FINS3626 WEEK 4 TUTORIAL

1. How far should boards get involved in the management of the corporation? Are new
regulations and guidelines promoting a "blurring" of the responsibilities of these two
parties?
The degree to which the board should be involved in management depends on the
structure of the corporation (insider or outsider). Generally, listed companies have
separate management teams. In this case, the board should have limited
management power as it becomes redundant if they hire management and proceed
to manage the company themselves. It would be inefficient if managers approach the
board to approve every corporate decision and risks. However, the board should also
take caution and assurance that management will not abuse their power. They exist
to provide guidance and protect the rights of shareholders.
New regulations and guidelines can argue that it keeps management aligned with
shareholders' goals and values and it is easier for the companies' stakeholders to
carry out their respective tasks as they are laid out point by point. However,
excessive regulations by the board can distract management from performing their
tasks properly and strip away managers' flexibility. Excessive regulation also means
that shareholders have managerial responsibilities as well (drawing guidelines and
outlines).
2. Who should be directors and why?
Directors should be those who has been in a qualified and high-skilled position such
as ex-executives, academics, government officials, leaders of corporate businesses
etc. There should a be a range of different skills and perspective, but all should have
knowledge of filings and financial reports. Contemporary academics propose that
directors should be independent of the company/ or no relations with the
management. Companies need to challenge themselves to remain relevant in an
dynamic corporate environment. Thus, directors must possess a diverse set of
competencies and knowledge to address complex issues. Further, directors should
have a range of perspectives as decision making process is more likely to take into
account various risks, explore opportunities and succeed in corporate governance.
Roles of the board?
i. Establish vision, mission and values
ii. Set strategy and structure
iii. Delegate to management on behalf of shareholders
iv. Performance (improved strategy and policy) and Conformance (adhere
to regulations)
Responsibilities of the board?
i. Exercise accountability to shareholders and relevant stakeholders
ii. Act in good faith and best interest of the company
iii. Act with due skill and care
Accountability of directors?
Directors have limited liabilities but still held accountable if the company
underperforms or acts unethically
Why (not) become a director?
3. What is a 'gender quota' and do you think it is a good idea?
Requirement of firms to raise female participation on board to 40%. I think it is a
good idea to promote diversity and gender equality, but may force corporations into
hiring inept executives.

Reasons for introducing a gender quota? To increase female participation and

gender equality
Problems? Board makes rash decision to nominate an inept director
Any alternatives?