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Trouble
 

Trouble

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    Trouble Trouble Presentation Transcript

    • How Directors and Boards Get into Trouble Title
    • Directors
      • Join the Board for variety of reasons like friendship, economic gain, networking, prestige and power. This can lead to a bad situation.
      • Therefore it is esssential for the Director to know the company and to be certain that they have the time and competency for this role.
    • Ignorance
      • Lack of understanding of the responsibilities of being a director
      • Lack of at least a working understanding of the business in which the company operates.
      • Lack of the knowledge of applicable rules/laws to the industry in which the company operates
    • Lack of Independence This renders the director ineffective in rendering objective judgments about important issues. Similarly directors are less likely to act independently if they receive substantial financial compensation.
    • Conflict of Interest
      • This arises when a director has the potential to profit from a decision at the expense of the shareholders.
    • Failure to care Busy directors may not be able to have latest knowledge about the business in general and the company in particular. This affects informed decision making.
    • Stock Trading Violations
      • Insider Trading problem could arise as Directors are privy to inside information.
      • Ignorance of law offers the Director no protection.
    • Collective Board Problems
      • Poor Business Performance
      • This invites the wrath of the shareholders
      • Board decisions could affect performance
      • Lack of leadership in the Board Many mistakes are a result of ineffective Board leadership
      • Inadequate involvement in management
      • Board decisions to the management should be followed with effective oversight but without micromanagement.
    • Entrenchment A high percentage of board members remain on the board for too long.
    • Personal conflict Internal politics hampers the smooth functioning of the Board.