Role Of Company Directors In Ensuring Shareholders Interest

Answer :

Executive summary

This report aims to provide an evaluation of the evidences that expect company directors to hold the interest of shareholders above all the other stakeholders. The report would also try to analyse the current situation and make recommendations that would guide the company directors when they are making board decisions. 

Assessment Task 1

A non-executive director, also known as Independent director, can be anybody with experience and sound expertise that heralds the company towards sustainability. The chief function of a non-executive director is of a watchdog’s and the independent director is dedicated to ensure sound governance and act as an agent of improved corporate credibility. The ethical criteria that a non-executive director is committed to abide empirically are;

• The independent director must not own any pecuniary relationship apart from receiving the subsidies and remuneration with any of the associates of the company
•  Any of the relatives of the designated director must not possess any pecuniary relationship with any of the subordinates of the company
• The relatives of the designated director is not allowed to hold any key designation or liability of the respective company

Apart from the above-mentioned ethical criteria, the ‘would be’ non-executive needs to satisfy a few more requirements and those can be categorized as follows

• The yet-to-be designated director imperatively needs to be constituted of prudent personal integrity and professional values
• The designated director needs to accredit the absolute mission of the company while exhibiting critical loyalty towards the objective interests of the key stakeholders
• The designated director must pertain the required skills and objective competency to act as the supremo of the decision-making agency of the respective company
• The essential flexibility to employ extensive time in order to satisfy the appointed duty
• The non-executive director needs to endow thyself with effective communication skills in order to sustain the creative collaboration with the rest of the directors of the respective company

Assessment Task 2

Introduction

A corporation has mainly two basic objectives as a separate legal person. These are: to survive and to thrive. Rather than being an objective of the corporation, shareholder value is more like the outcome of the corporation’s activities. Shareholders of a company place their stakes of a corporation to that specific corporation’s Board of Directors. Shareholders are just one among the many aspects and factors that the Board has to keep in mind while making decisions on behalf of the company, which are thought to be beneficial for the entire organisation as well as the individual employees. 

Role and objectives of the Board and the Director

The Board and the director have to account in for all the stakeholders of the company while decisions are being taken (McCahery et al. 2016). There are many stakeholders of a company apart from just the shareholders. There are financial stakeholders, such as bondholders. Also , there are non-financial stakeholders like the employees, suppliers, customers. NGOs are also stakeholders of organisations that represent the different civil concerns to the company and help them to maintain a proper role in the society. Corporations have to make decisions that comply to all the necessities and requirements of all the stakeholders of the company. The Director of the company has to make the decisions in such a way that incorporates all the stakeholders and keep in mind how would each of them be impacted by the decisions that are being taken. The Director should, on behalf of the board, has to make sure that all the audiences of the company have their interests preserved. The Director always has to act the most responsible (Al-Janadi et al. 2013).

Concerns of the AICD

The Australian Institute of Company Directors have employed corporate governance people because it is concerned that many directors or different companies believe that the company’s Board of Directors should place the interests of the shareholders of the company above the interest of all other shareholders (Van Grembergen and De Haes, 2017). This report would look at this point more closely and would try to decide whether the concerns of the AICD are true or not as well as try to make recommendations for the directors so that they can be guided while making the decisions.  

Evaluation

The directors of a company have to face many different situations and problems that requires them to make impromptu decisions (Mishra and Mohanty, 2014). These decisions often have lasting impact on a company and the employees as well. Since these impacts are long lasting and may decide the functions of the company for a long time to come, the directors have to be farsighted while taking these decisions. Often, the scenarios under which the directors are forced to make these decisions are so stringent and severe, that the directors may miss out on one or two of the company’s stakeholders. This has to be avoided at all cost as the director is the person, upon who lays the entire credibility of the company (Padachi et al. 2017). 

However, it must be remembered that this priority that is supposed to be given to the shareholders, is not a legal bond. Rather, it is more of an ideological thing that asks the directors to make the decisions that would help the company to be more morally just in terms of operations and distribution of the accumulated profit (Duncan et al. 2017). While many directors do believe that the Board should give paramount importance to the interest of the shareholders, many countries reject this primacy of the shareholders’ interests. Directors should make the decisions and implement them in such a way, so that it takes all the significance of all the audience of the company. 

Even if from the moral point of view, directors are expected to give most importance to the shareholders, all research till date have given the same result: the directors’ foremost duty is to serve in the best interest of the corporation itself, as a separate legal entity. All the members of the G20 countries have different rules and regulations that expect different roles from the directors of companies in their respective countries. 

In the United States, the jurisdictions have set primacy duality for the directors, which expect the directors to show the same importance to the corporation as its shareholders. No jurisdiction in the world has any guidelines that ask the directors to place the duty to shareholders  at a higher level than the duty to the corporation. 

In some other countries, like Brazil, the rules clearly state that the directors have to include the corporation’s obligations to the nonfinancial while making any decision. All of these judiciary guidelines make it very evident that the directors should not be giving the most importance to the interest of the shareholders only, however immoral it may seem to them. 

Since a board of director for any company has to consider the interests of many audiences and stakeholders, the board should clearly state annually who has been considered to be a legal stakeholder of the company. This would also, in turn, identify those audiences who the corporations do not consider to be a significant audience for the company. The statement issued by the board would help to concisely communicate with the stakeholders who matter, while firmly making it a point about whose interests it would not be concerned about. This also would enable the corporation to properly state which of its stakeholders it puts more emphasis upon. For example, if a corporation decides that its most important audiences are the short-term shareholders, it would then try to issue only those materials that maximize short term profits. On the other hand, if the corporation believes that the employees are the most important part of the organization, then it would do everything that would help them to retain its employees; even if that means cutting dividends.

Conclusions

While it is true that shareholders of a company has a lot of impact on a company and demands a lot of attention, it is not that the entire functioning of the company would pivot around the interest of these shareholders. The board and the director of the company have to act after considering a lot of facts. It is not of the most importance as it is not illegal in any country. This sole fact gives the directors to act freely without any binding obligations to the shareholders. They can obviously set the priority given to the shareholders momentarily if the collective interest of the other stakeholders collectively becomes a bigger problem for the company.

Recommendations

Since it is not illegal to not give the most importance to the shareholders, the directors are recommended to act according to the best interests of the company. Yes, from a moralistic point of view the directors are bound to see to that the interest of the shareholders are properly served. But since the director is an employee of the corporation, his/her primary duty is to work in such a way that would ensure the maximum profit for the organisation. The same importance must be levied upon all the stakeholders and not just the shareholders. 

Assessment Task 3

Introduction

In the recent years, the rapid development of technological expertise marks an epoch and it has become equally imperative to adapt with the technological advances in order to sustain in this volatile corporate ambience. This significant leap also comes with a subsequent theft of cyber crime which is of paramount concern for the strategic unit. The strategic units of several corporate sectors are able to acquire an in-depth understanding of the underlying fact and exhibit a sincere devotion to develop resilient virtual networks in order to ensure the security of their intangible properties. As per some recent citations about cyber risk and safety it has become very evident that some of the chief corporate sectors failed to synchronize with the brewing technological leap forwards and subsequent risks and striving for innovative solutions. This report is supposed to serve the moral obligation of answering this enquiry with introspective remedies. Moreover, this report aims to determine how prudent corporate governance influences the risk appetite of a company while enhancing the quotient of risk-propensity. In addition to that, this report is devoted to cite an analytical framework along with some brainstorming recommendations that may facilitate the process of integration with cyber security and virtual resilience protocols in order to ensure unimpeded business performance.

Best Corporate practices of Virtual Resilience

In order to cope with the increasing dependence on data and communication the tolerance of the cyber security has been significantly evolved and heralded towards the destination of cyber resilience. On that note, Cyber resilience can be illustrated as the flexibility of an organization to prevent, respond and retrieve from virtual assailants that may influence the essential information they need to protect in order to sustain their business performance (Christou, 2017). The issue of cyber insecurity has been elevated into the category of a human issue in the organizational context since it imparts an adverse repercussion on the bottom line and the annual revenue of the company while driving up the operating costs (Boyson, 2014). In this regard, the typical reasons for which the prevalent security awareness measures may fail can be summarized as;

• Over-reliance on monitoring the box
• Failure to accredit the awareness as unique and discipline-intensive
• Lacking prudent immunity measures to engage
• Improper collection of Metrics
• Expectations beyond feasibility
• Ignoring multiple training tutorials

BYOD

In order to facilitate the process destined towards sound cyber resilience, the employees are usually instructed to work on their own device in order to evade the nominal cyber threats (Davis, 2017). BYOD is the acronym of Bring Your Own Device which is a popular adage usually used to encourage the employees to exploit their own device during pursuit of any work.

IOT

IOT stands for Internet of Things that is dedicated to measure and command several aspects everyday life since the virtual space is transforming from mere an informational domain to control the immediate ambience of the lives of the people.

Conclusion and Recommendations

Most of the relevant electronic appliances have integrated accessories which are associated with the smooth communication and often resemble with a stereotypical computing device (Davis, 2017). These devices are prone to cyber threats due to the feeble network configuration and impeded internet access. Moreover, the sheer vulnerability of the devices turns them accountable to be exploited in launching attacks.