Essays on The Board of Directors, Resource Dependence Theory Assignment

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The paper "The Board of Directors, Resource Dependence Theory " is an outstanding example of a management assignment. The board of directors in every company have the mandate to hire the chairman of the general managers. It is the role of the directors to monitor and control the functions of the organization, therefore they are supposed to audit or hire an auditor general to their organization and hence, ensuring audit are conducted in a timely and transparent way every year. Once the board of directors have put in place the necessary requirements of hiring an auditor it now becomes easy to monitor how the managers are conducting their businesses and the funds that have been allocated to them in each financial year.

After the auditor’ s report is revealed, it is normally handed over to the directors for reviewing and analysing before it is gazetted. However, the directors may collude with the managers in order to hide some truth or loot company funds together in liaison with the company chairman for instance in the prosecution of TZ ltd. ’ s chairman, justice Adamson warned directors on the severity of dishonesty on the part of directors.

By concealing wrongdoing the directors become dishonest and thus, dishonesty of the director is a criminal offence and they are liable for jail term or stern warnings from the stakeholders and other authorities (Davis et al. 2012, p. 16-20). Once the shareholders become aware of any misleading information or missing documents in the audit summary they are supposed to take caution and find the gap in the report. For instance, the agency theory shows the relationship that exists between the principal that is the owner and agent that is the employees (Thomsen and Conyon 2012, n. d) With regard to this theory, the directors are supposed to monitor the management and also resolve the problems that occur in the organization.

According to the agency theory, some managers can on their own, conspire to benefit alone by stealing money from the company like in the case of TZ ltd. ’ s chairman (Nolan and McFarlan 2015, p. 96). Once a director is found to be concealing information or looting in conjunction with the manager they should be aligned in courts and be prosecuted regardless of their positions.

Further, once their trusted custodians have been found guilty investigations should be launched immediately to ascertain the directors’ involvement as well as their laxity while managers and chairmen misappropriated funds (Rabi, 2014.p. 73). for instance where were the TZ ltd. ’ s directors when the chairman was defrauding the company 24 times? . In reference to the agency theory, there should be effective separation or roles and as such directors should never collude with their managers with the aim of expropriating from the organization. According to this theory, the act of colluding with the management is considered unethical and henceforth should be treated with urgency to prevent further dishonest deeds (Nolan and McFarlan, 2015.p. 96).

Starting from the managers to the director's anyone found guilty of any offence that jeopardizes the organization’ s operations should be prosecuted and made to repay whatever they stole once they are found guilty. A dishonesty director should be punished through fines, imprisonment and made to repay the misappropriated funds (Gomez-Mejia and Balkin, 2012.p. 921-955). It is, therefore, important that the directors are always cautious to moral hazard situation of where the managers know more than the directors because they are the custodians of the company as stressed by justice Adamson in the case of TZ ltd. ’ s chairman.

References

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Donaldson, L. and Davis, J.H., 2010. Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of management, 16(1), pp.49-64.

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Nolan, R. and McFarlan, F.W., 2015. Information technology and the board of directors. Harvard business review, 83(10), p.96.

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