Shareholders are provided with a privilege of voting for the
Board of Directors of holding company. We'll discuss on why it is
important in choosing an external Board of Directors which
separates ownership from control by the management as below
points:
- Management makes many decisions over corporation like share
buyback, share consolidation, share repurchase, issuing debt or
raising an IPO which will impact the stockholder's value and
shareholder's will be obviously concerned about Board of Directors
who will hire this management. Hence, choosing the Board of
directors is indirectly choosing the controlling management of the
company.
- In choosing and electing vote for a Board of Director, a
shareholder will choose to elect someone who is experienced, who
have had positive contribution in his past career, who has made
sensible decisions and has competency to make financial decision
ahead.
- Choosing board of directors who can network with financing
could bring the market attractiveness to the company held by the
shareholders.
- Directors of the Board represents the shareholder's interests,
where management will regard the company's health on priority. At
times, this may create a principal-agent conflict where both the
parties may not agree, thus Directors of the Board supervises
wisely with the management's decisions.
We'll discuss over the concerns of shareholders with respect to
the friendly Boards of Directors..
- Shareholders may openly put their concern over corporate
affairs management held responsible by the Board of directors. As
the Board of Directors may not be able to create the independent
decisions exclusively without company's management help.
- Board of directors whoever are friendly and maintain
relationships with the management may not be able to have identical
views shared with the shareholders since they may get influenced
with the management's decisions or ideas.