¨Key Terms §Corporate governance
Set of mechanisms used to manage the relationships among stakeholders and to determine and control the strategic direction and performance of organizations
1.Tammy- Class,
Chapter 11 discussed the role of a board of directors. Our text defines it in this way;” The board of directors is a group of shareholders elected individuals whose primary responsibility is to act in the owner’s interests formally monitoring and controlling the corporation’s top-level executives” (Hoskisson, Hitt, Ireland, & Harrison , 2013, pp. 330-331) . Prior to the job I have now I had not worked with a board of directors. A board of directors are the governing body for many organizations. The members include; insiders, related outsiders and outsiders (Hoskisson, Hitt, Ireland, & Harrison , 2013, p. 331) . Each of these members brings a different outlook and agenda to the board. The purpose is to keep balance and proper controls in place.
The reading discusses the four man roles of a board of directors concerning compliance. Those include; 1. Codes of conduct, 2. Top management support, 3. Implementation and training and 4. Whistle blowing, record keeping, and information sharing systems (Berenbeim, 2012) . In my experience boards need to be properly trained and guided to understand their roles and purpose. Compliance is a large role for a board and they must fully understand that to be effective.
My current position is organized in such a way that I report to several different boards for various parts of my job. Directly I report to a board of directors that was developed through a business transaction when LP came to town to do business. LP gave our county money to start the Luce County Economic Development Corporation. These funds are used to spur economic development and retain business. I manage a revolving loan fund and report activity to my board, a township board and the county commissioner boards. Each of these boards ensure the funds are being used properly and in accordance with our agreements and mission. With this many layers of oversight the funds are less likely to be used inappropriately and continue to support our economy as intended.
References
Berenbeim, R. (2012, February). Corporate Governance in Emerging Markets ... and Everywhere Else. Vital Speeches of the Day, 59-63.
Hoskisson, R. E., Hitt, M. A., Ireland, R. D., & Harrison , J. S. (2013). Competing for Advantage (3 ed.). Mason: South-Western.
2.Rebecca-
In Chapter 11 I found the section regarding Managerial Opportunism fascinating. I have never worked at a company that this has happened to; however I can see how an active and engaged Board of Directors could help thwart these types of situation before they get out of hand.
Reading thorough our Proxy was interesting compared to the textbook. As a side note – I think we have it all covered! The corporate governance at my bank are as follows:
>Ownership Concentration – We are a mostly family owned firm, with one family owning a controlling interest in the institution. The Chairman has a son also on the Directorate, and the CEO is a Cousin. Our text tell us that a family owned firm performs better when a member of the family is the CEO; and I concur.
>Large Block Shareholders – Our Chairman has controlling interest with 18.6% ownership, the next highest is the CEO with 3.6%. No one else has more than 2%.
>Board of Directors – We have a 10 member Board that cover a broad range of backgrounds and experience. The selection process is deliberate to ensure that we have entrepreneurs, as well as seasoned executives to provide guidance and insights to Management.
>Rotation of Director Elections – our Directors are broken out into a three year cycle, thus to prevent takeover situations.
>Executive Compensation – Our executive compensation plan is laid out in the annual Proxy. I don’t know if the salary is competitive, but I know they are pretty up-front about it.
Becky Mannan
Hoskisson, R. E., Hitt, M. A., Ireland, R. D., & Harrison , J. S. (2013). Competing for Advantage (3 ed.). Mason: South-Western.
3.Michael.C
Class, This is a very interesting topic. I did not know much about corporate governance prior to reading this chapter. While reading chapter 11 and learning about some of the mechanism of corporate governance, some of my experiences became more clear. For example, when I worked for Citizens Banking Corp, I didn't realize that corporate governance was in place. The bank had a board of directors that controlled the activities of the management team. With the board voted in a new CEO, stocks initially fell. But once the new CEO began to implement changes that stabilized the bank, stock slowly began to climb. In an article published by Mlive.com, the sale of Citizens Bank in Flint ended a 142 year run. Pretty impressive for a bank to stay in business that long because banks continue to acquire other banks. The purchase of Citizens Bank by First Merit bank is intended to increase shareholder value. I am sure this change will make the board and the CEO lots of money if it is successful. As out text states, multiple mechanisms of corporate governance can take place at the same time. As a publicly held company, the salaries of the corporate executives are public knowledge. In the case of Citizens Banking Corp. back in the late 1990's the new CEO was going to make a lot of money over time if he brought success back to the company. The mechanisms used by Citizens Banking at that time was a board of directors and executive compensation. It seems that it was successful as the bank stayed in business for 142 years.
In another example, my current company is privately held. It still has a board of directors, but the owner is the chairman of the board and ultimately makes all the decisions. We have a company president, however, if the owner doesn't like the direction of the president, he just changes it. A few years ago the owners son-in-law was the president and ran the daily operations and strategic direction of the company. He worked for the company for over 15 years. A couple of years ago the son-in-law decided to resign from the company and seek other interest. Understanding that the employees will never truly know why the son-in-law resigned, it is evident that he and the owner did not see eye to eye on how to proceed with the company, and the owner made the final decision. Although the company uses corporate governance in theory to manage the company's strategic plan, ultimately because the company is owned privately, the owner, (1st generation) who built the company from scratch, will continue to call the shots until he passes on. Harsh, but it is the reality of the situation.
Reference
http://www.mlive.com/business/mid-michigan/index.ssf/2012/09/flint-based_citizens_bancorp_r.html
4.Isabel- Marcus: Thank you for sharing. You stated that "Starting from the board of directors to the employees, every member of my organization is abided by the code of conduct that has been prescribed by the company’s corporate governance policy, and this has established a democratic environment within the organization conducive to employees’ growth and development along with the success of the organization. " This sounds great. Has the periodic training offered to ensure everyone follow the code of conduct?