards must look at the world
through a prism that the CEO would not have full access to if it were not for the
directors.

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• Information Overload: Everyone has information, learn how to connect
the dots better
Businesses used to pay a lot of money to get access to information. That has
significantly decreased. The key questions now are: What does the data say?
What does this imply? And how do we put it to use? Businesses as a whole are
evolving. The boards must change. What boards must do is take on a new level
of leadership, anticipating what will produce value, how that will influence the
business, and determining if the necessary leadership is in place to make those
critical day-to-day operational decisions. Future boards must have a new
perspective on the future and think with a different level of expansiveness,
involvement, and opportunity creation.
It ultimately comes down to talent and succession, which are inextricably
linked. Talent begins at the top and works its way down to the lowest levels of
the organization. To properly foresee all of these difficulties, different types of
thinking will be required in the boardroom. The need for diversity in the
boardroom to do that successfully and foresee things has never been greater, not
because it's a noble cause, but because it will need quick thinking and a wide
range of perspectives to do so.
• Risk Management: Figure out what’s an opportunity and what’s a threat
The distinctions between competing markets have never been blurrier in today's
global and active economy. Is Amazon, for example, a consumer brand because
it offers everything from groceries to garage door openers? Or is it a
technological firm, given that it owns and operates the legions of computer
servers that enable e-commerce, both its own and that of others? With so much
overlap, it's impossible for board members to tell whether the interruptions are
helping or hindering the organization's progress.
• Handling individual director performance issues
Enhance the process of evaluating directors. Members believed that making the
yearly director review more robust would aid in the early detection of
performance difficulties. Directors noted that having a strong, candid process
requires confidentiality, and that having outside counsel oversee the evaluation
process would strengthen the processes confidentially. In addition to the yearly
evaluation, do regular assessments throughout the year. Boards often take too

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long to respond to signals of underperformance by directors, which some
directors believe is due in part to an overreliance on the yearly assessment
process. Outside of the review process, directors suggested offering regular
feedback to identify and solve performance concerns more rapidly.
• Corporate Governance Risks in Subsidiaries
The Enron incident, one of the most well-known examples of corporate
governance failure, demonstrated how a lack of sufficient compliance
inspections in subsidiaries can spell doom for a large corporation and a
well-known audit firm. Today's issues in corporate governance include strong
corporate governance processes and policies for subsidiaries. The operations of
subsidiaries can have a direct impact on the parent company's reputation, which
does not have as much visibility into the subsidiaries' activities as it would want.
Mitigation: The board of directors faces issues that can be addressed by a good
risk management approach that allows management to continuously detect,
assess, and manage risks. Dynamic risk management software is an effective
tool in many organizations for detecting and eliminating various types of
irregularities before they cause long-term damage. Start using Risk Oversight
right away.
• Shareholder activism
The danger of shareholder activism puts pressure on board members to be
responsive to their shareholders' needs. The board should be well-versed to
effectively handle activist requests. Activist shareholders will not always be
correct in their demands, but they will not always be incorrect. As a result, while
dealing with shareholder activism, board members will have to rely on their
own judgement and expertise of the company. Board members should be aware
of the risk factors that make companies more vulnerable to activist shareholders
and be prepared to defend against them if necessary. If, for example, a
shareholder launched a vote no campaign, the board may be asked to interact
with investors and major stakeholders.
• Managing board-CEO communication
The board of directors has a complicated relationship with the company they
govern. Although board members lack the consistent information required to
actively lead the business, they must still demonstrate leadership and be willing

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to make major decisions about the company, such as whether the CEO is
performing well or whether the business is performing for its stakeholders, and
provide guidance based on those decisions. Small difficulties that may have
been prevented with board advice can readily snowball and become big
impediments over time if supervision is too low. The board should
communicate with the CEO and other senior personnel on a frequent basis to
provide the best possible counsel. The board should be willing to do more than
just give mild monitoring and should ideally provide guidance or push back on
CEO decisions if they believe the company isn't performing well for
stakeholders.
• Guiding business communication
The board is a key element in a company's communication strategy the tone and
style of an organization always comes from the top. As a result, the board
needs to fully understand the company's mission and goals so they can properly
guide management on how the business should communicate. A lack of board
supervision might lead to muddled or contradictory brand communication.
Board members can help guarantee that the organization is able to communicate
effectively and consistently in this area. Board members should also be aware of
some of the most typical board communication blunders that might derail a
company's communication strategy.
• Following board duties
This is one area where nonprofit and for-profit boards differ slightly. While
most company boards believe they are bound by two primary duties: care and
loyalty, nonprofit boards are frequently believed to be bound by a third:
obedience. This responsibility requires board members to ensure that the
nonprofit complies with all applicable laws and regulations, as well as the
organization's bylaws, and to look for ways to use their resources, insight, and
connections to help the nonprofit achieve its objective.

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SUGGESTION TO HANDLE THE PROBLEMS AND ISSUES

A board has little hope of providing effective governance, let alone visionary and
strategic leadership, if it’s still held back by some basic sources of dysfunction. The key
to overcoming dysfunction and optimizing function is to first identify the source of the
challenge. Most of the resources on improving board effectiveness tend to focus solely
on the structural aspect of governance policies, procedures, Roberts Rules of Order,
bylaws, statute, fiduciary duty, etc. for overcoming dysfunction. But it’s the human
element that’s the real challenge. How well board members play in the sandbox
together is far more important than processes, policies and procedures which are often
completely ignored in the heat of battle.

The key to overcoming dysfunction and optimizing function is to first identify the
source of the challenge. Functional challenges fall into three main categories which
often work in combination with each other. There are key strategies, each different, for
addressing the three categories of dysfunction:

1. Individual challenges > address the individual’s behavior directly


2. Structural challenges > put the needed structures/policies/processes in place
3. Cultural challenges > adopt group expectations and norms of engagement

In reality, most board challenges contain elements of all three categories. All three may
be and usually are present, reinforcing each other. The key to solving the challenge is
identifying the primary category driving the dysfunction and address it first. Here are
examples with all three elements present, with the primary driver listed first:

i. Individual: A single divisive individual joining an otherwise united board might


create a factional cultural dynamic in response to the individual’s behavior. The
board might also have inadequate structural mechanisms in place to address such
behavior written policies, procedures, norms of engagement due to a history of
harmony and perceived lack of need.
ii. Cultural: A board with a “shiny object” culture (i.e., they pursue all “good idea”
board members suggest) might follow a charismatic individual’s personal agenda,
which is not aligned with the organization’s mission. Further, no structure exists
such as a Strategic Plan to help prevent such distractions.

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iii. Structural: A board with a constituency-based structure (i.e., fixed geographic or
special interest representation), might evolve a divided/parochial culture in which
an individual board member believes their fiduciary responsibility is to the
constituency they represent and not to the organization as a whole, lobbying for
disproportionate resources and special attention.
In the first example, if the board addressed the divisive individual’s behavior
directly, the need to address the cultural and structural dynamics arising in
response to the behavior might be mitigated or eliminated.
In the second example, if the board came to a group agreement to adopt a
mission-driven, strategy-focused culture, followed by adopting a Strategic Plan, it
would improve its ability to say “no” to an individual’s personal agenda that
doesn’t fit the mission/strategic focus.
In the final example, if the board were to adopt a competency-based selection
process vs. fixed constituency-based representation, the confusion over who board
members represent a constituency vs. the organization as a whole could be
eliminated.

A board of directors' powers and structure differ depending on the organization.


The bylaws of a firm establish the specifics. The rules govern topics such as how
often the board meets, how many members must be on the board at any given time,
and how new board members are elected. The size of the board of directors is
determined by the company's demands. Most boards, however, have three to 31
members. To avoid a tie vote, an odd number is recommended. Many experts
believe that a board of seven members is the perfect size. With external and
internal members, the directors should reflect the interests of both the shareholders
and management, regardless of the number.

Election & Dismissal

Board participants are normally elected through the business enterprise's shareholders
at the annual shareholders' meeting. Nominations are voted on through a unique
nomination committee created through impartial outdoor directors. Boards normally
attempt to stagger director phrases to limit the variety of elections in a year. Board
participants may be eliminated or fired however it's far discouraged. Many in their

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contracts encompass what is called a “golden parachute clause” that calls for the
business enterprise to pay the director an advantage if they're eliminated from their
position. Some forums element fitness-to-serve protocols of their bylaws and
foundational regulations which can result in a director's expulsion if broken.

Types of Board Members

Outside Directors: These contributors are anticipated to convey an unbiased view to


enterprise issues. They aren't concerned withinside the enterprise’s each day
operations. Outside administrators are regularly selected for his or her understanding in
related enterprise fields. Since they're now no longer an enterprise employee, they get
hold of repayment or pay to wait for meetings.

Inside Directors: Inside administrators are enterprise personnel whose enjoy brings
price to the board. They aren't compensated due to the fact they're regularly already a
C-degree executive, primary shareholder or a union representative.

Organizing the Board

Most powerful forums get their paintings accomplished via committees that document
to the whole board. Setting up a small organization of administrators selected for his or
her applicable knowledge has tested to be a powerful manner to look at complicated
issues. Audit, compensation, and nominating committees so as in their current upward
thrust to prominence overshadow the older govt committee whose characteristic tended
to turn out to be that of the complete board. None of those more recent committees is
designed to look at useful resource allocation. This interest is the very essence of
manipulation over the company’s future. The formation of a company goals or
approach committee of the board is a crucial first circulate to contain the board
withinside the approach (application for the future) of the company. Such a committee
typically capabilities first-rate if its contributors are outside, impartial administrators,
and therefore freed from the emotional commitments which competing claimants for
scarce assets unavoidably develop.

Board Committees

Board committees in most CG codes

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•audit committee

•remuneration committee

•nomination committee

Other board committees for the oversight of management

•governance and compliance committee

•Corporate ethics committee

Committees to spread the work of the board

•executive committee finance committee

•strategic planning committee

•risk management committee

•ad hoc committees for specific issues or projects.

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SUMMARY OF THE TOPIC

The Board's Role

The Board of Directors (the "Board") is in charge of overseeing the administration of


the Group's business and affairs in order to maximize shareholder value and improve
corporate governance. The Board's role is to give strategic leadership to the Group and
effective management oversight.

Authority

To administer the Group's operations, the Board shall exercise all rights not otherwise
exclusively reserved for the shareholders.

The Board has the right to ask Management for adequate administrative support and to
have separate and independent access to senior management. The Board has the
authority to summon any member of the Group's management or any employee to a
meeting and to respond as quickly and completely as possible to any director's
questions.

The Board has the authority to conduct or direct any investigation necessary to carry
out its responsibilities, and it has the authority to retain, at the Group's expense, such
legal, accounting, or other advisers, consultants, or experts as it deems necessary from
time to time in the performance of its duties.

Membership

Non-executive Directors (including Independent Non-executive Directors) and


Executive Directors make up the Board. Three directors form a quorum for Board
meetings.

At least three Independent Non-Executive Directors, representing at least one-third of


the Board, and at least one Independent Nonexecutive Director with appropriate
professional qualifications, accounting or related financial management expertise, in
accordance with relevant regulatory requirements, shall be on the Board.

The Board will appoint the chairman of the Board, who will be responsible for
providing leadership to the Board and ensuring that it functions efficiently and

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effectively. The Chairman's and Chief Executive's functions must be distinct and not
shared.

The Nomination and Remuneration Committee recommends that directors be


appointed. Non-executive Directors are appointed for a definite period, but may be
re-elected in accordance with the Company's and Bank's Articles of Association, as
well as any regulatory requirements. Directors will be inducted and trained on a regular
basis at the Group's expense.

Directors must attend Meetings of the board and any Board Committees on which they
represent on a regular basis, actively voice their views on issues discussed at the
meetings, and stay informed about the Board's powers and tasks, as well as their own
responsibilities as directors, and the Group's conduct, commercial activities, and
innovation.

Committees of the Board

The Board may form committees as it sees fit to help it carry out its duties. The Board
must develop, accept, and implement guidelines and operating rules regulating the
purpose, roles and responsibilities, composition, power, and functioning of the
following Committees:

Strategy and Budget Committee, Audit Committee, Risk Committee, Nomination and
Remuneration Committee, and Audit Committee.

The Board should appoint a special committee, consisting solely of Independent


Non-Executive Directors, to analyses, approve, and supervise associated transactions in
accordance with applicable laws, rules, and regulations, including their reporting in the
income statement.

Management's Delegation

The Board delegated authority and power to the Chief Executive to conduct the Group's
day-to-day business and affairs, subject to the Board's specified delegations and
constraints from time to time. The Chief Executive has the authority to transfer
authority and power to management members as he or she sees fit.

Delegation from Management

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The Chief Executive was given authority and power by the Board to run the Group's
day-to-day operations, subject to the Board's specific delegations and limits from time
to time. The Chief Executive has the power to delegate authority and power to
management members as needed.

Meetings

The Board should meet at least six times per year. The meetings will be scheduled to
correspond with significant dates in the Group's financial reporting cycle and other
concerns, as needed.

Appraisal and Report of Annual Performance

On at least a yearly basis, the Board of directors shall review and evaluate its process
and performance with the support of the Nomination and Remuneration Committee.
From time to time, the Board will monitor and evaluate the adequacy of its Mandates.

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REFERENCES

1. https://www.albaraka.com/en/corporate-governance/the-board-of-directors/intr
oduction-to-the-board-of-directors#:~:text=The%20Board%20of%20Directors
%20(the,operational%20performance%20of%20the%20Group.
2. https://s24.q4cdn.com/628382107/files/doc_downloads/gov_docs/Governance
-Guidelines-as-of-November-4-2019.pdf
3. Khurana, R. (2002). Searching for a corporate savior: The irrational quest for
charismatic ceos. Princeton, N.J.: Princeton University Press.
4. Kayla Matthews - Owner of Productivity Bytes, Monday, March 16, 2020. 5
Challenges Among Board Directors and How to Overcome Them.
https://www.insightsforprofessionals.com/management/leadership/5-challenge
s-among-board-directors
5. Greve, H. (2004 May). Searching for a corporate savior: The irrational quest for
charismatic ceos reviewed work(s). American Journal of Sociology, 109(6),
1542-1544.

6. Farley, J 2008, ‘The role of prices in conserving critical natural


capital', Conservation Biology, vol. 22, no. 6, pp. 1399-1408.

7. Daniel Kim| December 10, 2015 , Concerns & Challenges Faced by Board of
Directors.
https://www.auditboard.com/blog/concerns-of-the-board-of-directors/

8. Arnold, J., & Leading Associations. (n.d.). 3 strategies to overcome board


dysfunction. Leadingassociations.Com. Retrieved February 10, 2022, from
https://leadingassociations.com/3-strategies-to-overcome-board-dysfunction/
9. Dealing with board issues. (n.d.). Governanceprinciples.Scot. Retrieved
February 10, 2022, from
https://www.governanceprinciples.scot/dealing-with-board-issues
10. Https://Hbr.Org/1979/09/the-Boards-Most-Important-Function.
https://hbr.org/1979/09/the-boards-most-important-function
11. Board of Directors: Definition, Roles, Functions. (2021, July 10). Indeed
Career Guide.
https://www.indeed.com/career-advice/career-development/board-of-directors

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