Question

What are the responsibilities/duties of the Board of Directors in acting to protect the shareholders of a publicly traded company?

Why do you think that Directors should have these duties?

Do you believe that shareholders should be allowed to file lawsuits against members of the board if they feel the board member has not done a good job in making the corporation profitable? Why or why not?

Answer 1

The Board of directors is appointed to act on behalf of the shareholders to run the day to day affairs of the business. The board of directors' key purpose is to ensure the company's prosperity by collectively directing the company's affairs, whilst meeting the appropriate interests of its shareholders and stakeholders. In addition to business and financial issues, boards of directors must deal with challenges and issues relating to corporate governance, corporate social responsibility and corporate ethics.

The roles of the board of directors:

Establish the vision, mission and values

• Determine the company's vision and mission to guide and set the pace for its current operations and future development.
• Govern the values to be promoted throughout the company.
• Determine and assess the company goals.
• Determine the company’s policies.

Set strategy and company structure

• Review and evaluate the present and future opportunities, threats and risks in the external environment, identify the current and future strengths, weaknesses and risks relating to the company.
• Determine strategic options, select those to be pursued, and decide the means to implement and support them.
• Determine the business strategies and plans that underpin the corporate strategy.
• Ensure that the company's organisational structure and capability are right for implementing the chosen strategies.

Delegate to management

• Delegate authority to management, and monitor and evaluate the implementation of policies, strategies and business plans.
• Determine monitoring criteria to be used by the board.
• Ensure that internal controls are effective.
• Communicate with senior management.

The board of Directors have these duties because they are directly accountable to the shareholders and each year the company will hold an annual general meeting (AGM) at which the directors must provide a report to shareholders on the performance of the company, what its future and plan the strategies of the organization. They ensure that communications both to and from shareholders and relevant stakeholders are effective. It is the duty of the board to understand and consider the interests of shareholders and relevant stakeholders.

Apart from monitoring they relations with shareholders and relevant stakeholders by gathering and evaluating the appropriate information they also promote goodwill and support of shareholders.

Yes, the shareholders should be allowed to file lawsuits against members of the board if they feel the board member has not done a good job in making the corporation profitable. because it is the main job of the board to take the company to achieve greater accomplishments for the company and its stakeholders and if they fail to do so they the shareholders should be allowed to file lawsuits.