Protecting the Interests of Stakeholders – Responsibility of a Director of a Company

Buzzes are noises, useless, except for that antiquated door bell of yore. Transparency, good governance, functioning boards, are words with lots of buzzes. They may make the MBA students look intelligent and smart but in reality  many directors of companies  are struggling.

Many directors have this narrow belief that they are in the board to protect the shareholders they represent. The consequence is the loss of the spirit and principle of a COMPANY. A company is a partnership of two or more people. It is a partnership and even for a 100% equity controlled the Companies ACT requires at least 2 shareholders and at least two directors. thus the loss of opportunity of having a functioning board.

What then is a functioning board? I define a functioning board as one who is able to protect in a just manner the interests of stakeholders. I use the word just to amplify the risk of a conflict of interest situation which may result in failure to fulfill executive duties, fiduciary duties and statutory duties. It is indeed a balancing act, the ideal in justice is being balanced in our judgement and action.

Who are the stakeholders? I can list 7 stakeholders that a responsible and competent board need to take care of. That is the manner I conduct my board if I am the chairman. I go through the list one by one. Here is the list

No 1 – the government

No 2 – the shareholders

No 3 – the employees including the management

No 4 – the clients

No 5 – the vendors and creditors

No 6 – the society at large  and the Environment, usually looked at as Corporate Social Responsibilities

No 7 – the bankers and Financiers

You take care of the shareholders fairly, and in its order of priority and importance ( the above listing is not) , then you are on your way to become and effective director of a company.

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