Governance of Corporations

Corporate Governance

Define corporate governance.

In its very simplest form, corporate governance is defined as the method by which corporations are managed and administered (Ghillyer, 2011, p. 88). Corporate governance, however, is much, much more than this simple explanation. It covers the interrelationships between inside management, shareholders and the Board of Directors via policies and guidelines that are designed to protect the shareholders, including creditors, from CEO's, COO's, and CFO's acting solely in their own best interests. Ideally, corporate governance would ensure that corporate management at the highest levels would operate as if they were the actual shareholders of the company (Proctor & Gamble, 2011).

Explain the roles of:

CEO:

I subscribe to the McKinsey Quarterly business publication. There is a wealth of information there on corporate governance and how the top roles of management are being transformed post Enron, WorldCom, HealthSouth, Adelphia, Tyco, et.al. In this report, Carolyn Aiken and Scott Keller write on the key attributes a CEO can bring to the table to lead in transforming a corporation. To boil a six-page article down to its key points, the CEO plays a meaningful and critical role by focusing on the leadership functions in key areas: personalizing the significance of the necessary changes, walking the walk -leading by example, building a strong and united team, and unrelentingly pursuing the desired impact. Also, the CEO must keep in mind the demands of meeting the near-term profit goals with the necessity for building in the capacity to deliver results in the future (Aiken, 2007).

CFO:

Just as the role of CEO's has changed, the role of CFO's has changed post-Sarbanes-Oxley. Butler and Quint put forth in Bloomberg Businessweek that CFO's now must interact much more closely with their Boards and their CEO's to strategize and serve as business partners rather than simply as budgeters and accountants. CFO's should be playing a key role in managing risk, not just controlling or avoiding it. They should also serve as a connection between the investors in the company and the Board, so that the Board is informed of what investors and shareholders are expecting. Key attributes of an excellent CFO today include: having a broad-based knowledge of business and finance, the ability to build strong teams that can be relied upon, the ability to play a strong role in shaping strategy and increasing operational efficiency, as well as managing regulatory and reporting responsibilities (Butler, 2009).

COO:

If I worked for a large corporation, this would be my perfect job. I couldn't describe it better than Rita Numerof and Bill Ott in Hospitals & Health Network Magazine, "Brilliant ideas are useless without a realistic plan to carry them out. The chief operating officer needs to ensure that the strategy can work" (Numerof, 2009). The COO's role is to take the strategic plan and utilize whatever resources are available to put into action. I sometimes feel like I am the bearer of bad news, but part of the role of a COO is to ground the strategists in reality. The COO must identify the key processes of the new strategy and set clear accountability for expected outcomes, as well as establishing the organizational infrastructure to back up the implementation of the strategy (Numerof, 2009).

Explain the role of the Board of Directors.

The Board of Directors is the highest authority governing a corporation and is elected directly by the shareholders. Usually the members are elected for rotating terms so that all members are not up for election at the same time. The ideal size of a Board is between eight and fifteen members, with no more than 50% of the members being from upper management. The Board elects a Chairman. In some cases the Chairman and the CEO of the corporation are one and the same, although this is not advisable. The remainder should be independent members with no inside connections to the corporation, but with excellent resumes in business, finance or other relevant fields. The primary purpose of the Board is to oversee and safeguard the shareholders' assets to see that they receive the best return possible for their investment. Subcommittees that report to the Board are the compensation committee and the audit committee. In well-run corporations, there is also a corporate governance committee that reports to the Board (Kennon, 2011).

Outline the corporate governance structure of the company you work for - or one you have worked for in the past.

I have never worked for a company with more than 200 employees. The company was a start-up and when I was hired, I was among the first 42 employees. The company grew extremely quickly. There were never outside shareholders. Three investor/owners/officers were active in company operations on a day-to-day basis: President, Vice President of Regulatory Reporting, Vice President of Development and Marketing. I started as Assistant to the VP of Development and Marketing and eventually became the Manager of General Services which was equivalent to an operations manager. The three original investor/owners continued to operate the company for the five years I worked there before moving to Florida. With three owners, I presume they used majority rule to settle any differences of opinion in direction the company would take. It was not public knowledge if they were all equal