Dual Board Of Directors Case Study
According to board structure, the difference of corporate governance among different countries is may be unitary or dual board on the country. In the UK and the USA, a unitary board of directors in the form of board structure, characterized by one single board comprising executive and non-executive directors. (Aguilera, 2003) It is responsible for all aspects of the activities of the corporation. A dual board of directors is including a supervisory board and executive board of management. Nevertheless, there is an accurate separation between the functions of monitoring and functions of management.(Bebchuk, 1999) For example, in Austria and Germany, the major board structure is dual board and employees have representation on the monitoring board.
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It is fundamental for an effective board to develop a company. The board is a bond between investors and managers and it is vital to good corporate governance and close relationship with investors. According to UK’s unitary board, it illustrates that the roles of CEO and Chairman are separate because it will be worse, if one person achieves too much power. The chairman is responsible to run the board and CEO is responsible to operate the corporation. The Code (FRC, 2010) also said’ the roles of chairman and chief executive should not be exercised by the same individual’ ( …show more content…
(Clarke, 2004) There are a number of disadvantages linking to the opportunism or self-seeking of the agent in the agency relationship. There is an illustration. The agent may not act in the best interests of the principal. There could be some proportions to this, for example, the power of agent being misused for monetary or other benefits, and the appropriate risk not being taken in the purchase of the principal’s interests because the agent sights those risks as not being suitable. It is possible for the risk that the principal has different attitudes. There is also the problem of imbalanced information via different levels of information that the principal and the agent have right to use. It means the principal has a disadvantage because the agent wants to achieve more benefits.
In the problems of corporate control, agency theory reflects corporate governance system, especially the board of directors. It represents a basic supervising method to try to minimize issues that principal and agent relationship may bring. The inside managers want to be the ‘agents’ of a company’s ‘owners’, however, managers must be supervised and the arrangement of an institution must provide some balance and checks to ensure that they don’t misuse
It is fundamental for an effective board to develop a company. The board is a bond between investors and managers and it is vital to good corporate governance and close relationship with investors. According to UK’s unitary board, it illustrates that the roles of CEO and Chairman are separate because it will be worse, if one person achieves too much power. The chairman is responsible to run the board and CEO is responsible to operate the corporation. The Code (FRC, 2010) also said’ the roles of chairman and chief executive should not be exercised by the same individual’ ( …show more content…
(Clarke, 2004) There are a number of disadvantages linking to the opportunism or self-seeking of the agent in the agency relationship. There is an illustration. The agent may not act in the best interests of the principal. There could be some proportions to this, for example, the power of agent being misused for monetary or other benefits, and the appropriate risk not being taken in the purchase of the principal’s interests because the agent sights those risks as not being suitable. It is possible for the risk that the principal has different attitudes. There is also the problem of imbalanced information via different levels of information that the principal and the agent have right to use. It means the principal has a disadvantage because the agent wants to achieve more benefits.
In the problems of corporate control, agency theory reflects corporate governance system, especially the board of directors. It represents a basic supervising method to try to minimize issues that principal and agent relationship may bring. The inside managers want to be the ‘agents’ of a company’s ‘owners’, however, managers must be supervised and the arrangement of an institution must provide some balance and checks to ensure that they don’t misuse