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Innovations in North American Business USA vs. Canada

The tasks of directors are divided into three categories: control, services, and resource reliance. Given that managers must prioritize the interests of shareholders, the control function needs directors to be in charge of recruiting and firing managers as well as the CEO. They must also ensure that managers continuously act in the best interests of their shareholders (Monks and Minow, 1995). The service function entails advising the CEO and other top managers on administrative and managerial issues, as well as establishing firm strategy (Johnson & Solomon (2010) identified many fundamental factors for establishing effective boards. 

An independent board is often seen as a positive feature of an effective governance structure. When the board is independent of management, it can better perform its job of overseeing management on behalf of stakeholders (Liu and Fong, 2010).


These include regular meetings, open and effective communication between board members and shareholders, a willingness to consider and incorporate suggestions from all parties, a strong commitment to integrity, a focus on identifying and addressing financial risks, and a proactive approach to increasing company efficiency. Walker (2005) emphasizes the importance of properly appointing and compensating directors while establishing a board structure. Ingely and Walt (2002) stressed the need of improving board diversity by using particular criteria to select directors. These criteria include qualifications, gender balance, and a diverse range of experiences. A board's effectiveness is measured by its capacity to add value to the firm. These recommendations are visible in acceptable governance processes, as evidenced by the UK Combined Code, which states: The board is responsible for providing dynamic leadership to the organization while also ensuring that proper controls are in place to effectively analyze and manage risks. The board is in charge of creating the firm's strategic goals, ensuring that the organization has the financial and human resources it needs to meet its objectives, and reviewing management performance. The board is in charge of creating the company's values and standards, as well as ensuring that its obligations to shareholders and other stakeholders are clearly understood and met. (UK Combined Code, 2006, page 3).

I'm interested in investigating board structure, particularly board size, CEO duality, and the presence of non-executive directors (NEDs).


In addition, I am interested in examining ownership structure, such as the presence of significant shareholders or concentrated ownership, shareholder identity, and managerial control. Furthermore, the study will look into how foreign investors influence firm performance. Finally, the chapter digs into the issues that firms face in emerging countries and compares various models. In the classic principal-agent paradigm, misaligned incentives might cause managers to prioritize their personal interests over maximizing shareholder value, resulting in agency difficulties. Managers frequently emphasize their own job security, position, and compensation, which can lead to shareholder expropriation and the associated agency costs. Interestingly, these managerial habits are more closely related to company size than firm profitability. Monitoring the activity of agents incurs agency fees for principals, which can have an impact on overall business performance As a result, the board of directors has the right to appoint, fire, and compensate top-level executives, oversee and assess major decisions, and ensure that executive directors act in the best interests of the company's owners. According to Fama (1980), the board of directors serves as an important instrument for supervision and evaluation. Decisions made by the corporate manager. According to the agency theory, the board of directors is critical to achieving successful corporate governance and protecting shareholders' interests. Its primary goal is to address agency issues and identify the most effective remedies (Fama, 1980). Resource dependency theory suggests that the board of directors aligns the corporation with external environmental demands (Aguilera and Cuervo-Cazurra, 2009). According to the list, it's 2009.Agency theory is founded on a fundamental understanding of human nature in contracting.Emphasizing agreements and accords highlights the role of agents in business success.

The Board of Directors


The board of directors' principal role is to oversee the company's operations and mitigate any issues that develop as a result of the interaction between the owners and managers. In this setting, principals operate as owners, agents as managers, and the board of directors as a monitoring mechanism. An agency problem occurs when the agent's and principal's interests do not align. There is always the possibility of agency difficulties, in which individuals prioritize their personal aims over those of the company. To solve this, principals choose members of the board of directors and agents to ensure that the firm acts in the best interests of its shareholders. This conflict of interest, along with the requirement to manage agents, results in agency fees for the firm. These expenses include monitoring and bonding fees, as well as residual losses (Jensen and Meckling, 1976). In the end, the principals incur these costs, thus it is their obligation to reduce agency costs in order to maximize shareholder value. The board of directors is the highest level of corporate control systems, overseeing management on behalf of the shareholders who elect its members. When the board has too much power and influence over managers, it limits their ability to engage in activities other than increasing shareholder profit (Liu and Fong, 2010). As a result, the board of directors is an important monitoring instrument for protecting principals' interests (Jensen and Meckling 1976). 

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