In the United Kingdom, there are Listing Rules that require all companies with a premium listing of equity shares to abide by the Code; failure to which they must give shareholders a reasonable explanation as to why they did not comply. This principle is commonly referred to as, comply or explain. The United Kingdom Governance Code contains broad principles and provisions that are more specific and its effective for it covers issues such as risk management, remuneration, role of board of directors and relations with shareholders (Rafael 3).
Duties of directors are covered in Chapter 2 of the Company's Act 2006, from section 170-177. These obligations include duty to avoid conflict of interests, duty to make unbiased decisions, duty to act within his powers, exercising reasonable skill, diligence and care, duty to promote the success of the company, duty to declare interest in a proposed transaction, and accepting rewards from third parties.
In this case study, Mr. Anthony Mason who is the chief executive is not acting in his powers for he takes up the roles of a Chairman. For example, he dominates meetings which Sir Basil should be chairing for his the president. Each director and non-director having their duties and responsibilities clearly written down as part of the corporation’s laws can address this problem. When one of the members breaches this, there should be consequences such as: the member gets suspended or demoted (Shleifer 734).
The Aston Bank administration is reluctant and there is no equality. This is because Sally and Jeremy were not consulted prior the meeting about the new strategy. Despite been given an opportunity to air their views about the new proposal, they ought to have been consulted prior the meeting so that they can research whether the strategy is a smart move for they are part of the Remuneration and Audit Committee respectively. The chief executive makes decisions without consulting anyone for everyone was surprised about the new strategy and the board members were reluctant to question his move. The company should focus on medium and long term goals, short-term goals tend to focus on immediate results and not the future (John and Senbet 371).
There should be transparency and accountability from the Board members, each one of them should be answerable to their dockets. Steps to passing a new strategy that will affect the Bank should not be a one-man decision but a series of consultations are key to produce good results. The non executive directors should bring an independent view this will aid improve governance.(Solomon 72) Effective information policy is important so that crucial information is not left out, misuse and retaining information contributes greatly to poor governance. Hiring of any person or firm should not be left to one person; there should be a human resource department that is in charge of the job. This could avoid corruption and favor ism in hiring for Anthony hired an external IT consultancy firm even though he was fully aware the wife is partner in the firm.
Gender equality in the board is important; in the case study, there is only one woman who is a non-executive director. When companies are gender sensitive, there is cohesiveness from both genders in achieving targets (Dimsdale and Prevezer 310). Directors involved in bribery cases should be meticulously probed and provisions provided in the Company's Act and UK Bribery Act adhered to. Activities that have potential bribery transactions should have a separate ledger account such activities can be: travel expenses, gifts and entertainment expenses (Brennan and Solomon 900).
Governance should stop being director-based but rather shareholder-based because that vote in the directors but are never in-charge of management. Directors should not be politically influenced when it comes to management.
Director appointment should not be automatic, just because ones father or relative was on the board it should not be obvious, shareholders should be aware of the qualifications of those vying to be directors. Leadership review should be on an annual basis to determine a board’s competence and one should not exceed a certain term in governance. The board’s decisions and meetings should be documented adequately to avoid misunderstandings and misinterpretations when it comes to executing the decisions made.
The board of governance should be active and engaged; a single individual should not undertake all the work, as seen in the case study where Mr. Anthony was the rainmaker. They should obtain relevant information and consult relevant board committees and board advisors. The committees should be independent to avoid impartial advice. Alternative solutions should be discussed when it comes to decision making so that all directors can feel appreciated and considered relevant.
Works Cited
Becht, Marco, Patrick Bolton, and Ailsa Röell. "Corporate governance and control." Handbook of the Economics of Finance 1 (2003): 1-109.
Brennan, Niamh M., and Jill Solomon. "Corporate governance, accountability and mechanisms of accountability: an overview." Accounting, Auditing & Accountability Journal 21.7 (2008): 885-906.
Dimsdale, Nicholas, and Martha Prevezer. Capital markets and corporate governance. Oxford: Oxford University Press, 1994
John, Kose, and Lemma W. Senbet. "Corporate governance and board effectiveness." Journal of Banking & Finance 22.4 (1998): 371-403.
La Porta, Rafael, et al. "Investor protection and corporate governance." Journal of financial economics 58.1 (2000): 3-27.
Li, Jing, Richard Pike, and Roszaini Haniffa. "Intellectual capital disclosure and corporate governance structure in UK firms." Accounting and Business Research 38.2 (2008): 137-159.
Shleifer, Andrei, and Robert W. Vishny. "A survey of corporate governance." The journal of finance 52.2 (1997): 737-783.
Solomon, Jill. Corporate governance and accountability. New Jersey: John Wiley & Sons, 2007.
Tricker, RI Bob. Corporate governance: Principles, policies, and practices. Oxford: Oxford, 2015.
