Learning Unit 1

Corporate Governance:
Role of Board of Directors & Top Management
 Corporate Governance

Corporation is a mechanism established to allow different parties to contribute

capital, expertise, and labor for their mutual benefit.

The investors/shareholders participates in the profits of the enterprises without

taking responsibility of the operations.

Management runs the company without being responsible for personally providing
funds.

Investors/shareholders are represented by directors in the Board, the BOD.

 Corporate Governance

As representatives of shareholders, directors have both the authority

and the responsibility to establish basic corporate policies and to
ensure that they are followed.

The BOD has, therefore, an obligation to approve all decision that might
affect the long-run performance of the corporation.

This means that the corporation is fundamentally governed by BOD

overseeing top management, with the consensus of the shareholders.
 Corporate Governance

• To sum up…
• Corporate governance refers to the
relationship among these three groups - top
management, BOD and shareholders - in
determining the direction and performance of
the corporation.
 Responsibilities of the Board

1. Effective board leadership including the processes,

makeup and output.
2. Strategy of the organization.
3. Risk Vs. initiative and the overall risk profile of the
organization.
4. Succession planning for the board and top management.
5. Sustainability.
Role of the Board in Strategic Management

• In order to fulfill these many responsibilities,

the role of the board of directors in strategic
management is to carry out three basic tasks:
1. Monitor
2. Evaluate and influence
3. Initiate and determine
Board of Directors’ Continuum
 The Role of Top Management

• The top management function is usually conducted

by the CEO of the corporation in coordination with
the Dy. CEO, COO, Vice President, DGM etc.
• Even though strategic management involves
everyone in the organization, the BOD hold top
management primarily responsible for the strategy
and its implementation of the firm.
Responsibilities of the Top Management

The CEO, with the support of the rest of top

management team, has two primary responsibilities
when it comes to strategic management.
1. To provide executive leadership and strategic
vision.
2. To manage the strategic planning process.