Corporate Governance and Ethics

Corporate Governance and Ethics

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Table of Contents
Introduction................................................................................................................................... 2
Role and responsibilities of directors.............................................................................................3
Analysis...................................................................................................................................... 4
Evidence from examples of companies.........................................................................................5
Levi Strauss & Co........................................................................................................................5
Apple Incorporation...................................................................................................................6
Starbucks................................................................................................................................... 6
Recommendations.........................................................................................................................6
Conclusion..................................................................................................................................... 8
References..................................................................................................................................... 9

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Introduction
The Board of Directors in a company plays a crucial role in managing its operations. Although a
corporation has a separate legal entity from its members, however, it is an artificial person that
cannot take its decision on its own. Therefore, the board of directors acts as the brain of the
company, and they take business decisions for the organisation. The board deals with third
parties on behalf of the corporation and form contractual relationship in which the corporation
is held liable. Similarly, the board also evaluates the interest of different stakeholders of the
corporation to implement business strategies which are focused on fulfilling their interest
(Tricker and Tricker, 2015). Traditionally, it was considered that shareholders are the key
stakeholder of a company and the board has a responsibility towards them to ensure that their
interest is prioritised before other stakeholders. It was because the shareholders take the most
risk in the corporation by investing their capital in its operations. However, this is not true, and
the board is equally responsible for the company and its stakeholders. As per corporate
governance principles, the board have to ensure that the interest of all stakeholders is achieved
based on the actions of the organisation (McCahery, Sautner and Starks, 2016). The purpose of
this report is to prove that directors should not prioritise the interest of shareholders above
others as per the concern of the Australian Institute of Company Directors (AICD). This report
will evaluate examples of various other corporations to prove this theory. Various
recommendations will be given in the report for directors to ensure that they consider the
interest of a diverse range of stakeholders while discharging their duties.

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Role and responsibilities of directors
The board of directors play a significant role in a company because they are responsible for
managing the operations by the corporation by forming business strategies. Various powers are
given to the directors because they act as the apex authority in the organisation (Eccles and
Youmans, 2015). Along with these powers, a wide range of responsibilities is imposed on the
board as well. These responsibilities are recognised under the Corporation Act 2001 in which
duties are directors are mentioned (Hedges et al., 2016). In case the directors failed to comply
with these duties while conducting the operations of the business, then they can be held liable
under this act. Evaluation of these duties also highlights the role of directors towards
stakeholders of the company. This evaluation will help in understanding whether directors
should prioritise the interest of shareholders above other stakeholders or whether they should
cater to the needs of a diverse range of stakeholders.
Care and diligence (section 180)
The directors of a company are obligated to maintain a level of care and diligence while they
are discharging their duties. This care comes with the powers which they have in order to form
future business strategies for the organisation. They should maintain care and diligence which
is expected from a person who is acting in a similar position (AICD, 2018).
Good Faith (section 181)
The directors are obligated to act in good faith for the company. They are responsible for
prioritising the interest of the company above their personal interest, and they should
discharge their duties for a proper purpose (Pugliese, Nicholson and Bezemer, 2015).
Improper use of position (section 182)
Since directors operate in an apex position in the corporation, they have to ensure that they
use their position for proper purposes only. They have to ensure that they take business
decisions and use their powers within appropriate limits and avoiding taking any business