board structures & styles

8/6/2019 Board Structures & Styles

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Types of Directors

Executive Directors

Non- Executive Directors

Nominee Directors

Representative Directors

Alternative Directors

Shadow Directors

Associate Directors



Types of Board Structures

All Executive Board

Majority Executive Board

Majority Outside BoardTwotier Supervisory Board (Non-executive

supervisory board & the executive

management board)



Issues in Designing a Board

The Board size

The role of the chairman and the Chief

ExecutiveDuality in subsidiary company board



Board Styles

Rubber stamp boards

Representative boards

Country club boardsProfessional boards



Roles and Responsibilities of Board of

Directors

Definition :-Sec.2(13) A person having the

control over the direction, conduct ,

management or superintendence of the affairs

of the company.

Only individuals can be directors - sec.253 -

DIN



Directors

Number of Directors

Increase or reduction in number of directors

(Articles)Sanction by the central government.



Directors

First director Sec. 254 & Clause 64

Appointment of directors by the company/

appointment of directors by proportionalrepresentation

Appointment of directors by directors

As additional directorsCasual vacancy



Directors

Advisory directors

Alternate directors

Appointment by third partiesAppointment by central government

Specialist directors (out-side directors)



Role of Directors

As agents, trustees and managing partners

Directors as an agent

Directors as employeesDirectors as officers

Directors as trustees Alexander V/S

Automatic telephone co. (all the shares )Piercy V/S S. Mills & Co. Ltd. (issued the un

issued shares of the company)



Role of Directors

Performance role

Conformance role



Responsibilities /Duties of Directors

Number of directorships - Secs.275, 277 to

279. not more than 15 companies.

Qualifications an individual, competent tocontract and hold a share qualification if so

required by the articles.

Managerial remuneration Sec. 198



Responsibilities /Duties of Directors

� Standard of care - city equitable fire insurance

co. case (management left in the hands of

MD)

� Not to delegate his functions

� To disclose his interests and not to make

secrete profits

� Maintain confidentiality

� Protect interests of the creditors



Liabilities of Directors

Misrepresentation in offer documents and

annual accounts

Failure to return subscription money toinvestors

Contravention of the law.



The Role of the Chairman

The role of the chairman is to

manage the board and

ensure that its policies are put into practice bythe management.

To work closely with company secretary

To address legal issues.




Must have a good understanding of the

financial standing of the company.

To keep a strict watch on the actualperformance of the company.

should assess where the company stands

And where it is heading.Must identify shortcomings




To cater to the internal needs of the Board

Relationship with CEO

Relationship with executive & non-executivedirectors



Functions of the Chairman

To act as a representative of the company

To act decisively in times of crisis

To set standards to ensure that the policiesand practices are in place



Functions of the Chairman

To ensure that the directors make good

decisions

To make sure that the directors arecontinuously upgraded to the levels required

by investors to meet the current and future

needs of the company.



The Role of CEO

The primary role of the CEO is to run the

organization in an efficient manner to produce

the desired result.

Should have constructive relationship with the

chairman and the directors.



Functions of the CEO

Formulating strategic proposals

Provides leadership

Develops a plan

Representative of executive directors



Functions of the CEO

Present the company

Source of inspiration

Identify situations that requireintervention

board structures & styles

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