Corporate Governance and Performance

This assignment delves into the world of corporate governance, examining the impact of board composition, CEO involvement, and institutional investor influence on firm performance. It draws from a range of research studies, including those on board gender diversity, CEO hubris, and environmental performance. By analyzing these factors, this solved assignment provides insights into how effective governance can drive better business outcomes.

Interactions between the CEO and
board members lead to better
corporate performance

Table of Contents
Literature Review.............................................................................................................................1
REFERENCES..............................................................................................................................10

Literature Review
The main objective of research is to determine the relationship among business
performance and interaction between Boards of members and also CEO (Chief Executive
Officer).
Under this given study helps to understand the impact of relationship including
interaction of Board of members and CEO related to the stock prices and also performance of
business. An interaction will be develop on the basis of trust among CEO and also members. If
there will be the trust, then it helps in achieving the positive result and also outcomes. The
positive relationship is necessary between the members of Board and CEO (Chief Executive
Officer) in an organisation. For better performance of business, positive interaction is necessary
at workplace. In context to this, it is necessary that relationship should be good and every one
should understand the role of each other. There should also be recognition in which the roles of
Board of members and also CEO are different from each other but they all work on achieving the
common goals and also objectives of firm. The main responsibilities of Boards of Members to
selecting a right CEO (Chief Executive Officer), making some of the main decisions, approving
some of the main policies, overseeing performance etc.
As per the view point of Arosa, Iturralde and Maseda (2010) it has been stated that role
clarity is very necessary for assuring about a productive Board of Directors and also Chief
Executive Officer is founded. The main role or duty of Board of Directors is to control and also
govern the managerial opportunism and on the other hand CEO is responsible to carried out all
the functions of managers and also their duties in an effective manner. The board of members is
one of necessary series related to the stakeholders under which a CEO plays a necessary and also
effective roles. The main function of Members is to select a CEO, and also help Chief Executive
Officer in choosing a management team. So, in order to this, it is necessary that the relationship
among the members and also CEO should be goods and also interactive. If in case they both do
not deal with each other properly, then from this the productivity of firm will be affected badly.
On the basis of Balasubramanian, Black and Khanna (2010), it is necessary that there
should be a clear and also good understanding among the CEO and also Board of Directors of
company. It will be helpful in enhancing the profitability of business. If the relation between the
Board of Members and also Chief Executive Officer, then from this company can implements its
business related strategy in an effective and also proper manner. It helps in resolving the
1

problems and also issues of company. It is necessary that Board and also CEO both are seen in a
partnership who plays an important role in a accomplishing the organisational task in an effective
and systematic manner. Chief Executive Officer and also Board of Directors will need to make
changes in their interactions and also relationship from the passive to cooperative and also
positive in order to better and also effective corporate performance. In favour of company Chief
Executive Officer takes an effective decision which increases the development and also
profitability of business.
As per the view point of Boyd, Haynes and Zona (2011), it has been regarded that there
are some of the relationship responsibilities of the Chief Executive Officer in order to better
performance of an organisation. The CEO works effectively to interact and also develop a
harmonious and healthy relationship with the directors of company and also chairman through
informal and also regular interactions from outside of the board meetings. CEO of a company
uses the communication from not sharing and also collection a data and information but also
create a strong and healthy professional chemistry with Board of members. It is necessary that
communication should be transparent and proactively. From outside the Board Meetings CEO
should take feedback from every member regarding the meeting. When at the time Chief
Executive Officer presents an effective strategy for the approval then in this case there should
also be an agreement of Board of Directors.
On the basis of Carcello and et. al., (2011), it has been concluded that it is necessary that
CEO should be provides an informal introductions among the people of management team and
also Board Of members. In context to facilitate a succession planning, it is the responsibility of
Chief Executive Officer to brings some management team members in to the board meeting
where the employer of company plays a necessary role. A Chief Executive Officer should
increase the motivation of Board of Members in order to provide some advise to managers on
any kind of problems in particular areas. It is important reading the corporate business that CEO
should accept the roles of Board of Members in selecting their successor and also give its support
to the succession management. It will be helpful in enhancing the productivity and also
development of company. The CEO of an organisation works on neglecting the growth and also
increment of factions of Board. Chief Executive Officer should recognise an importance of board
through the skills and also capabilities of individuals. It is essential that CEO of company should
2

be feel capable through the Board of Members which maintain their skills and also strengths.
CEO does not agree to play any politics with Members of Board.
As per the view point of Carter and et. al., (2010), it has been started that there is a
relationship responsibilities of Directors regarding Chief Executive Officer. Directors can give
their advice to CEO about the strategic decision of company in order to better corporate
performance of company. Directors give an actionable and also thoughtful guidance to CEO on
convert or transform a business strategy in to an action. It is necessary that directors should
maintain a policy related to the Open- door for Chief Executive Officer. With an agreement of
Chairman of company, directors can not hesitate for act in order to standard of governance and
also the responsibility of fiduciary need an intervention. In context to this directors will be
willing to use a hand- on approach. It is the responsibility to directors for maintain and also
develop a strong commitment about the performance of company. It is necessary that directors
should motivate the staff members to work in a team and also communicate with Chief
Executive Officer in organisation.
On the basis of Deutsch, Keil and Laamanen (2011), it has been regraded that there are
four main areas which explains responsibility which are every crucial to the Board Of Members.
The main accountability of Board of members to assure about the work of organisation and also
determine that company should serve the better products of the local society in order to
satisfying their needs and also wants. It is necessary that aware the people about the compliance
problems and also needs of regulators. There is a requirement to Board Of Directors to bound
through the duties of Directors in the Corporations Act 2001 (Cth). It is necessary that company
should be take care about the interests and also needs of stakeholders. The Chief Executive
Officer is very accountable to Board of Members. Chief Executive Officer should give the report
to Board of Members and also inform them about the activities and also business related
operations. In context to this, Chief Executive Officer should be perform at which helps in
identifying the given details of report. If in case the relationship between Board Of Members and
also Chief Executive Officer is characteristic through the needs of onerous and frequent report.
In context to this, a way under which these all the roles of accountability which are implemented
are very crucial and also difficult. It is necessary that members should perform their
responsibilities in an effective manner and also interact with other people in an organisation in an
effective and also proper manner. It will be helpful in maintaining a effective relationship and
3

also good for the corporate performance. On the other hand the Chief Executive Officer and also
Board Of Members plays a necessary role in the process of decision making. In any kind of
decision making process, it is necessary for both to give their good contribution. There is a need
to Board of Members for the strategic direction of a company and also responsible for setting up
gaols and objectives along with creating some of the effective business strategies and also
policies which are necessary to converting the mission of company in to the determining goals an
objectives of company. In context to this, it is the responsibility of Board Of Members to set all
the discretionary financial and also concerned to the operating limits for management which
helps in regulating the operating limits for managers. It is also helpful in assessing all the
necessary activities of company in against goals and vision of company along with the business
plans on the annual basis in order to assure about the organisation meeting related to the
particular purpose.
These all the responsibilities related to the decision making should given to any person.
As per the view point of O’connell and Cramer (2010), Board of Members should be reserve all
business related matters which can develop a negative impact on the financial stability of
business.
For an example- Investments Commission v Healey and Australian Securities decided to
imposes a legislation related to the liability on the approval regarding financial statement through
Directors of firm.
In context to this, it is necessary that directors should take advice about the financial
statement from external advisors and also management of a business firm. In the decision
making, the role of CEO is varied from role of Board of Members. Under this, it is the
responsibility of Chief Executive Officer to execute and also carried out policies and goals which
are develops through the Board in an effective and proper manner. After all this, it is necessary
to CEO to check the report regarding the operational outcomes. It is also a duty of CEO to assure
that each person should be aware about the strategic policies, direction and also goals so that
they all are work in a same direction for achieving the comm,on goals and objectives of firm.
The decision making of Chief Executive Officer is likely related to that way in which they
execute some of the evaluated shoals and objectives which are formulated with the help of
Board.
4

According to Tuggle and et. al., (2010), it is necessary for an organisation to set the
policies in an effective and also proper manner. When the Board takes a responsibility regarding
formulating the policies of company then there is a main involvement of Chief Executive Officer
on the business operations in an organisation. The CEO is very capable and also expert in give
the suggestions regarding the beneficial policies for the consideration of Board. After all this, it
is the responsibility of Chief Executive Officer to executing all the effective policies at
workplace and also monitor them in an effective and also proper manner.
For an example- If in case there is any kind of requirement regarding the programme in a
community in which the non- profit organisation serve better, in context to this CEO can be
propose an effective policy to the Board of Members for addressing the gap in policy.
There is a big role of Board of members to use the resource of company in an effective
manner so that CEO and management can implement the organisational policies properly.
As per the view point of Jenter and Kanaan (2015), it has been stated that in an
organisation it is necessary to prepare a financial report in a proper and systematic manner. There
is a need to Chief Executive Officer to develop a budget and also financial reports of the annual
basis for the purpose of presenting to the Board of Members for the approval and also review.
There has an opportunity to Chief Executive Officer to offer some of the effective strategies and
also ideas for improving the performance of corporate. The main role of Board is to, analyse,
review and also monitors regarding the information which is presented through the CEO by
proving the appropriate data and information. On the other hand, Board is also responsible for
financial health of company and also needs the cooperation of Chief Executive Officer in context
to assure that the information is completed.
As per the view point of Dobbin and Jung (2010), there are some of the major factors
which can be impacted on the relationship among Boards of Members and Chief Executive
Officer. For increasing the performance of company, it is necessary that their relationship will
be strong and also healthy. But some time,s communication or interaction between the CEO and
also Board Of Members can complex. In context to this, there is difficulty arise for company to
running its business. It will also be impact on the productivity of business negatively as well as
positively. There is a potentially for the Board of Members to feel empowered and also excluded
and there is a struggle to make secure an information or data which is necessary from Chief
Executive Officer. The CEO monitors and also controls all the business related activities. It is
5

necessary that the Board of Members and also Chief Executive Officer should be work together
for accomplishing the common goals and aims of company. It is necessary for Chief Executive
Officer to to see the certainty and also consistency in the decision making through the Board OF
Members. If in case the Chief Executive Officer is not very much assured that the decisions
which are made through the support of Board of Members then it will not be good for business.
It is very necessary that among the Board of Members and also CEO, there is be proper and also
transparent communication. If they both will work together and share their ideas and opinion
about the particular project, then it will be beneficial for the business. With the help of this
positive impact will be developed on the performance of company in an effective manner. If in
case they will communicate properly and do not provide the complete information and data to
each other, then from this it will impact negative on the performance of business. There should
be the mutual understanding among all.
On the basis of view point of Li and Tang (2010) about the relationship of CEO and also
Board of Directors which should be regarded on the types and also size of company. If they both
work together and also proper, then there should be the mutual understanding, respect, ability of
tolerances to each other. It is necessary to recognise an importance of the roles of Chief
Executive Officers and also Board of Members in order to running a business. It is necessary for
both to share their responsibilities with each other in making the business performance better.
There is an authority, expertise to the CEO in order to manage the business at pragmatic level. In
context to this, there is a minimum time to Board OF Directors on flow of information or data to
management in context to exercise its responsibilities and also power. The major aim is to
empower the Chief Executive Officer and also Board in order to carried out effective and
efficient functions and also roles in complementary method.
On the basis of He and Huang (2011), an obligations of Board to Chief Executive Officer
consist some of the necessary points like working environment, benefits to employees and also
compensation which make the position of CEO more attractive in front of staff members of
company. There is also a clear performance goals and also duty of CEO in an organisation. This
person gives the formal review about the level of performance of business. If there is any person
who give their performance better, give it a reward and it is very effective method for motivating
them.
6

There is also some of the obligation of CEO towards the Board of Members. Like for an
instance effective and also proper representation of company in front of local community and
also commitment for increasing the image of firm in the mind of public. Good and also clear
interaction with the Board of Members regarding the administrative as well as financial matters.
The mechanism of decision and also an administrative structure that helps in promoting a
effective and also positive working environment and the healthy or good relationship with the
staff members at workplace in an organisation. It is necessary for the Chief Executive Officer to
interact with its Board Of Members on proper time. In an organisation, it is the responsibility of
Chief Executive Officer to focus on performance of administrative along with the organisational
tasks. It is the duty of both the parties to take the good interest in the process of company. There
are different roles and also responsibilities of Board and CEO but these both parties have good
understanding, transparent or clear communication and they work on achieving the common
organisational gaols and objectives in a systematic and also proper manner. It will be helpful in
increasing the performance level of the firm . If there will be the positive interaction among the
Board of Directors and also CEO, then it will be helpful for firm to maximising the performance
of company.
As per the view point of Nielsen and Huse (2010), it has been concluded that
relationship among Board of Members and also Chief Executive Officer needs a strong and also
healthy strong sense of humour, more trust, leading to people and also have a ability to interact
with the people. CEO and also Board of Directors both take some decisions for the betterment of
company. It is necessary that in any decision, both the parties should be agree on this. These both
are the most necessary part of an organisation and also work for increasing the productivity and
also development of firm. The Board of Directors has an authority to recruit, terminate the CEO
(Chief Executive Officer). The CEO of firm takes the decisions on the daily basis on an
organisation. The Board members take the review of the work of CEO and also takes some of the
effective decision in favour of the company. The Chief Executive Officer has some of the legal
duties and also responsibilities which are mostly extend from the business hierarchy.
According to the view point of Boulouta (2013) the Board OF Directors and also CEO of
a company have some of the fiduciary responsibilities which are concerned to the shareholders of
company. Fiduciary duties are related to the legal concepts which are developed on the basis of
legal relationship of CEO with the owner of an organisation. On the basis of American Bar
7

Association that if the relationship of shareholders with shareholders then it carries out some of
the effective legal responsibilities than relation with creditors of an organisation. Other than this,
the legal responsibilities of Chief Executive Officer towards the shareholders are divided in to
the three main fiduciary duties like for an instance duty of disclosure, duty of care and also duty
of loyalty. The duty of care means the responsibility of CEO to include all the relevant
information in to the decisions which are related to the business by taking advice and
suggestions to the staff members and also some other experts. Under this includes a
responsibility to determine and also understand the day to day business operations and also the
agreements terms and conditions. On the other hand, there is a need to the CEO of an
organisation to do work on fulfil the interest of its shareholders and also take some of the
effective decisions in the favour of company. It will be beneficial in increasing the performance
level of business in an effective and proper manner. Under this, it is necessary that Chief
Executive Officer of company should deal with any conflict related issues at workplace in an
effective and also proper manner. At last, the fiduciary duty related to the disclosure
authorization that it is the responsibility of the CEO to inform the shareholders and also Board of
Directors regarding the main issues and problems which company faces. From this, they all will
deals with the problems and also make their solutions in an effective manner. It will develop the
positive impact on the performance of business along with the staff members. It is necessary that
Board of Directors should take the effective decision regarding business and also implement the
policies at the workplace in an effective manner.
As per the view point of Walls, Berrone and Phan (2012), it has been stated that in legal
proceedings, rules related to the business judgement protects the Chief Executive Officer from
any kind of losses and also liabilities which are concerned to business. According to this
judgement rule, CEO is not only responsible for the loss of shareholder if in case this person acts
openly, honestly with best and effective interest of an organisation. In this Corporate Judgement
Rule, the shareholders are responsible for exhibit the failure of Chief Executive Officer in order
to deal with its responsibilities related to the fiduciary. The Board Members and also CEO
should be try to accomplishing the aims and also objectives which should be based on the respect
and also trust. The Chief Executive Officer serve to the Board of Directors, helps in developing
the effective strategies which are beneficial for the business by supporting the strategies of
board. The CEO is very helpful in formulating annual budgets, profit targets and also the
8

objectives of strategic management. On the other hand, Board of Directors have the main
responsibility for assuring about the needs of business with the requirements of mission. The
Board of Directors give their support to the Chief Executive Officer in order to executing the
business related decisions of Board like for an instance ending of contracts and also awarding.
The CEO needs to the Board of Directors in order to intervene with management in order to
increasing the performance level of business. The Board members give their support to the Chief
Executive Officer through using their strong networks in a community in context to support the
company work. The relationship between the Board of Directors and also Chief Executive
Officer creates for the high- efficiency for success of an organisation. In order to make
improvement in the performance of business, then in this context it is necessary that there should
be the effective and also positive interaction among the Board of Directors and also CEO (Chief
Executive Officer).
9

REFERENCES
Books & Journals
Arosa, B., Iturralde, T. and Maseda, A., 2010. Outsiders on the board of directors and firm
performance: Evidence from Spanish non-listed family firms. Journal of Family
Business Strategy. 1(4). pp.236-245.
Balasubramanian, N., Black, B.S. and Khanna, V., 2010. The relation between firm-level
corporate governance and market value: A case study of India. Emerging Markets
Review.11(4). pp.319-340.
Boulouta, I., 2013. Hidden connections: The link between board gender diversity and corporate
social performance.Journal of Business Ethics. 113(2). pp.185-197.
Boyd, B.K., Haynes, K.T. and Zona, F., 2011. Dimensions of CEO–board relations. Journal of
Management Studies. 48(8). pp.1892-1923.
Carcello, J.V. and et. al., 2011. CEO involvement in selecting board members, audit committee
effectiveness, and restatements. Contemporary Accounting Research. 28(2). pp.396-
430.
Carter, D.A. and et. al., 2010. The gender and ethnic diversity of US boards and board
committees and firm financial performance. Corporate Governance: An International
Review. 18(5). pp.396-414.
Deutsch, Y., Keil, T. and Laamanen, T., 2011. A dual agency view of board compensation: The
joint effects of outside director and CEO stock options on firm risk. Strategic
Management Journal. 32(2). pp.212-227.
Dobbin, F. and Jung, J., 2010. Corporate board gender diversity and stock performance: The
competence gap or institutional investor bias. NCL Rev. 89. p.809.
He, J. and Huang, Z., 2011. Board informal hierarchy and firm financial performance: Exploring
a tacit structure guiding boardroom interactions. Academy of Management
Journal.54(6). pp.1119-1139.
Jenter, D. and Kanaan, F., 2015. CEO turnover and relative performance evaluation. The Journal
of Finance. 70(5). pp.2155-2184.
Li, J. and Tang, Y.I., 2010. CEO hubris and firm risk taking in China: The moderating role of
managerial discretion.Academy of Management Journal. 53(1). pp.45-68.
Nielsen, S. and Huse, M., 2010. The contribution of women on boards of directors: Going
beyond the surface. Corporate Governance: An International Review. 18(2). pp.136-
148.
O’connell, V. and Cramer, N., 2010. The relationship between firm performance and board
characteristics in Ireland.European Management Journal. 28(5). pp.387-399.
Tuggle, C.S. And et. al., 2010. Commanding board of director attention: investigating how
organizational performance and CEO duality affect board members' attention to
monitoring. Strategic Management Journal. 31(9). pp.946-968.
Walls, J.L., Berrone, P. and Phan, P.H., 2012. Corporate governance and environmental
performance: Is there really a link?. Strategic Management Journal. 33(8). pp.885-913.
10

11