Financial Reporting and Ethics - The Institute of Chartered ...

CORPORATE GOVERNANCEtrust, possible fruitless litigations, inability to earn fair rewardon the capital employed and complete corporate failure;(b)(c)(d)Many corporate boards fail to do their jobs. A lot of them revel inmundane issues and ‘board room’ politics, thereby derailing fromtheir avowed responsibilities. Others are not sufficiently informedabout the nature of the business of the company. Indeed, somesee their positions as offers of offices and ‘ego trips”;There are instances of over-bearing boards which do not givetheir chief executive officers any breathing space. Conversely,certain chief executive officers and top management areuncompromising with the boards. Indeed, in some instances,there have been such comments as “many boards continue tohave directors whose only credence is that they have personalrelationship with the chief executive officer.” Such directorscannot, therefore, serve as watchdogs, nor can they perform theiroversight functions; andThe job of looking for new board members is sometimes devolvedon the chief executive officers who tend to select directors thatthey “can count on.” The end result is that the fear of inflictingdamage to the ‘friendly’ relationship between them tends todeprive the chief executive officers of the performanceevaluation, counsel and criticism that they would have needed.11.5 MINIMISING THE THREATS TS OF AGENCY COSTS AND BENCHMARKINGGOVERNANCE CASES IN PRACTICE11.5.1 Minimising The Threats of Agency CostsThe first requirement is to define terms. The Chambers Universal LearnersDictionary volunteers the following definitions for ‘a’ and ‘b’:(a)(b)Minimise“To make as little as possible.”Threat“A warning that one is going to hurt or punish someone. A signof something dangerous or unpleasant which may be, or is, aboutto happen.”Aluko et al (2007) define a threat as “an issue or condition inthe external environment that may prevent the firm from reachingits goals.213