Abstract
The board of directors is the highest body responsible for corporate strategy, customer satisfaction, and operations management. Its mission is to lead the company forward. Essentially, the supervisory board oversees the activities of the board. The duty to administer the code of conduct is solely the responsibility of the ethics and compliance committee and will be overseen by the board of directors, general counsel, and the chief financial officer. It is important to point out that the compliance and ethics will largely be made up of top-level leaders who will be representative of the corporate governance functions.
Chief Executive Officer (CEO), on the contrary, is a top managerial position, which is subordinate to the board of directors. The relationship between these two positions of corporate governance is complex. Although many companies may have their own unique approach to the relationships between the CEO and the board of directs, there are common traits and functions that are shared in the general corporate world. Therefore, the paper investigates common trends in relationships between the board of directors and the CEOs and provides an example of the global company Home Depot.
Introduction
The board of directors is the highest body responsible for corporate strategy, customer satisfaction, and operations management. Its mission is to lead the company forward. Essentially, the supervisory board oversees the activities of the board. The duty to administer the code of conduct is solely the responsibility of the ethics and compliance committee and will be overseen by the board of directors, general counsel, and the chief financial officer. It is important to point out that the compliance and ethics will largely be made up of top-level leaders who will be representative of the corporate governance functions.
Analysis
Corporate governance is a set of structures and processes that ensures effective control of the companies, and it usually involves the relationships among the shareholders, executive, and supervisory board. Ledgerwood (2017) argues that the purpose of corporate governance is to create a better shareholder value, attract financing, create a better reputation as well as improve operational efficiency. The paper discusses whether the scope of corporate governance covers the extent of the subject of governance and identifies the change that can be made to offer a better point of view.
As indicated by the figure 1 diagram, the scope of governance involves the board of directors, shareholders, management, financial market, government entities, external auditors, media, contractual shareholders, suppliers, society as well as customers. The central part of the corporate governance contains the shareholders, board of directors as well as management team. The board of directors is appointed by the shareholders to represent them in the company. The BOD is also involved in making a decision about the management by choosing the CEO who helps run the day-to-day activities of the company (Naciti, 2019). The external auditors help in tracing any potential financial frauds with the help of the internal auditor. Besides, the company’s share market and the rules and regulations guiding it are captured in the scope of governance. In addition, government regulations guiding the operations and successful running of organizations are part of the scope of governance.
Discussion
Considering the scope of governance as illustrated in the figure 1 diagram, the issue of ownership and management can be a major limitation. For instance, the shareholders are not directly in the management, and this can cause a conflict of interest. In order to eliminate this limitation, some changes, for example, ensuring that shareholders’ interests are represented in the management, should be made. For other entities such as not-for-profit charitable entities, the diagram is an indication of their corporate governance structure.
The situational theory of leadership helps executive directors to make the right decisions in matters such as staffing and planning of the organizational activities. Different organizations in different contexts deal with many issues, and this diversity can be managed by the CEOs of the organizations to ensure the best results for the public. Financial solvency is an essential aspect of organizations, and the board of directors and CEOs of the organizations should ensure that the organizations are financially solvent. Economic policies should be evaluated by the board of directors to see if they are useful or not. It is also the responsibility of the board of directors to approve budgets and review financial reports for the economic viability of the organizations. The CEOs of organizations must ensure that funds are not misappropriated in different departments such as finance. Other financial processes are connected to legal procedures such as paying taxes. Further, the structure separates the supervision and business execution functions in the management. Essentially, the goal is to improve the speed and to acquire appropriate issues when faced with issues (Chams & García-Blandón, 2019). The structure is made up of a delegation of decisions of the executive board, management of the board of directors, committee organization, and a support system for directors.
Corporate strategies & Roles
Organizations have many concerns in society, and their financial resources need to be effectively managed to match the needs, which should be addressed. For this reason, the board of directors, in collaboration with the CEOs of the organizations, should ensure they balance different needs and strategize on how to improve service delivery by the organizations for the service of all people in the society. Priorities are given to the organizational functions, which are more critical, and the corporate mission, vision, and objectives should be used to provide a direction to the board of directors on what action should be prioritized.
The boards of directors in organizations provide program oversight. It is their responsibility to ensure that different programs required for the efficient functioning of the organizations are put in place. The mission and goals of the organizations are critical and need a dedicated board, which could oversee the implementation of different policies to achieve the purpose and objectives of the organizations (Berns et al., 2021). The board and executive should work together in legal, financial, system, and personnel matters for the success of the organization. In addition, the boards of directors should work hand in hand with advisory boards to achieve effective program support, promotion of specialized skills in the organizations, and planning for fundraisings and other vital events in the organizations. The board members should be accountable in their operations so that the decisions they make can be valid and encourage legal and ethical development. The boards of directors for the organizations should be its community advocates. They should represent the interests of the organizations to the outside world. Any organizations require ambassadors who can represent the organizations to the community, and the board of directors deliberates on this matter. During fundraisings, the management of the organizations together with the board of directors encourages the public to provide funds for their performance.
Home Depot Example
The current Chief Executive Officer of Home Depot is Craig Menear, and he has held office since November 2014. Craig Menear’s roles include supporting motivation of employees in the company’s programs and operations, promoting any changes to the company or stakeholders that are related to the company’s mission. In addition, he is ensuring staff and Board members have sufficient and up-to-date information regarding the organization, and looking into the future to tap into any opportunities that could benefit the company as well as customers (The Home Depot, 2019). Mr. Menear is also the interface between the board and the employees, as well as the interface between the company and the community.
His role as a decision-maker includes formulating policies and plans recommendations and presenting them to the board, and deciding or guiding the courses of actions that staff members can take to see them through. In addition, his role as a manager of the organization includes implementing plans and policies, overseeing the operations of the company, managing the human resources of the company, and managing the financial and physical resources of the organization. He is also responsible for overseeing the design, marketing, promotion, delivery of quality products and services that reflect the core values of Home Depot. In addition, he is responsible for overseeing the company’s charitable non-profit foundation that the company established in 2002. It also partners with other philanthropic organizations to give back to the community (The Home Depot, 2019). Craig Menear is mandated with several roles as the Board developer where he assists in the selection and evaluation of board members. He also makes recommendations and offers support to the board when there is orientation as well as self-evaluation.
The Board of Directors of Home Depot is made up of thirteen members, and twelve of them are independent directors. The current members are Graig Menear, who is the Chairman, Chief Executive Officer, President and Director, Mark Vadon, Wayne Hewett, Helena Foulkes, Stephanie Linnartz, Gerard Arpey, Ari Bousbib, Jeffery Boyd, Gregory Brenneman, Frank Brown, Albert Carey, Armando Codina, and Linda Gooden (The Home Depot, 2019).
The Board of Directors’ mission statement is “Committed to maximizing long-term shareholder value while supporting management in the business and operations of the Company, observing the highest ethical standards and adhering to the laws of the jurisdictions within the Company operates.” (The Home Depot, 2019). The primary responsibilities of the board of directors include exercising its professional ruling to act in what it equitably trusts to be the best interests of the organization and its shareholders. Their primary purpose also includes ensuring the organization’s success by mutually directing the organization’s affairs while meeting the appropriate interests of its stakeholders and shareholders.
In carrying out its functions, the Board of Directors picks the organization’s management, acts as an advisor to the management as well as supervises the performance of management. It is the responsibility of the management to run the day-to-day operations of the organization. The board is mandated to, from time to time, review the business’s long-term strategic plan, capital projects, business initiates, and budget matters (The Home Depot, 2019). The board also allows the management to speak for the organization in any dealings with a third party. In addition to dealing with business and financial issues of the organization, the board of directors must deal with issues and challenges concerning corporate governance, corporate ethics, and corporate social responsibility.
The board holds four regular special meetings each year, and they are considered necessary. All directors are normally expected to attend all Board meetings as well as meetings of the Committees of the Board on which they serve. During these meetings, the directors discharge their duty to control the organization’s general situation, plan, and policy and to supervise the implementation of any delegated power. Individual directors are also expected to report on their specific areas of responsibility (The Home Depot, 2019). They are also expected to attend the annual general meeting of shareholders and are only allowed to be present under extraordinary circumstances.
Recommendations
The way the CEO and the board of directors of The Home Depot interact with each other seems to be well-balanced. Both corporate institutions seem to balance each other out in a way that complements and fulfills the strength of people and leaders who represent their positions. For example, the chair of regular meetings is Craig Menear, and his responsibilities during these meetings include ensuring they are conducted in such a manner that the purpose for which it was organized is properly attended to (The Home Depot, 2019). He is also mandated with ensuring that those entitled to express their views do so and that the decisions arrived upon during the meeting reflect on the views and opinions of the meeting as a whole. The agendas of the meetings are also often decided upon by the chair, and he is also likely to sign off the minutes.
Conclusion
In conclusion, the legal and ethical responsibility of the board of directors in for-profit organizations is an important matter. The boards of directors are involved in creating good relations with the public and overseeing the financial, social, and legal operations of the organizations, such as planning. A good leadership capacity should be developed by the boards of directors to meet their roles in promoting the mission and vision of the organization. The situational leadership strategy/theory accurately outlines the best leadership practices which should be adopted by organizations to achieve the best in service delivery to society. Accountability is an essential virtue that the board of directors of for-profit organizations ought to address.
References
Berns, J. P., Gupta, V. K., Schnatterly, K. A., & Steele, C. R. (2021). Chief executive officer dismissal: a multidisciplinary integration and critical analysis. Group & Organization Management, 46(2), 362-398.
Chams, N., & García-Blandón, J. (2019). Sustainable or not sustainable? The role of the board of directors. Journal of cleaner production, 226, 1067-1081.
Ledgerwood, G. (Ed.). (2017). Greening the boardroom: Corporate governance and business sustainability. Routledge.
Naciti, V. (2019). Corporate governance and board of directors: The effect of a board composition on firm sustainability performance. Journal of Cleaner Production, 237, 117727.
The Home Depot (2019). Corporate Governance Guidelines Of The Home Depot, Inc. Board Of Directors. Web.