Governing bodies are therefore of all shapes and sizes and have a variety of functions. A governing body may be a council, council, steering committee, assembly of elders or traditional owners, or a selection of extended families or clans, and may be gender-specific. In large companies, the board is often divided into committees with functional roles such as management, finance, compensation, strategy, audit, etc. Board members are assigned to committees, which in turn develop positions on topics relevant to the functional issue assigned to the committee. They make recommendations to the entire board of directors. According to the law adopted in 2002, review committees are mandatory and their functions and composition are clearly defined. The board may eventually evolve into a “board of directors” in the next phase, when the company, which is trying to either cash out its assets for the owners or raise funds for the next stage of expansion, “goes public” and becomes a publicly traded entity. Currently, the company is under the regulatory auspices of the SEC. Its board members are now exposed to the colder and harsher winds of securities law. The nature of the board of directors changes automatically, even if internal management retains control and retains more than half of the outstanding shares.
The main tasks of a public board of directors are the selection of officers, the approval of the issuance of additional shares, the declaration of dividends and the monitoring of financial activities by the audit committee. Under securities laws, directors are responsible for the legitimate exercise of their functions; Otherwise, high fines and jail time may be imposed. Members of an organization`s governing body may be chosen or elected on the basis of their land ownership, particular cultural knowledge, age or gender, or position in their group, community, region or nation. In large companies, the board of directors – and its committees – will have full-time employees involved in the preparatory and administrative work related to the activities of the board. Employees of these employees are also considered insiders due to their unique access to sensitive data. The composition of a governing body is “inclusive” when its membership reflects the broad range of rights and interests of the group on whose behalf the organization operates. The benefits of having a confident and qualified Chair include better discussion, informed decision-making, and the establishment of a shared spirit of collaboration and performance among Board members. If you sit on a board of directors, you will have to deal with conflicts of interest in your role. You can use this control to see when you might have a conflict of interest. If you find that this could happen, you must declare that you have a conflict of interest if this matter is discussed or decided by your governing body. Definition: A governing body is the group of people who are given the power and authority to shape policy and guide the overall direction of an organization. Its members may be elected to this position of power by vote or appointment by Aboriginal and Torres Strait Islander decision-making processes.
Those legal obligations impose specific conditions and restrictions on the management body which it must comply with collectively and individually. Individuals selected or elected to serve on the governing body of a legitimately constituted organization have responsibilities, but they also have “rights” associated with their roles. The dramatic collapse of Enron Corporation, the energy trader, on December 1, 2001, added to the national problems in a year of shock following the 9/11 terrorist attack of the same year, the largest bankruptcy in U.S. history. This bankruptcy, ultimately due to hidden and suspicious off-balance sheet transactions, fraudulently exaggerated profits, and failures in formal external audits, brought to light a long-standing and widespread criticism not only from senior management, but also from comfortable boards that were seen as cheerleaders for extravagant CEOs willing to approve actions without due diligence. Long before Enron, there was growing pressure to engage boards in a fight for more disciplined and publicly responsible corporate behavior. Enron provided a very forceful legislative response in the form of the Sarbanes-Oxley Act of 2002, abbreviated as SOX. The subject is discussed in detail elsewhere in this volume. Suffice it to note here that SOX revised financial reporting requirements, created a National Public Accounting Oversight Council to reform all audit procedures, and criminalized a number of actions taken by management and directors.