Optimum Corporate Structure

This report suggests an optimum corporate structure for a company in Ireland operating in the jewelry sector. It covers board structure, duties and obligations of directors, committees and subcommittees, and internal control requirements.

OPTIMUM CORPORATE STRUCTURE
OPTIMUM CORPORATE STRUCTURE
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OPTIMUM CORPORATE STRUCTURE
Introduction
An organizational structure is a system that describes how activities are performed and directed
in order to achieve the objectives of the organization. Companies in Ireland and more so in the
jewelry sector operate in a competitive environment hence an optimum corporate structure is
vital if any company is to survive in the long term. They also operate in a heavily legislated
environment where business laws keep on changing from day to day and lack of compliance may
lead to heavy penalties (Ireland, 2012). Need for Good corporate governance has risen in recent
years hence firms have to make sure they maximize the value of shareholders while taking into
account other stakeholders (Kumar and Zattoni, 2015). Areas of corporate governance that must be
considered include board of directors, internal control system and governance system. This
report suggests an optimum corporate structure for a company in Ireland operating in the jewelry
sector.
I) Board structure

OPTIMUM CORPORATE STRUCTURE
The board should be structured in such a way that it is economical and in conformity with the
companies act. Seven directors would be an ideal number given that the jewelry sector is not so
much developed in Ireland. It should comprise of four executive and three directors who are non-
executive. The executive directors should be employed by the company on a full-time basis no
other major income sources (Bekiris, 2013). They should serve in senior capacities such as
finance, marketing, information technology among others and receive the highest remuneration
packages. The finance director and chief executive officer should be executive directors and be
engaged on fixed-term contracts if possible. The non-executive directors are not directly
involved in the daily operations of the firm and they have a major source of income elsewhere
(O'Higgins, 2012). They should be engaged in a service contract and receive a flat fee for their
services. The main aim of including the non-executive directors is to minimize conflict of
interest. However, they play other roles such as; contributing to the strategic plan and providing
an external view of risk management. They should be independent and not hold a significant
amount of shares in the company. They should also be people of integrity and uphold high
ethical standards.
A unitary board structure would be ideal for a company in the jewelry sector. Both the
executive and non-executive directors should serve together in the same board to enhance
coordination and for economic purposes. There should also be a provision for a shadow director;
an individual who is not connected to the company but gives instructions to a member of the
board. This is meant to enhance decision making by obtaining independent views from outside.
The appointment of directors should be done by shareholders in consideration of age, skills,
competence, and industry experience. The board should contain the chairman, company
secretary, managing director, chief executive officer, and other directors. The chairman provides

OPTIMUM CORPORATE STRUCTURE
leadership to the board and oversees its operations. He also performs several other duties such as:
enhancing board performance, promoting good corporate image, ensuring effective
communication with the board, reporting and signing financial statements, ensuring compliance
with statutory requirements and corporate governance. He or she should be effective in
communication, effecting changes and a person of high integrity.
The chief executive officer is in charge of the day to day running of the organization. He
or she is the top decision maker although he can delegate to senior managers. He or she should
focus on strategic issues and long-term future planning. Duties of the chief executive officer
include: implementing decisions made by the board, developing objectives and strategies,
advising the board on investment and financing decisions, promoting good corporate image,
linking the board and company management and providing regular communication to the
directors on technical and administrative matters (Donnelly and Mulcahy, 2008).
The company secretary is the most senior and is responsible for ensuring the efficient
administration of the company. He is the legal advisor to the company and acts as the company’s
legal representative in signing contractual documents. Other duties include: ensuring compliance,
maintaining the register of members, ensuring payment of dividends, circulating board papers in
advance before meetings, assisting the chairman in organizing meetings, keeping the company’s
legal documents, and administering employees;’ benefits scheme.
The managing director is a director on the service contract and is appointed other
directors. He should acquire qualification shares within a specified period and should meet the
minimum qualifications stated in the articles of association (Hussain and Mallin, 2013). He should

OPTIMUM CORPORATE STRUCTURE
also be a person of high integrity as he is involved in top decision making and day to day running
of the organization.
II) Duties and obligations of directors
The directors should operate as a board and individual decision making should not be permitted
hence all issues must be discussed and voted for in board meetings. The board of directors
should be charged with the following duties:
 Recommending the dividend policy during annual general meetings
 Appointing and reappointing auditors of the company
 Determining and developing the mission, vision and core values
 Reviewing, evaluating and approving the firm’s budgets and other forecasts.
 Evaluating and approving resource allocation and capital investments
 Ensuring accurate, timely and transparent disclosure of company performance
 Ensuring the effectiveness of risk management policies.
 Reviewing, evaluating and approving the firm’s remuneration structure.
 Reviewing the performance of top managers and the chief executive officer.
 Enhancing the corporate image of the firm.
 Protecting the rights of the shareholders and maximizing their value (Demsetz and
Villalonga, 2009).
 Reviewing objectives and policies resulting in the sustainability of the company.
 Implementing and monitoring compliance with the code of ethics.
 Monitoring compliance with the company statutory requirements.
 A delegation of duties to committees and other board members to enhance efficiency.

OPTIMUM CORPORATE STRUCTURE
 Promoting good corporate governance practices.
III) Committees and subcommittees
Committees comprise of the board members and perform a specialized set of duties as assigned.
It is ideal for the company to have several companies but the four most important are: risk
management committee, remuneration committee, Nominations committee, and the audit
committee. The remuneration committee should be responsible for deciding the compensation of
senior executives including the executive directors. It should be responsible for formulating a
policy on remuneration that will aid in attracting and retaining the most appropriate talent. Non-
executive directors should be included in the committee so as to make sure that directors do not
decide their own remuneration. Executive directors should be compensated in such a way that
they will be motivated to achieve the organizational goals hence the remuneration committee
should make sure of that and take into account several other factors.
The audit committee is also made up of non-executive directors who have expertise in
finance and auditing. It should be charged with the mandate of reviewing the internal control
system and approving financial statements before they are sanctioned by the full board. Other
duties they should carry out include: Improving communication between management and
external auditors, reporting to shareholders, improving the reliability of financial statements and
deciding the remuneration of auditors.
The risk committee should be an independent committee made up of members of the board and
whose main responsibility is developing and implementing a risk management policy. It aids the

OPTIMUM CORPORATE STRUCTURE
board in achieving its objectives regarding the organization’s risk appetite and compliance with
the risk framework. The committee should be made up of members with experience in
identification, assessing and managing risk exposure. It carries out various duties such as
identification of risk, assessing the risk, prioritizing the risk, mitigation and reviewing of the risk
management policy. The nomination committee should be made up of members of the board and
charged with the responsibility of identifying the skills needed in the board. It should also be
involved in reviewing and change of corporate governance policy. It should also appoint the
chairman of the board of directors and may also aid in the search for a chief executive officer.
The chief executive officer should be a member of the committee but not necessarily the
chairman.
IV) Internal control requirements
Jewelry companies often deal with expensive merchandise hence effective control procedures are
crucial for risk mitigation. The internal control system should take into account both the external
and internal threats to ensure assets are safeguarded. Some of the internal controls should
include:
 Background Checks
Applying thorough checks on employees’ background is an effective way to avoid recruiting
criminals and individuals with a bad reputation. It should be done online before inviting the
candidates for an interview and physically before recruitment as a way of protecting the jewelry.
Thieves may come in as employees to try and identify weaknesses in the control procedures of
the firm. Background checks should be conducted for a few years into the candidates’ history
and further investigations carried out if there is cause for suspicion. This will enable the

OPTIMUM CORPORATE STRUCTURE
company to identify and avoid candidates with hidden agendas apart from helping the company
achieve its objectives. The checks should also be carried out regularly to ensure the employees
maintain the integrity and any details missed during recruitment can be identified.
 Restrictions on access
Access to rooms where merchandise is stored and display cases should be restricted to avoid
cases of theft. People who have permission to touch the merchandise should be as few as
possible so as to easily identify the responsible individual when inventory goes missing. They
should also be the most trusted employees and who can be easily traced in case of theft. Keys to
display cases should be issued to specific individuals and inventory rooms should be accessed
using key cards or fingerprints. Other restriction tools that are available should be implemented
but should be efficient and cost-effective. This control will enable the company to have control
from the inside and minimize cases of theft as much as possible.
 Testing of metals
Purchasing of precious metals is among the operations of the firm hence it is crucial that the
metals be tested for quality and authenticity. The firm may apply various methods including the
use of x rays and fire essays that are non-destructive. Employees responsible for making the
metal purchases should be trusted individuals and trained on testing methods and completion of
transactions. This control helps the firm save on time and money that could have been spent on
metals that are substandard.
 Verification of identity

OPTIMUM CORPORATE STRUCTURE
Fraudulent customers will often try to defraud the firm by use of fake credit cards or fake
currency, therefore, the firm should always request for identity and detailed information of the
customer before completing a transaction. Several online tools could be applied to verify this
information as fast as possible so as not to inconvenience the customer. This control will help the
company a great deal in minimizing losses due to fraud.
Conclusion
Corporate governance in Ireland is mature, encourages the independence of the board
and represents the interests of the shareholders. The board structure in Ireland differs from the
USA in that employees have to be represented in the board and the directors have to act in the
company's best interests as compared to the United States where they act in the shareholders’
best interests (Chhaochharia and Grinstein, 2009). The duties of the chairman and the chief
executive officer are more distinct and separate in Ireland hence the chief executive officer has
less power as compared to the United States. Directors’ duty of care is more relevant in Ireland
since it has a developed court system hence directors easily face criminal charges in case of
breach of duty. Ultimately, if the company was in the United States, the governance structure
would have been more flexible and one that encourages adaptability to changes.

OPTIMUM CORPORATE STRUCTURE
References
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Demsetz, H. and Villalonga, B. (2009). Ownership structure and corporate performance. Journal of
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