Basis Of Corporate Governance Research Articles

Independence of Independent Directors

INTRODUCTION A company is a legal entity of its own, but being an artificial person, they also constitute a body for controlling their affairs, which are the board of directors. A board of directors is the governing body of a company, whose members are elected by shareholders (in the case of public companies) to set strategy, oversee management, and protect the interests of shareholders and stakeholders. Every public company must have a board of directors. The independent director—also known as an outside director—is a member of a board of directors who brings a unique, unbiased perspective. The term “independent director” is commonly used to denote a director who's not an employee of the firm or organization where they serve on a board. OBJECTIVE OF RESEARCH There are mainly two controlling bodies present in a company; Shareholders and the Board of Directors. The difference between the shareholders and directors is based on the formation and setup of the company. It is the basis of corporate governance where there is a separation of duties and responsibilities. Mainly the shareholders are the owners of the company or business they are they provide funds to the business in the form of capital. While the directors are the managers of the business, they are the decision-makers in the daily running of the business. While the shareholders have rights to their investments, the directors have responsibilities towards the shareholders and all the stakeholders. The significance of Independent directors is that they don’t have a conflict of interest with the companies where they serve. They bring unique expertise, perspective, and background to the boardroom table. And most importantly, they help maintain an objective viewpoint during decision-making. This paper tries to highlight the the importance of the unbiased outlook of the independent directors and how if that outlook is dismayed, the entire purpose gets defeated. The independent directors’ main duties and responsibilities typically include: Protect the interests of all stakeholders, Balance the interests of all stakeholders while making deliberations. The directors have fiduciary relationship with the shareholders and not the management. There are instances where the objectives of management differ from those of the wide body of shareholders. The non-executive directors must be able to speak up in the interest of the ultimate owners and discharge their fiduciary oversight functions. this is the reason that the independence has become such a critical issue in determining the composition of any Board. CONCLUSION This paper aims at critically examining the flaws in the functioning of the independent directors and how it affects the purpose of their creation through case studies and decided case laws.

BOARD SIZE, BOARD COMPOSITION, LEVERAGE AND ITS EFFECT ON INTELLECTUAL CAPITAL DISCLOSURE

Disclosure of non-financial information by companies is very important information, such as voluntary disclosures. The most common type of information used by investors is not actually disclosed by managers in annual reports. This causes a social gap between investors and management. It can be concluded from the research that voluntary disclosure is very important to improve the quality of annual reports and satisfy the interests of stakeholders. A management system that can work professionally, honestly and transparently can increase demand from the market and will encourage companies to provide more transparent information. The information disclosed in the financial statements is actually not able to represent the overall condition of the company in order to produce values and make decisions by investors. Therefore, in order to increase value and assist investors in making decisions, companies can disclose information voluntarily. With this obligation, it can encourage companies to disclose more information, because honesty and transparency are the basis of corporate governance, this is what is referred to as disclosure of intellectual capital (intellectual capital disclosure) The main purpose of this research is to find empirical proof about the effect of board size, board composition, and leverage on intellectual capital disclosure. The data used in this research were obtained from manufacturing companies that listed on the Indonesian Stock Exchange (IDX). 288 data were gathered from 144 companies in the year of 2020-2021. Purposive sampling method is used to collect the data and panel data regression model is used for hypothesis testing. Software EViews 9 is used for preparing and processing data. This research reached a conclusion that the number of board composition is positive and have not give a significant effect on intellectual capital disclosure. Variables of board size and leverage have a negative and dont have a significant effect on intellectual capital disclosure.

Enhancement of the professional competence of specialists who form an accumulative pension system based on social responsibility

The purpose of the study is to determine the areas of increasing the social responsibility of the private pension funds (NPF) based on the growth of professional competence of specialists in the formation of the system of funded pension provision through the risk-based government regulation and supervision. The article proposes an improved definition of the social responsibility of the subjects of the accumulative pension system and determines the qualitative indicators of their social responsibility. An analysis of the work experience of pension funds in Thailand, Brazil, the United States, Norway and the South Africa allows us to conclude that the main areas of increasing social responsibility are to ensure decent and safe working conditions, environmental safety, absence of corruption and violation of the ethical and legal norms. It is proved that the subjects of the accumulative pension system should act on the basis of corporate governance and be guided by the OECD principles of corporate governance. According to the best foreign practices, improving the competence of pension fund employees is one of the main areas of the social responsibility. To determine the directions of increasing the social responsibility of the subjects of the accumulative pension system, an expert survey was conducted. Based on the results of the study, it is substantiated that the main direction is to increase the professional competence of specialists in the formation of a funded pension system based on risk-oriented state regulation and supervision.

Interests as the basis of corporate governance: Shareholders' profit versus social responsibility

In the article, the author pointed out that determining the content of company's interest is dialectically related to question of whether there is a particular company interest or it is just a set of different interests that are affected by the externalization of operating costs. Shareholders are usually designated as the owners of the company, so the protection of their interests is perceived as a priority. However, the company's limited liability and the separation of ownership from management provide an exceptional capacity for independent action and therefore require protection of company's separate interests. Classical theories about company relations limit the circle of participants to ones that are involved only in relations with a contractual nature. However, within the framework concept of corporate social responsibility (CSR), it is evident that there is essential importance of protecting company's distinguished interests, and also the public interests personalized in interests of consumers, interests of the state and society. The stakeholder theory emphasizes fundamental significance of harmony in relations between stakeholders, so the value could be created in the long run, and that it is counterproductive to focus only on economic principles of value creation. It is impossible to ignore that the company itself is an entity with its own expectations, and if the interests of other stakeholders are removed, the only relevant company's goal would be its existence, or the sustainability of its business. When the company's interests are understood in this way, it is obvious that a long-term business policy forms the basic protection of those interests. CSR in modern sense is linked with the goal of sustainability, with a profitable nature as the most important factor of long-term business policy and sustainable development. However, as the contractual mechanisms are not enough to protect the stakeholders' interests to a degree greater than company's legal obligations towards its employees, consumers and creditors, there is a need for strong influence of imperative regulations in the field of CSR.

Myth of Shareholder Primacy in English Law

This article assesses the validity of the shareholder primacy norm, with particular focus on the pre and post Companies Act 2006 implications of shareholder primacy in English company law. Prior to the Companies Act 2006, much was written about shareholder primacy, which assumed it to be the basis of corporate governance in English law. In testing the validity of that assumption, this article examines the historical application of partnership principles to corporate governance, the case law often called in aid of the shareholder primacy norm, and finds that shareholder primacy remains at odds with the tenet of corporate legal personality in English law. It concludes that the assumption that shareholder primacy was the basis of corporate governance in English law is a myth.

Shareholders Should Welcome Knowledge Workers as Directors

The most influential approach of corporate governance, the view of shareholders’ supremacy does not take into consideration that the key task of modern corporations is to generate and transfer firm-specific knowledge. It proposes that, in order to overcome the widespread corporate scandals, the interests of top management and directors should be increasingly aligned to shareholder’ interests by making the board more responsible to shareholders, and monitoring of top management by independent outside directors should be strengthened. Corporate governance reform needs to go in another direction altogether. Firm-specific knowledge investments are, like financial investments, not ex ante contractible, leaving investors open to exploitation by shareholders. Employees therefore refuse to make firm-specific investments. To gain a sustainable competitive advantage, there must be an incentive to undertake such firm-specific investments. Three proposals are advanced to deal with this dilemma: (1) The board should rely more on insiders. (2) The insiders should be elected by those employees of the firm who are making firm-specific knowledge investments. (3) The board should be chaired by a neutral person. These proposals have major advantages: they provide incentives for knowledge investors; they countervail the dominance of executives; they encourage intrinsic work motivation and loyalty to the firm by strengthening distributive and procedural justice, and they ensure diversity on the board while lowering transaction costs. These proposals for reforming the board may help to overcome the crisis corporate governance is in. At the same time, they provide a step in the direction of a more adequate theory of the firm as a basis for corporate governance.

Shareholders Should Welcome Knowledge Workers as Directors

The most influential approach of corporate governance, the view of shareholders' supremacy does not take into consideration that the key task of modern corporations is to generate and transfer firm-specific knowledge. It proposes that, in order to overcome the widespread corporate scandals, the interests of top management and directors should be increasingly aligned to shareholders' interests by making the board more responsible to shareholders, and monitoring of top management by independent outside directors should be strengthened. Corporate governance reform needs to go in another direction altogether. Firm-specific knowledge investments are, like financial investments, not ex ante contractible, leaving investors open to exploitation by shareholders. Employees therefore refuse to make firm-specific investments. To gain a sustainable competitive advantage, there must be an incentive to undertake such firm-specific investments. Three proposals are advanced to deal with this dilemma: (1) The board should rely more on insiders. (2) The insiders should be elected by those employees of the firm who are making firm-specific knowledge investments. (3) The board should be chaired by a neutral person. These proposals have major advantages: they provide incentives for knowledge investors; they countervail the dominance of executives; they encourage intrinsic work motivation and loyalty to the firm by strengthening distributive and procedural justice, and they ensure diversity on the board while lowering transaction costs. These proposals for reforming the board may help to overcome the crisis corporate governance is in. At the same time, they provide a step in the direction of a more adequate theory of the firm as a basis for corporate governance.

Boardroom in the 21st Century: Issues & Challenges

Quantum advances in science and technology (telecommunication, information technology, biotechnology) have radically altered the methods of doing things and have opened limitless possibilities. Among the economic-business models, free-market capitalism has decimated all other models. Capitalism is value neutral. However, the way business is to be run does have value-implications, relative to the environment of the business. ‘Corporate wars’ cannot be allowed the ‘all is fair’ philosphy. The need for ‘regulation’ in general governance and politics has been extended to the corporate world too in order to curb adventurism and to promote transparency and accountability The Cadbury Code, the Greenbury Code, the Hampel Committee have gone into the details of Corporate Governance in the UK. The Nolan Committee (later the Neill Committee) dealt with ‘Standards in Public Life’ and the basic principles laid down by the Committee ought to form the basis of Corporate Governance too. In India also, CII's Committee, Rahul Bajaj Committee and Vittal Committee have addressed the issue of Corporate Governance. The unique Indian context for business (both public and private) should be kept in mind while dealing with the issue of Corporate Governance. Corporate Governance requires a change of mindset and culture. These fundamentals are of enduring relevance and will be relevant for the 21st Century Boards. Twenty-first century will witness dramatic changes in the locational, communicational, decisional, financial aspects of running an enterprise in the changed global-regional-national scenarios. ‘Vision-led’ Corporates and Visionary Boards will be more effective. Culture-balance and culture-sensitivity will be important areas for the Boards operating in global/multicultural context. Corporate ethos and governance will gain increasing ascendancy in an integrated business world. The Boards' performance will be under evaluation by investors and adherence to the principles of governance will be among the evaluation parameters. Entrepreneurial enthusiasm and sustainable systems/values will have to be balanced. Good governance will achieve this blend. The Indian ethos contains the essence of Corporate Governance and this remains our most potent tool.