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.