Corporate Governance: Foundational Issues - Paper Example

Published: 2023-12-16
Corporate Governance: Foundational Issues - Paper Example
Type of paper:  Essay
Categories:  Company Business Corporate governance
Pages: 3
Wordcount: 611 words
6 min read


Corporate governance entails how firms are governed, directed, administered, and operated in a more ethical manner to ensure the organizational resources are well protected. In the real world, challenges exist through which resources that belong to the organizations are being embezzled by the people intended to protect them. Among those under scrutiny are the directors who are deemed to be utilizing their power to achieve selfish goals. Facebook, for instance, in 2014, came under scrutiny due to the conflict between the shareholders and the directors.

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Whether Directors have the right to approve their Own Compensation

Ideally, the directors should not be allowed to conduct the approval for a given degree of the intended compensation. The directors should only approve their compensation after the approval that is obtained through the shareholder's vote. The CEO or director is mandated to approve the remuneration of the other staff, but they are not allowed to approve for themselves unless authorized by the shareholders. For instance, the director can approve the backdating, which allows other people to purchase stock at the expired date, and this is contrary to the desires of the shareholders since the director might be using proxies to gain more wealth. The directors have the inside knowledge on the direction the organization is taking, and they can use this information to their advantage.

Whether Zuckerberg broke the law for not bringing the Compensation issue up in a stockholder Meeting

Through the decision not to bring up the issue, Zuckerberg did not break the law. The compensation in the Facebook Company needs to be reviewed during an annual meeting that involves the proportion of holders. His silence to do so became an issue involving moral conduct. He aimed at explaining in detail during the popular meeting that is held annually that involves the board of directors. Through keeping quiet, Zuckerberg did not break the law but instead followed the right channel by waiting for the popular annual meeting.

The appropriate Level of Director Pay and whether the Proposed Compensation in the Facebook Situation is Excessive

The appropriate level of pay should always be an affordable means that the administrators. The level of play should nearly be the same when compared to the pay other directors in the same market get. The excessive compensation the directors receive tends to affect their ability to conduct the monitoring role as they only think of themselves. The proposed compensation in the case tends to be in excess compared to the existing similar pay in the market for the directors. The appropriateness of the payment is determined by the nature of works being carried out and in line with what the peer companies charge in the market.

Duties of the Directors and the Justifiable Pay

The works carried out by the directors should always be reasonable to justify their pay. The directors ensure the company achieves the decided strategies and direct it towards the desired direction. The work conducted should be eligible for pay at the approximate rate what other peer organizations are offering their directors given the nature of work. In this case, the amounts given does not justify the scope of work the directors conducted. The amount paid should, therefore, be justified by the amount of work conducted by the directors, and extreme excess in the stated standard pay should be keenly investigated to establish the reasons and motives behind it.

Corporate governance should, therefore, be taken into consideration to ensure conflicting interest and misappropriation of the organization's funds does not take place. It is aimed at ensuring the directors stick to their fiduciary duties, and they do not enrich themselves at the expense of the organization.

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