Posted on

How Much Should Directors Direct

Case 3: How Much Should Directors Direct? Q:How active do you think boards should be? A:In my views, boards shouldn’t active in corporate governance, strategic planning and general decision too much, but they should be more active in communicate with CEO. Boards and CEO have different role. CEO is boards’ only one subordinate. They have their own responsibility. CEO’s job is making sure that the company can make money for shareholders with a sustainable condition.

Boards’ job is get report from CEO and defining CEO’s target, which is quantifiable and definite. Q:Should directors mix with employees to obtain company information from the ranks? Why or why not? A:I think directors should not mix with employees to obtain company information from ranks. This behavior is more harm than good. Maybe directors will know some real condition of company with this information, but this behavior will lead to crisis of confidence between directors and CEOs.

Probably, sometime directors will disclose some important information. In addition, directors haven’t involved in the production and business operation, probably this information will mislead and confuse them. They might make wrong decisions attribute to this information. Actually we should ask: Why directors want to get information from employees instead of only to ask CEO directly? What happened between directors and CEOs? Q:Where is the line between representing shareholders’ interests and micromanaging or second-guessing the CEO?

A:Firstly, Definition of responsibility is the most important element in the company. Secondly, boards and CEO must have a close relationship and communication, and to avoid misunderstand between each other. Boards also need to set up a reasonable assessment method to evaluate CEO’s performance. Finally, the company shall establish a system or define a regulation to restrict each role’s behavior. To avoid someone do something what exceed one’s power or authority.

Leave a Reply

Your email address will not be published.