Corporate Governance Concepts Worksheet and McBride

Concept

Application of Concept in the Scenario

Reference to Concept in Reading

Shift in corporate power from the CEO to other stakeholders -

Board impact on corporate governance

Hugh states in an email "I want to give it its due attention but do not plan on allowing the money men to dictate how I'll run this company. Please proceed with invitations for those listed as my choice for directors." Beltway Investments believes that Hugh will use "sound corporate governance exercised by you and your team" (University of Phoenix, 2008).

Hugh does not see the advantages of having proper corporate governance at McBride Financial Services Inc. (MFSI). Hugh also does not see the benefit of independent directors without any close relations to Hugh in his email statement stating, "Since Beltway will need to approve these selections, I'll need a 'flowery' biography for each selling them on approval" (University of Phoenix, 2008).

A fully functioning independent board of directors will not keep Hugh around for long with his current attitude and work ethic.

"An active and independent board of directors working for shareholders clearly benefits the corporation by reducing the "agency problem" that arises from the separation of ownership from control in the modern corporation. It does so by acting as agent for owners in controlling a management whose principal motive is not to maximize value but rather to enhance its own position. Any resulting change in management's behavior, no matter how limited, should increase returns to the owners as residual claimants" (Chew & Gillan, 2005, p. 180).

"To serve as effective monitors, directors must be independent of the management they monitor. Directors who are members...