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A Seminar Report on Board Composition
This particular seminar aimed at finding a criterion to determine the level of accountability in corporate board members. We looked at several contemporary issues from which we can evaluate the performance of a corporate board. For this particular report, my principal focus will be on the contemporary issue of ‘Board Composition.’ The issue formed 38% of the evaluation of the corporate board members. The seminar also looked at three other criteria for rating Canada’s corporate boards. They are shareholding and compensation, shareholder rights and disclosure.
Some of the questions we looked at in this issue include the percentage of women on the board. As an emerging issue, more businesses have adopted the practice of including women in their boardrooms. According to Yang and Oliver (2009), the composition of the board determines the success of a business to some extent. Another perspective from which we looked at the issue pertains to the system of evaluation for the board members. The speaker elaborated that a corporate board that is accountable should have a credible system to evaluate the performance of its members. Those that perform poorly should face disciplinary action.
The seminar also touched on transparency among the board members. A board that is accountable ought to disclose information regarding the director’s education processes throughout the year. The board should also provide formal evidence that the process took place. The company should disclose the process that the board uses to manage succession planning for the CEO’s job. The process should be fair and consistent over the years. Any board that appoints CEOs without following the due process automatically loses marks in the accountability test. Splitting the role of the Chairman and the CEO is another area of evaluation. Companies that split the role score highly on the accountability test.
While testing for corporate board accountability, it is important to look at the independence of the board members. Independent board members tend to make wiser decisions than those linked to the company. The main idea behind independence is to avert a conflict of interests. Using this criterion to establish accountability, one of the aspects we looked at is the percentage of the audit committee, company directors, and the compensation committee that is fully independent. A company that has a high percentage of independent members in the groups mentioned above, scores high on accountability.
Another aspect used to test independence was the freedom of independent directors. The evaluation tool ranks lowly a company in which independent directors can meet with involving the management. It is also important to look at how many directors sit on four or more company boards. Directors that have to oversee the operation of many companies may be faced with a conflict of interest hence score lowly on accountability.
In conclusion, the aspects used by the speaker to evaluate the composition of the board are quite satisfactory. Aspects such as the percentage of women and independent directors have been controversial for quite some time. As mentioned earlier, the composition of a board is very important, hence the highest contribution to the final mark of the evaluation. The other aspects of this evaluation criterion are also important in determining accountability in our companies. For some time now, companies have been electing a new CEO through some shady processes. The end result is an undeserving or incompetent CEO runs the company. The Seminar was conclusive and easily comprehensible.
References
Wang, Y., Oliver, J. (2009). Board composition and firm performance variance: Australian evidence. Accounting Research Journal; 22 (2); 196 – 212