Question

Corporate governance is referred to as mechanism, processes as well as relation which assist in controlling and directing the organizations. It is defined as set of systems, principles as well as procedure that makes sure that organization is governed in the best interest of stakeholders (Larcker, Richardson and Tuna, 2007).

What is the board’s role in corporate governance — and how does that differ from management’s role?
Describe the respective roles of the Chairman and the chief executive officer (CEO), and explain why it is important for good corporate governance that they should be able to work well together.

Answer 1

Corporate governance could be defined as how the board of director oranises and manages the corporation, considering the fact that how every decision may have an impact on the employees, customers, suppliers, communities and shareholders.The board delegates responsibility for the coampany's day to day carried activities carried out through different hierarchial levels.

The difference between the board's role and the managements role are:

1) The CEO comes under the management who is responsible for taking day to day decisions carrying out the directives of the board whereas the Board of Director's sits once or twice a year to review the decisions, outcomes of the company/organisation.

2) The Board oversees CEO's make operational decisions and sets company policies whereas the CEO keeps the board informed about the corporate activities and make recommendations to it.

The Chairman's primary role is to ensure that the board is eefective in its task of setting and implementing the company’s direction and strategy. The chairman is appointed by the board and the position may be full-time or part-time. He is elected by shareholders and is responsible for protecting investors interests, such as the company’s profitability and stability.

The CEO is the head of an organisation and all the executives are answerable to him/her. The role of the CEO is to take tactical and strategical decisions such as which markets to enter when and how etc.

It is important for good corporate governance that the CEO and a Chairman to work efficiently for the better of the organisation/company because:

1) Any organisation/company is completely dependent on the working style of their employees and how well they co-ordinate with each other in their respective fields. Every organisation has differentn hierarchial levels and work is co-ordinated between them. For the smooth running of the organisation this is essential and compulsory.

2) The CEO and Chairperson need to have respect and faith in one another and also in their respective leadership teams as well. If they cannot fight in the bad times  together, nor reciprocate with constructive feedback, then they do not have a genuine and healthy relationship.