Companies are the business vehicle of choice world-wide and one of the key issues both for investors and for regulators is the structure, composition and responsibilities of the board of directors. The real power in a company tends to be concentrated in the board with the result that directors may be inclined to advance their own interests rather than the interests of the investors (while risking the investors’ money, of course).
When companies collapse, often with substantial losses to investors and creditors, regulators too want to know why the board failed to manage the business in a sustainable way.
Hence, corporate governance is the key issue in the sustainability of large enterprises. Corporate governance is about the structure and composition of boards of directors, especially in traded companies (i.e. companies with shares traded on stock exchanges).
Much of the UK Corporate Governance Code, which leads the world in this regard, is focused on the structure, role and responsibilities of the board. The Code is ‘soft’ law, but is a significant regulatory tool coupled with the framework of hard law regulation of traded companies (statute and stock exchange rules). Practically every developed economy has a corporate governance code, most are based on the UK Code, and there are international examples as well, such as the G20/OECD Principles of Corporate Governance. All focus on the role of the board.
This module will focus on board governance issues, from composition and structure, to tasks and responsibilities, particularly with respect to risk management, strategy, long-termism and sustainability.