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Board Of Directors' Role In The Us And Uk

1637 words - 7 pages

There are many similarities and differences in the way that companies, in both the United States and the United Kingdom, are owned and operated. One of the main issues to look at between companies in these two countries is the roles and responsibilities of their board of directors. The board of directors of any business plays a crucial role in the success of the company. Although there are many similarities in the board of directors in these two countries, a few key differences can change the aspect of the company’s oversight.
The board of directors is a group of individuals, mostly non-executives, who are elected to become the highest governing authority of any publicly traded company. Because of this power it is their primary responsibility to do whatever is in the best interest of the company and the owners of the company, or in other words, the shareholders. It is their responsibility to protect the shareholders’ assets and ensure that they receive a return on their investment. Within this responsibility it is the board of directors’ role to make decisions on major issues that a company would face. In order for the board of directors to effectively solve these issues they must act both as an advisory board, and an oversight board. The board of directors’ role as an advisory board would be to consult with management regarding strategic and operational direction of the company, and the role of an oversight board would be to monitor the company’s performance and reduce agency costs. (Stanford CITE) Some of the issues that would fall under the responsibility of the board of directors in the US and the UK would be to: select, evaluate, and approve compensation for top executives of the company, approve the corporate strategy, indentify risk areas and oversee risk management, guarantee the integrity of the company’s financial statements, ensure the company is in compliance with laws and regulations, and to recommend or discourage acquisitions and mergers. Board of directors are in the best position to solve these issues, in the interest of the shareholder, because most who are elected are independent of the company and on the board exclusively for their business expertise. Although this is some of the general responsibilities of the board of directors, in the US and the UK, they are very broad and can be interpreted differently, especially when taking into account the different laws, regulations, and cultural traditions these countries have.
One of these differences is in the interpretation of the duties that the board of directors has to act in the best interest of the company. In the US this is pretty cut and dry that the board of directors is to act in the best interest of the shareholders. Board of directors in the US are obligated to have fiduciary duty. Fiduciary duty means that you are acting in the best interest of another, and by breaching this duty board of directors become personally liable for their decisions. In the UK...

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