Role of Board of Directors

Topics: Board of directors, Corporate governance, Non-executive director Pages: 43 (10028 words) Published: April 24, 2014
 TABLE OF CONTENTS______________________________
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Abbreviations…………………..............................................................................iii PART 1: Introduction...........................................................................................................1 PART 2: Important definition need to know to understand Board of directors………..7 PART 3: Role of Board of Directors………………………………………………………..12 PART 4: Journey of Guidelines to Make BOD more accountable...................................16 4.1 Guidelines by Cadbury Report..........................................................................................17 4.2 Guidelines by Kumar Manglam Report…………………………………………………..20 4.3 Guidelines by OECD……………………………………………………………………...23 4.4 Guidelines by SEBI Listing Agreement Clause 49...........................................................25 4.5 Duties Incorporated in Companies Act 2013…………………………………………… 28 PART 5: CASE STUDY: SATYAM………………………………………………………..32 PART 6: Conclusion and Suggestions…….........................................................................39 Bibliography………………………………………………………………………………….40

ABBREVIATIONS………………………………………………………………….

BOD Board of Directors
ED Executive Director
IMS Invoice Management System
OECD Organization For Economic Co-Operation And Development NYSE New York Stock Exchange
SEBI Securities and Exchange Board of India.
SEC Securities and Exchange Commission. (US)
SCSL Satyam Computer Services Limited
SFIO Serious Fraud Investigation Office

PART 1: INTRODUCTION­­­­­­­­­­__________________________________________________ By the already established law, it is stated and proved that the company is the legal person which is incorporated through the process of law, however company being an artificial person cannot make policies to run the corporation, cannot implement those polices, cannot control or manage four major pillars of any corporation i:e Production, Human resource, Marketing and Finance without human intervention. Therefore if we consider company as Human Body then Board of Directors is the brain of any corporation. Board of Directors formulate and implement policies and take decisions to organize, control and direct the corporation to move in the direction so that the interest of all the stakeholders and corporation as whole could be protected. The company is entitled to the benefit of collective wisdom of board of directors. At the same time, if company fails to protect the interest of its stake holders then it is considered that it is the failure of Board of Directors. Now the question is whether that failure was due to lack of expertise in the board of directors or that the board of directors could not compete in the market or board of directors could not anticipate the market situation or whether the corporation is failed due to integrity on the part of board of directors. There are many examples which proves defect that the corporation collapse due to lack of integrity on the part of Board of directors, where board of director has given priority to their personal interest on the interest of corporation as a whole. Example of Enron Collapse, Satyam Scandal1 which are discussed in detail in the later part of Paper. The growth or failure of a corporation to a great extent is depend on the Integrity of the members in the board of directors, their wisdom to run rather I would say to lead the organization and their expertise to understand the market situations and requirements which are never same. Example of Kodak Camera which was one of the leading camera Manufacture company but due to lack of vision it is nowhere today. The clear message from the series of corporate debacles that occurred in America and several parts of the world (Enron Collapse, Satyam Scandal etc.) was simple that the Board of Directors is being...
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