Corporate Governance Report: Shareholder and Director Responsibilities

This report provides a comprehensive overview of corporate governance, exploring its definition, objectives, and importance in the UK context. It delves into the roles of companies, shareholders, and directors, including their respective powers and responsibilities. The report discusses shareholder power, the influence of shareholders in corporate decision-making, and the dynamics between shareholder primacy and director primacy. It examines the composition and functions of the board of directors and its relationship with shareholders. The report also outlines the UK corporate governance code, its significance, and the impact of corporate scandals such as Enron on the development of governance practices. Furthermore, the report defines key terms such as 'company' and 'shareholder' and their legal implications. The report concludes by emphasizing the significance of corporate governance in promoting transparency, accountability, and effective management, thereby ensuring the long-term success and sustainability of organizations.

Corporate Governance
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Table of Contents
Introduction.................................................................................................................................................2
Define company..........................................................................................................................................3
Define shareholder......................................................................................................................................4
Discussion of shareholder power................................................................................................................5
Explanation of board and director...............................................................................................................7
Director’s power..........................................................................................................................................8
Shareholder primacy vs director primacy..................................................................................................10
Position in the company............................................................................................................................12
Conclusion.................................................................................................................................................14
Bibliography...............................................................................................................................................16

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Introduction
Corporate governance is known as the combination of laws, processes and rules by which
organizations are controlled, regulated as well as operated. It encompasses both the external and
internal aspects that impact the interests of the stakeholders of the company which involve
management, government regulators, suppliers, customers and shareholders. It is also referred to
the promotion of corporate fairness, accountability and transparency. The major objective of
corporate governance is to simplify efficient and entrepreneurial administration that could
convey the long-term victory of the firm. It is noticed that the board members are held
accountable for the authority of their corporations. In the UK, corporate power is the part of the
legal structure of listed corporations and applies to improve accountability along with
transparency.
Corporate governance is the interaction amongst several participants to shape the presentation of
the corporation. One of the key advantages of corporate governance is that it enhances the
reputation of the company by ensuring its success and economic growth. It allows the company
to share internal information with primary shareholders to make them feel confident. Another
advantage is that it enables the company to take steps to remain compliant with laws and
regulations. The board of directors conduct a review of the hiring practices of the corporation to
follow the rules. Thus, it reduces the possibility of expensive lawsuits or fines. Decrease of
conflict and fraud is the other advantage of corporate governance which limit the potential for
the bad behavior of workers. Through corporate governance, the company draft a statement of
conflict of interest and forbid loans to family members.
Corporate governance is significant to the corporation’s today in various ways. It assists the
company in changing ownership structure by forcing them to become accountable or transparent
and make customer-friendly policies for protecting the social groups1. It is noticed that several
scams or frauds are rising due to the misuse of money in companies. Corporate governance is
relevant to ignore the scams and misappropriation of money in corporations. Moreover, it is
crucial in expanding to the international market to attract foreign investor as well as customers. It
is observed that directors or shareholders abuse their power for their profits, and thus, corporate
governance is important to guard all the key stakeholders all the entity.
1 Mudji Utami and Bertha Silvia Sutejo, 'The Importance of Corporate Governance'.

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The UK corporate governance code guides the listed companies and allows them to develop
along with preserve effective relationships with all stakeholders2. The code in the UK applied in
the company to change its culture and enable to provide a responsive view to each stakeholder.
Enron was the company considered as the root of rising of contemporary corporate governance.
The corporate scandal was taking place in Enron Company due to accounting errors and
reduction in net equity of shareholders3. UK code establishes standards of good practice to
ensure accountability, effectiveness and leadership. The UK corporate governance code July
2018 applied to the companies within the accounting period in January 2019. The code provides
guidance to the directors related to risk management, financial reporting and internal control.
Define company
A company can be defined as an entity that engaged in business and a legal entity created by a
number of individuals for operating a business4. It refers to the incorporated business
organization that is registered under the company act 2006. A company can also be referred to as
the business organization that earns money by selling products or services. It can be different
types which include limited company, public company, unlimited company, private company,
statutory company, firm limited by shares and guarantee. A company comes into existence after
gets registered under the relevant Companies Act. Moreover, it is an artificial legal person that
contain rights to acquire as well as dispose of any property as per the company’s law. In
addition, a company is required to fulfil all the requirements related to memorandum of
association, directors, share capital, shareholders and article of association.
Furthermore, being an artificial individual in the perspectives of the law, a company uses its
common seal for the signature to keep the legal document bind. In order to incorporate a
company, there should be at least one shareholder, one director, and name as per the country,
office address and legal documents. However, a company is usually formed to earn revenue from
business operations. A company possess numerous legal rights along with responsibilities such
2 Mercedes Rodriguez-Fernandez, 'Social Responsibility and Financial Performance: The Role of Good
Corporate Governance' (2016) 19.
3 'Enron: An Investigation into Corporate Fraud' (Law.jrank.org, 2020).
4 Austin Smyth and Luke Kelleher, 'Differences in Control and Regulatory Structures of Public Transport
within the United Kingdom and Ireland: Implications For Quality And Effectiveness Of Service Delivery'
(2018) 2672.

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as the right to sue, pay taxes, borrow money, enter into contracts and own assets5. Besides this,
the majority of international investors form a company in the UK, and the country contains all
eight types of companies. The UK has a business-friendly and transparent system that motivates
the creation of a new company to earn a profit. However, the company is not recognized as a
corporation in some countries, but all corporations are considered as companies because of the
range of corporate structures. A company means an association of individuals, perpetual
succession, common seal, separate legal existence and undertaking of business activities6.
Define shareholder
A shareholder is regarded as someone who becomes a partial owner of the firm by purchasing
stock in a corporation. Shareholders buy corporate shares with the hope that their value will
increase with the growth of the firm7. In corporate governance, the role of a shareholder is to
appoint auditors and directors. As shareholders are regarded as the significant owners in a firm,
they reap the success of the business. Shareholders are subjected to dividend payments and
capital gains as residual claimants on the company’s profits. As per Companies Act, 2006,
shareholders possess certain rights like voting at shareholder meetings to permit things such as
mergers, dividend distributors and board of director’s members8.
In relation to their control of the firm, they have certain rule and responsibilities. According to
the Companies Act 2006, the role of a shareholder is to approve the significant rights of
shareholders at the corporation’s general meeting conducted by the directors9. Most of the
decisions can only be made by the shareholders like authorizing a service contract for a director,
changing the name of the firm and eliminating a director from office. Their major role is to
discuss the major aspects of a particular agenda and attend the meetings. While the main duty of
shareholders is to approve determinations at the general meetings by voting as per their
shareholder capacity. The rewards of shareholders come in the form of financial profits or
5 Nicholas Apergis and Yannis Georgellis, 'Regional Unemployment and Employee Loyalty: Evidence
from 12 UK Regions' (2018) 52.
6 Joanna Sadłowska-Wrzesińska and Agnieszka Mościcka-Teske, 'Relations between Stress Potential of
Work Features and Occupational Commitment Of Transport Workers-In The Context Of Optimization Of
Logistics Strategy Of A Company' (2016) 49 IFAC.
7 Sarah Arras and Caelesta Braun, 'Stakeholders Wanted! Why And How European Union Agencies
Involve Non-State Stakeholders' (2017) 25.
8 Xue Lin, Christabel M.F. Ho and Geoffrey Q.P. Shen, 'Who Should Take the Responsibility?
Stakeholders' Power over Social Responsibility Issues In Construction Projects' (2017) 154.
9 Andrew Judge and Robert Thomson, 'The Responsiveness of Legislative Actors to Stakeholders’
Demands In the European Union' (2018) 26.

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increased stock valuations which are distributed as shares. Within an organization generally,
three types of meetings are held such as meetings conducted by the NCLT, extraordinary general
meetings and annual general meetings. Majority of stakeholders within a company are
determined to be common stockholders as their stock is more plentiful and cheaper as compared
to preferred stock10.
Discussion of shareholder power
The person who purchases common shares of company stock is regarded as the actual owners of
that particular firm. A common shareholder possesses specific rights and powers that are directed
by the laws that conquer within the public where the head office of the corporation is located11.
The most critical rights of the mutual shareholders involve the power to share in firm’s assets,
income and profitability along with a degree of influence and control over the management
selection of the organizations. The power also includes newly issued rights and preemptive rights
as well as general meeting voting rights. In other words, the partial owners of the firm, such as
the common shareholders, have the power to contribute to a firm’s profitability as long as they
purchase the shares. For example, by following Companies Act of 2006, Unilever in the UK
gains benefits from its shareholders by strengthening the growth of voluntary dividends. Another
strength is that shareholders can place higher entitlement on the organization’s assets12. This
helps Unilever to guarantee a dividend every year and in case if the shareholders fail to return the
profit than the investments are compensated by preferred shareholders. Common shareholders
possess the power to influence organization management with the appointment of the
corporation’s board of directors.
According to Substantial Acquisitions and Takeovers (SEBI) Regulations 2015 shareholders are
forced to reveal the confidential details of the changes that take place in shareholding, followed
by prescribed onsets13. There also possess certain limitations for the shareholding firms in certain
restricted sectors like defence, real estate, airlines, insurance and many more. Therefore, it is
regarded as one of the significant weaknesses of shareholders that creates an impact on the
10 Pablo Aragonés-Beltrán, Mónica García-Melón and Jesús Montesinos-Valera, 'How To Assess
Stakeholders' Influence In Project Management? A Proposal Based On The Analytic Network Process'
(2017) 35.
11 Christian Downie, 'One In 20: The G20, Middle Powers and Global Governance Reform' (2016) 38.
12 'Companies Act 2006' (Legislation.gov.uk, 2020)
13 Pierre L. Kunsch and Jean-Pierre Brans, 'Visualising Multi-Criteria Weight Elicitation By Multiple
Stakeholders In Complex Decision Systems' (2019) 19.

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company’s business operations along with profitability. Meanwhile, based on the perspective of
investors within the company, the major weakness of preferred shares is that desired
shareholders do not have the power to vote in the firm as mutual shareholders. Lack of voting
rights by shareholders indicates that the firm is beholden to preferred shareholders even though
with guaranteed return on investment.
Another power of shareholders is to cast votes in the company’s general and annual meetings
that provide various opportunities to the company14. For example, it helps Unilever to propose
the fundamental changes that affect the company like liquidation and mergers. If the
shareholders cannot attend the meeting, they have the power to cast a vote through mail and
proxy. Another opportunity is that shareholders have the power to transfer ownership that
enables shareholders to trade their stock, followed by an exchange. This provides an opportunity
for the company to buy or sell security or asset within the market without creating an impact on
the costs of the assets. This is regarded as a major factor that distinguishes shares from the
investments. The shareholders gain power and opportunity to inspect corporate records and
books. It provides an opportunity for the firm to release their financials in two major forms of
annual reports like one for their shareholders and another for the Securities and Exchange
Commission (SEC)15.
Moreover, it can be said that stakeholders have the power to eliminate or employ directors from
the boards that create an impact on the company’s strategic decisions. Such power of
shareholders creates certain threats for the company like sale of shares in a material subsidiary, a
scheme for arrangement or compromise, entering into a new line of business and amendments to
charter documents as all these require approval from shareholders16. For instance, the power of
shareholder democracy creates threats for Unilever as the shareholders are needed to approve
certain parties those who are not associated with the firm. Furthermore, if the board of directors
of the company does not convene a general meeting within a given period, the shareholders have
the power to conduct the meeting by themselves. However, this provision is implemented by the
shareholders to eliminate the directors of the company. As a result, it creates threats for the board
of directors of the firm. Therefore, to overcome this threat, the company is required to provide
14 Aikaterini Argyrou and others, 'Unravelling the Participation of Stakeholders in the Governance Models
of Social Enterprises in Greece' (2017) 17.
15 Ericka Costa and Caterina Pesci, 'Social Impact Measurement: Why Do Stakeholders Matter?' (2016) 7.
16 Emel Parlar Dal, 'Rising Powers in International Conflict Management: An Introduction' (2018) 39.

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notice 21 days before conducting shareholders meeting. It must also provide timely and
sufficient information determining the agenda, location and date of the meeting.
Explanation of board and director
Board refers to the legal requirements of various forms of profit as well as non-profit
organizations. The major objective of the board is to ensure that the prosperity of the company
directing its affairs collectively when meeting suitable interests of relevant stakeholders17.
However, the board offer the business with strategic purpose along with the direction. A board is
commonly made up of those persons who are not hired by the organization. A board comprises
of chairman, chief financial officer, vice president, secretary and chief operating officer. The
board of directors elected or appointed by the shareholders of the concern. The chairman of the
board is observed as the spokesperson for the company along with the board. A board is known
as the governing body and held responsible for overseeing all activities of the organization18. The
members of the board used to meet periodically for discussing the affairs and policies of the
corporation.
Moreover, a director is the individual who supervises or leads a specific area of the company.
According to the company law, a director can be defined as a person who manages, control and
directs the affairs of the company and appointed to perform all duties along with functions of a
company with the provisions of company act19. It is analyzed that only a person or individual can
be appointed as a board of directors by the shareholders. A person must possess all the key skills
such as technical, leadership, communication, management, training and creativity to become a
director. The board of directors are responsible for organizational planning, assessing skills,
monitoring as well as managing financial resources and establishing a company’s mission or
goals. The key part of the board of directors is to develop the long-term value of stockholder by
reviewing strategies and maintaining a succession plan20.
17 D Kouloukoui and others, 'The Impact of the Board of Directors on Business Climate Change
Management: Case Of Brazilian Companies' [2019].
18 Sharifah Faatihah Syed Fuzi, Syahrina Adliana Abdul Halim and M. K Julizaerma, 'Board Independence
and Firm Performance' (2016) 37.
19 Andrew Kakabadse, Nadeem Khan and Nada K. Kakabadse, 'Leadership on the Board: The Role Of
Company Secretary'.
20 Elinda Esa and Abdul Rahman Zahari, 'Corporate Social Responsibility: Ownership Structures, Board
Characteristics & the Mediating Role of Board Compensation' (2016) 35.

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Director’s power
As per Company Act 2013, the directors of the company can exercise all those powers for which
it is authorized and take all actions on relevant matters21. The director has statutory as well as
managerial powers in the company, which could be beneficial or non-beneficial to the
corporation22. The board of directors has the power to make strategic along with the operational
decision of the company. It helps in ensuring that the company meet its statutory obligations.
Being a director, the person has the power to appoint the managing director as well as the
secretary of the company. Moreover, he or she has the power to control as well as supervise the
work of subordinates. These powers of director provide benefits to the company. For example,
Shell is the oil and gas company in the UK that earned over 187 billion pounds revenue in the
last year. One of the key strength to the company from the director’s power is that director
appoints capable and skilled manager for the company to oversee business operations. Another
strength is that the company subordinates performed all work effectively to generate revenue
under the guidance of the director. Shell could run its business efficiently with the formation of
policies and instruction, which is the other power of director.
The director can exercise some powers only at the meeting of the board members under the
passing of the resolution23. One of the powers exercised by the director at the board meeting is to
make loans. Making loans can be the weakness to the company because if the company failed to
produce adequate revenue and unable to pay the loan amount, then the company can be bankrupt.
Moreover, it may cause loss of shares of shareholders of the company, which put a heavy burden
on the management of Shell. Besides this, the director has the right to monitor the financial
position of the corporation and keep accurate accounting records24. In addition, another power of
director is to pay the corporate tax within the deadlines as well as arrange a minute of meetings.
Therefore, these powers of directors if not performed well, then the company undergoes into
huge losses and may face lawsuits. One of the weaknesses is that the director may fail to
maintain exact records of all accounting data, which can cause accounting errors and results in
21 '2013 No. 1970 COMPANIES'.
22 Jigao Zhu and others, 'Board Hierarchy, Independent Directors, And Firm Value: Evidence from China'
(2016) 41.
23 Taekjin Shin, 'Fair Pay or Power Play? Pay Equity, Managerial Power, and Compensation Adjustments
For Ceos' (2016) 42.
24 Abdulkader Omer Abdulsamad, Wan Fauziah Wan Yusoff and Alhashmi Aboubaker Lasyoud, 'The
Influence Of The Board Of Directors’ Characteristics On Firm Performance: Evidence From Malaysian
Public Listed Companies' (2018) 2.

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the failure of the business25. Another weakness is that corporate tax or other tax liability may not
be paid by the director within the given deadlines, which can generate expensive fines to the
company.
The director’s power may bring a threat to the company if misused or abused in conducting any
activity. One of the case laws in the UK is Eclairs Group Ltd v JKX Oil & Gas Plc, which shows
that the power of directors has breached26. The directors tried to abuse the minority shareholding
in the enterprise to acquire voting control without paying the other shareholders. The UK
Supreme Court made a judgment that the director can exercise the statutory powers only for the
purposes for which he or she was conferred. Moreover, another power of the director is to
comply with employment law and appoint or remove managerial employees27. If the director
breaches his or her powers or duties, then the company may face financial loss. The shareholders
can make a claim against the director for preventing the damage caused due to loss of shares in
the company.
Furthermore, the director possesses the power to approve merger or amalgamation of a company
which could bring opportunities to the company28. With the amalgamation of companies, the
company could obtain a competitive advantage and save advertising expenses by reducing costs.
Another opportunity obtained from the merger is to get market shares and generate revenue. The
company also obtain the opportunity to expand its business internationally as merger or
amalgamation enable balanced growth which is less risky29. The other power of director is to
issue debentures within and outside the country, which provide an opportunity to the company to
finance through them without diluting control of equity shareholders30. It is seen that financing
through issue debentures is less costly, and thus, the company can borrow loan from the general
public. The company could pay the interest on debenture if it faces loss and issue of debenture is
beneficial during inflation of the company.
25 Chloe Yu-Hsuan Wu and Hwa-Hsien Hsu, 'Founders and Board Structure: Evidence From UK IPO
Firms' (2018) 56.
26 Eclairs Group Ltd v JKX Oil & Gas Plc [2015] UKSC 71.
27 Saeed Akbar and others, 'Board Structure and Corporate Risk Taking in the UK Financial Sector' (2017)
50.
28 Suman Banerjee and Mark Humphery-Jenner, 'Directors’ Duties of Care And The Value Of Auditing'
(2016) 19.
29 Elimma C. Ezeani and Elizabeth Williams, 'Regulating Corporate Directors’ Pay and Performance: A
Comparative Review' (2017) 25.
30 Monica M Cossu, 'State-Appointed Directors, Related-Party Transactions and Corporate Opportunities
In Open State-Owned Companies' (2018) 4.

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Shareholder primacy vs director primacy
Empowerment of shareholders
Stakeholder empowerment consists of two different principles, such as the principle of
maximization norm of shareholder wealth and the principle of ultimate shareholder control31.
Even though shareholders do not practice regular authority, they eventually exercise decisive
decision making power with the help of the market for corporate control, shareholder lawsuit,
and institutional investor activism along with proxy contests. Shareholders do not have any
authority to begin the corporate action and entitled to disapprove or approve some of the board
actions32. The direct limitations on shareholder power delivered by corporate law are
accompanied by a group of legal and economic forces that protects investors from practising
major influence over the decision-making process of the company. Shareholder primacy not only
contends certain principles but also carries out ultimate control over the corporate enterprises.
Thus, shareholder privacy analyzes shareholder voting rights that are both strong and exclusive.
The control rights are so poor that they are rarely considered as a significant part of corporate
governance. For instance, the voting rights of shareholders are limited to voluntary dissolution,
sales of corporation’s assets, mergers, and bylaw amendments, approval of charter and election
of directors. Such limitations on shareholder power are categorized by several rules that protect
shareholders from practicing major influence over corporate decision-making. Shareholders
practice any control over the corporation with the control of the board of directors. Meanwhile,
the empowerment of shareholders is evidenced in the way through which directors agrees with
the demand made by shareholders. The ability of the shareholders to influence the election of the
board of directors represents the degree of impact they have over the firm. The proxy regulatory
regime disappoints a large number of shareholders from replacing obligatory directors through
their contenders33. It also depresses them from interacting with each other. Usually, shareholders
lack either indirect or direct mechanisms of control. In today’s context as compared to directors,
shareholders can put their precatory resolutions that can be included by the organizations within
its materials as per Rule 14a-8 of the Securities Exchange Act.
31 Mohd-Sulaiman AS Rachagan, 'Shareholder Primacy, Controlling Shareholders and Malaysia’S
Companies Act 2016' (2016) 17.
32 Marc L. Ross, 'Shareholder Primacy, Corporate Social Responsibility, and the Role of Business
Schools' (2016) 46 CFA.
33 Ann M Lipton, 'What We Talk About When We Talk About Shareholder Primacy' (2018) 69 Case W.
Res. L. Rev.

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Empowerment of directors
On the other hand, most of the time, directors are held responsible for managing shareholders
aspects through various market forces like reputational and capital markets. As per corporate
statues, the majority of corporate decisions are allocated to the board of directors or their co-
workers. The powers of the director’s primacy are assigned at the final stage. Directors are
obliged to attempt within the law to increase the long-term interests of the firm’s stockholders34.
Moreover, the election of directors does not need the approval of boards before the actions of
stakeholders are possible. Additionally, the election of directors is determined by the current
board nominating the next year’s board. While control is conferred in the board of directors. The
company’s affairs and business are managed under or by the direction of a board of directors.
Majority of the firm’s decisions are generally made by the board of directors. In the statutory
decision-making model, the shareholders react and board of directors act. Thus, it can be said
that control is vested in a board of directors rather than shareholders. In the real world, it is seen
that senior management acquires board of directors. The senior managers dominate the board of
directors by utilizing their power and compensate and choose by personal operating ties with
them35. Nowadays, much of the compensation of the director is paid in stock that helps in
supporting shareholder and director interests. The power of directors is regarded as the agents of
shareholders. Under the direction of the board of directors the corporation’s affairs and business
are managed. The directors are determined to be an institution of corporate governance that does
not adhere inevitably36. The conduct of directors is forced by an active market for shareholder
litigation and corporate control. Thus, modern directors are smaller as compared to antecedents
which have better access to information, buys more stock and independent from management. It
has been analyzed that the responsibility of a director is to fulfil the legitimate expectations of
shareholders that can be enjoyed by the firm. Therefore, it can be said that as compared to
director primacy, the role of shareholder’s interests is regarded as economically competent
company’s goal.
Position in the company
34 David J. Berger, 'Reconsidering Stockholder Primacy In An Era Of Corporate Purpose' [2019] SSRN.
35 Julian Velasco, 'Shareholder Primacy in Benefit Corporations' [2019] SSRN.
36 Christofer Adrian and Sue Wright, 'Perceptions Of Shareholders And Directors On Corporate
Governance: What We Learn About Director Primacy' [2018].

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As per UK corporate law, there must be a basic allotment of power among shareholders and
management to develop good corporate governance. Strengthening shareholders empowerment
by helping them to take major corporate decisions, approve by a vote along with the power to
initiate helps in overcoming the major issues associated with an agency that have affected public-
traded firms37. Followed by shareholder intervention power the significant corporate decisions
can be grouped into three classes such as,
• Change the firm’s state of incorporation or rules-of-the-game decisions to amend the
company’s charter
• Game-ending decisions to combine, trade or melt all assets
• Lowering down decisions to determine the size of an organization’s assets through in-kind
distribution or ordering a cash
It has been acknowledged that as long as shareholders contain power to substitute the
corporation’s directors, the corporate decisions are highly anticipated to be concentrating on
shareholders. The power to determine fundamental corporate change and the power to elect the
director’s states that shareholders have their way. Various powers of shareholders might create a
huge difference in corporate results by providing potential benefits to the organization. It can be
said that without having shareholder intervention power, the control of management towards
such changes may result in inefficient arrangements of corporate governance. Facilitating power
to shareholders may bring substantial improvements in the standard of corporate governance.
With the intervention of shareholders power, the desired changes can be made. For example,
shareholders who are highly concerned regarding their recent failures in governance will be able
to improve their processes by following charter amendments.
As an executive director, I will be the managing director or chief executive officer (CEO) of an
organization. The role of an executive director is to plan, create and adopt strategic plans for the
company in a well-structured manner in both time and cost-efficient way. The role of an
executive officer is to manage staff and committees and create a business plan in coordination
with the board38. As an executive director, I will have the power to run the company that will
37 Donald Nordberg, 'Edging Toward ‘Reasonably’ Good Corporate Governance' (2018) 17.
38 Natalia Ortiz‐de‐Mandojana, Javier Aguilera‐Caracuel and Matilde Morales‐Raya, 'Corporate
Governance and Environmental Sustainability: The Moderating Role Of The National Institutional Context'
(2016) 23.

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help in developing good corporate governance. It has been acknowledged that good corporate
governance needs responsibility where all the parties have a particular job description, and the
firm highlights the responsibilities expected by an individual within their role. In order to do so,
there is a need to maintain clarification among the roles through written descriptions of
maintaining clear communications and describing roles and responsibilities among executive and
board of directors. Providing relevant feedback to the board of directors regarding organizational
progress, strategic plans along with budget required to meet the expected duties helps in
developing good corporate governance.
The parties those who are impacted due to executive directors are the company’s board of
directors, insider director, shareholders, internal and external directors on a board. For example,
in the UK, the corporate governance comprises of the executive board which possess insiders
elected by shareholders and employees, and it is headed by the executive director. The executive
directors within the companies in the UK are in-charge of regular business activities. In the UK,
the Companies Act of 2006 is determined to be the principle statute that is associated with
corporate governance. It replaces and codifies certain common law duties of directors, including
executive directors39. Such common law and duties help executive directors within the
organizations in the UK to develop effective board management by considering the firm’s long-
term interest. As an executive director, I will consider the advantages of diversity that includes
gender diversity while hiring new directors into the board that leads to good corporate
governance. It also determines the level of major risks while attaining strategic goals by
maintaining internal control structures and sound risk management. In order to develop good
corporate governance, the executive director must agree and review with the opinion of every
director by determining their development and training needs.
Good corporate governance can be developed by strengthening the positive relationship among
the executive director and board chair. The executive director may influence the staff members
by providing them with relevant training regarding organizational culture and strategy to shape
the business model40. As a result, improved structure either permanently or temporarily will help
in overcoming the issues faced by the organization. As an executive director, I will be able to
39 Ruth Aguilera, Chris Florackis and Hicheon Kim, 'Advancing The Corporate Governance Research
Agenda' (2016) 24.
40 Patricia Grant and Peter McGhee, 'Personal Moral Values Of Directors and Corporate Governance'
(2017) 17.

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develop various policies to improve different programs that help in fulfilling the charitable
objectives of the firm. Furthermore, it can be said that sound corporate governance can be
developed, creating public presentations to the members of the community, government
representatives, organizational members and media.
Conclusion
The paper concludes that corporate governance is crucial for every corporation to reduce
corporate scandals and fraud. It helps the organizations to comply with the laws, rules and
regulations of the country to avoid fines and lawsuits. A company is known as the legal entity or
an artificial person designed by a group of people to earn profit from the business activities. It
can be of different types such as public limited, private limited and many more. A shareholder is
a person who purchases the stock of the company and becomes a partial owner of it. Board is
comprised of the members who are not employed by the corporation in order to oversee all the
activities of the organization. A director is a person who manages and controls the policies of the
company to improve long-term stockholder value in the business. The power of both
shareholders and directors could bring opportunities as well as threats to the company and
strengthen the position of the company in the market.
It is important to develop good corporate governance in order to reduce the opportunity for
corruption and regulate risk. There is a possibility of scandals and fraud within the company if
the directors and other management do not comply with good corporate governance. With the
help of good corporate governance, the company can operate more effectively, mitigate risks,
safeguard key stakeholders and enhance access to capital. It also helps in ensuring that the board
of directors maintain a risk management system, meet regularly and retain control over the
business. Good corporate governance makes the board of directors aware of their duties in order
to make effective decisions. It also assists the company in updating all registers and books and
allows the board members to keep all goals in mind. By developing a good corporate governance
system, the corporation can improve the functioning of the business.
Being an executive director, the person is responsible for overseeing the administration as well
as the strategic plan of the corporation. The position of executive director highly supports the
development of good corporate governance as it is also related to overseeing entire
organizational activities. A person is in the position of executive director should report directly

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to the board of directors. The role of an executive director is important to good corporate
governance as it supports all board decisions. The executive director emphases on the
components of good governance, which include clearness, accountability, efficacy, fairness,
responsiveness and participation, which are advantageous to the company for decreasing the risk
of fraud. However, the executive director can discuss the importance of developing good
governance with the board members and create a set of laws or rules in the company. The
executive director may advise the board of directors to build corporate governance in the
company to avoid scandals and misappropriation of money.

16
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