Corporate Governance

Week 7
DELEGATION OF SHAREHOLDER POWER

• Shareholders are the owner of the joint-stock, limited liability

Company, and are the principals of that particular
corporation.
• By virtue of their ownership, the principals (shareholders)
define the objectives of the company.
• The management directly indirectly selected by the
shareholders to pursue such objectives, are the agent of
shareholders
RIGHTS OF SHAREHOLDERS

• As its owners, shareholders collectively occupy a position of

fundamental authority within the firm,

• Giving rise to certain rights in respect of their assets:

• The right to make decisions by voting at company meetings,

• The right to transfer assets to another person the right to

receive income from those assets and thereby maintain
relationships with the firm.
BOARD OF DIRECTORS

• The great majority of decisions made by a company are made

through the Board of Directors and the day to day business of
the company is run through the Board of Directors.
• It Includes all directors elected by Shareholders to represents
their interests is vested with the powers of management.
• The Board of Directors of a company is authorized to exercise
such power and to perform all such acts and things which as
the company entitled to.
BOARD MEMBERS CAN BE DIVIDED INTO
TWO CATEGORIES

• Executive Directors

• Non-Executive Director
CHAIRMAN OF BOARD

• The chairman is the highest office of an organized

group such as a board of directors.

• The person holding the office is typically elected or

appointed by the members of the Board.

• In Ideal cases the Chairman of the board is from Non-

executive directors of the board.
THE ROLE OF THE CHAIRMAN

• The Chairman and the CEO are collectively responsible for the
leadership of the Company.

• Act in an advising capacity to the CEO, president and other officer

on all matter concerning the interest of management &
Corporation.

• The Primary role of the Chairman is for leading the board and
ensuring its effectiveness by implementing its decisions.
• Setting Agenda of board meetings ,Ensuring clear,
accurate and timely information to board members

• Train and develop the individual members of board

and tailored induction of new director,

• Evaluating the performance of each board members

RESPONSIBLITIES OF CHAIRMAN

• Plans and organize all the activities of board of Directors.

• Chairs the special and Annual meeting of shareholders.

• Work closely and through the CEO on all concerning issues.

• Together with the CEO participates in external relationship and

various groups including Government , industry and the
community.
• May attends all Board committee meeting as non –Voting
member except in Governance Committee as voting member.

• Represents Shareholder and board to the management and

management to board and Shareholder.
EXECUTIVE/INSIDE DIRECTORS

• Directors are the members of a board of directors. Directors

must be individuals. Directors can be owners, managers, or any
other individual elected by the owners of the business entity.

• Directors who are owners and/or managers are sometimes

referred to as inside directors, insiders or interested directors.
NON-EXECUTIVE/INDEPENDENT DIRECTOR

• Directors who are not owners or managers and are not connected
with the directors, promoters of listed company in any
relationship

• are referred to as outside directors, outsiders, disinterested

directors, independent directors, or non-executive directors.

• The non-executive directors combine broad business and

commercial experience with independent and objective
judgment.
BOARD BALANCE

• The balance between non-executive and executive directors

enables the Board to provide clear and effective leadership and
maintain the highest standards of integrity across the company's
business activities.

• It satisfied that no individual or group of Directors has unfettered

powers of discretion and that an appropriate balance exists
between the executive and Nonexecutive
• members of the Board.
BOARDS APPOINTMENT

• Appointment of Executive Directors.

• Appointment of Non- Executive Directors.

APPOINTMENT OF EXECUTIVE DIRECTORS.

• In most legal systems, the appointment and removal of

Executive directors is voted upon by the shareholders in general
meeting of company
APPOINTMENT OF NON- EXECUTIVE
DIRECTORS.

• In order to protect the rights of minority shareholders the non- Executive

directors are being appointed and board of any must not have less than 3 or
1/3 which ever is higher independent members of board

• He must not be the employee ,material business relationship with company

within last three years and close relationship with the major shareholders
etc,

• The Independent director is appointed for three years cannot be selected for
next tenures consecutively

• Independent directors are appointed usually at the time of annual general

meeting on by minority shareholders , government etc
THE CHIEF EXECUTIVE OFFICER

• A chief executive officer (CEO) /Managing director (MD), or chief

executive is the highest-ranking corporate officer (executive) or
administrator in charge of total management of an organization.

• An individual appointed as CEO of a corporation, company,

organization, reports to the board of directors.
END OF WEEK 7