Board Meeting Effectiveness

942 Words4 Pages
The board of directors of a company has three main functions: monitoring, guiding and controlling. It has legal right to ratify and monitor managerial initiatives, evaluate the performance of management and reward or penalize that performance(Fama and Jensen, 1983). Board meeting is the main platform for directors to collect information and make decisions. Lipton and Lorsch(1992) suggest that the biggest challenge directors face today, is the lack of time to carry out their duties. Board meeting time(frequency) is an important factor in improving the effectiveness of a board(Conger et.al., 1998). An opposing view is that board meetings are not necessarily useful because of the fact that almost always the chief executive officer set the…show more content…
Brick and Chidambaran (2010) find a positive association between board meetings and firm value and they accentuate the theory that the increase in meeting frequency represents a rise in the level of monitoring, leading to better performance of the firm. In the backdrop of conflicting views on the board meetings, the importance of board meeting frequency and its impact on board effectiveness or firm performance, does not seem to be clear. In conclusion, it can be said that, in one hand it has associated costs including managerial time, travel expenses and director's sitting fees, etc and at the same time it has its benefits like more time for directors to confer, set strategy and monitor…show more content…
Security Exchange Board of India, constituted different committees from time to time and their recommendations are accepted and followed by companies. One of such committee was formed under the chairmanship of Kumar Mangalam Birla and it's recommendation was to have the audit committee of atleast three non-executive directors and at least two of them should be independent directors and the committee should also be headed by one of the independent directora. Independence of audit committee has been emphasised by Cadbury committee of UK and many other committees, across the world. It has also been found by researchers that firms with independent audit committees have fewer instances of corporate fraud(Uzun et al., 2004; Persons, 2005). The report of task force formed in 2009 by CII, under the chairmanship of Naresh Chandras recommended for more responsibility and accountability of Audit committee. It says that all the members of the audit committee should have good financial knowledge and all the appointments of auditors should be scrutinised by the audit
Open Document