SEMINAR REPORT 4
A Seminar Report on Board Composition
This particular seminar aimed at finding a criterion to determine thelevel of accountability in corporate board members. We looked atseveral contemporary issues from which we can evaluate theperformance of a corporate board. For this particular report, myprincipal focus will be on the contemporary issue of ‘BoardComposition.’ The issue formed 38% of the evaluation of thecorporate board members. The seminar also looked at three othercriteria for rating Canada’s corporate boards. They areshareholding and compensation, shareholder rights and disclosure.
Some of the questions we looked at in this issue include thepercentage of women on the board. As an emerging issue, morebusinesses have adopted the practice of including women in theirboardrooms. According to Yang and Oliver (2009), the composition ofthe board determines the success of a business to some extent.Another perspective from which we looked at the issue pertains to thesystem of evaluation for the board members. The speaker elaboratedthat a corporate board that is accountable should have a crediblesystem to evaluate the performance of its members. Those that performpoorly should face disciplinary action.
The seminar also touched on transparency among the board members. Aboard that is accountable ought to disclose information regarding thedirector’s education processes throughout the year. The boardshould also provide formal evidence that the process took place. Thecompany should disclose the process that the board uses to managesuccession planning for the CEO’s job. The process should be fairand consistent over the years. Any board that appoints CEOs withoutfollowing the due process automatically loses marks in theaccountability test. Splitting the role of the Chairman and the CEOis another area of evaluation. Companies that split the role scorehighly on the accountability test.
While testing for corporate board accountability, it is important tolook at the independence of the board members. Independent boardmembers tend to make wiser decisions than those linked to thecompany. The main idea behind independence is to avert a conflict ofinterests. Using this criterion to establish accountability, one ofthe aspects we looked at is the percentage of the audit committee,company directors, and the compensation committee that is fullyindependent. A company that has a high percentage of independentmembers in the groups mentioned above, scores high on accountability.
Another aspect used to test independence was the freedom ofindependent directors. The evaluation tool ranks lowly a company inwhich independent directors can meet with involving the management.It is also important to look at how many directors sit on four ormore company boards. Directors that have to oversee the operation ofmany companies may be faced with a conflict of interest hence scorelowly on accountability.
In conclusion, the aspects used by the speaker to evaluate thecomposition of the board are quite satisfactory. Aspects such as thepercentage of women and independent directors have been controversialfor quite some time. As mentioned earlier, the composition of a boardis very important, hence the highest contribution to the final markof the evaluation. The other aspects of this evaluation criterion arealso important in determining accountability in our companies. Forsome time now, companies have been electing a new CEO through someshady processes. The end result is an undeserving or incompetent CEOruns the company. The Seminar was conclusive and easilycomprehensible.
Wang, Y., Oliver, J. (2009). Board composition and firm performancevariance: Australian evidence. Accounting Research Journal 22(2) 196 – 212