Analyse the corporate governance issues facing x company, Financial Management

Assignment Help:

M has recently joined the board of X Company, a main listed confectionary manufacturer. The company was established as a family business over a century ago and members of the founding family still occupy lots of the senior board positions.  When directors are because of retire they are usually replaced by other family members.  The Board is reluctant to make any external appointments, M being an exception.
 
M has noted that there are seven executive board members and only two non-executive members.  On doing some homework about every of the directors, M discovered that all of the directors were from same backgrounds.
 
At the first board meeting after M's appointment, the board papers for discussion were handed out at the initial of the meeting.  The agenda included discussion of a main contamination issue that had occurred in single of the manufacturing plants but when this point was to be discussed at the meeting it was discovered that the board papers for discussion had been omitted.  One of the major institutional investors had expressed concern over the incident. At the subsequent board meeting the executive chairman commented that the company had outperformed in its sector in the past year and that the shareholders should therefore trust him to run the company as he sees fit.

Analyse the corporate governance issues facing X Company.


There are a number of corporate governance issues facing X Company:

Insufficient number of non-executive directors (NEDs)
One of the principles of governance is that listed companies should be led by an effective board with a balance of executive and non executive directors like that no individuals or small groups can dominate decision making. It is doubtful that in X Company two NEDs are sufficient to bring sufficient scrutiny to the executive board. It would suggest that the family members may have the ability to dominate.
 
Senior board positions are based on family membership
A principle of governance is that appointments to the board should be made in a formal, rigorous and transparent manner typically by a nominations committee. Senior positions in X Company appear to be based on family membership rather than getting the correct person.
 
Poor diversity and external expertise
Whilst experience is very significant on a board, governance also calls for the appointment of new members with diversity and external expertise in order to bring in fresh ideas. X Company has poor diversity of backgrounds amongst members which might decrease the level of debate needed when analysing strategic decisions.


Related Discussions:- Analyse the corporate governance issues facing x company

Evaluate the initial exchange of cash, Consider a currency swap in which th...

Consider a currency swap in which the domestic party pays a fixed rate in foreign currency, the UK pounds sterling, and the counterparty pays a fixed rate in US Dollars. The not

Exchange rate uncertainty affect firm exchange risk exposure, The exchange ...

The exchange rate uncertainty may not essentially mean that firms face exchange risk exposure. Describe why this may be the case. Answer:  A firm can comprise a natural hedging p

Asset management ratios (turnover ratios), Asset management Ratios (Turnove...

Asset management Ratios (Turnover Ratios)   Receivables Turnover Ratio  It is a measure of receivables turnover.   Payables Turnover Ratio  It is a

Replacement Theory, How is the failure Table for assets that fail suddenly ...

How is the failure Table for assets that fail suddenly constructed?

Foreign exchange - maximum loss, Q. Foreign exchange - Maximum loss? Fr...

Q. Foreign exchange - Maximum loss? From Marton's point of view an adverse outcome is depreciation of the dollar against sterling as this lowers its income when converted into

Explain adjustments necessary to translate enterprise value, Explain the ad...

Explain the adjustments necessary to translate enterprise value to the total present value of common equity. To acquire the value of the company’s common stock, add the value of

Award and signing of contract, A w ard of contract In previous sub se...

A w ard of contract In previous sub section you learnt in what situations you can negotiate. Now let us discuss the procedure for awarding the contract. Below are the step

Leverage, What is the importance of leverage in business management of a sm...

What is the importance of leverage in business management of a small scale company

Causes of risks, Q. Causes of Risks 1) Wrong decision of what to invest...

Q. Causes of Risks 1) Wrong decision of what to invest in. 2) Wrong timing of investments. 3) Nature of instruments invested such as shares or bonds, chit funds, benefit

Arrow as an fsa’s risk based approach to regulation, ARROW as an FSA's risk...

ARROW as an FSA's risk based approach to regulation ARROW stands for Advanced, Risk-Responsive Operating Framework. In January 2000, FSA set out a proposed approach to regulati

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd