In the current financial crisis, the directors of stricken UK financial institutions run as listed companies have faced few legal consequences of arguably poor strategic management and risk management on their part, and there has been little new regulatio

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In the current financial crisis, the directors of stricken UK financial institutions run as listed companies have faced few legal consequences of arguably poor strategic management and risk management on their part, and there has been little new regulation affecting the boards of listed companies in the financial sector since the crisis began.

Discuss those changes that have taken place and those that are being considered, and evaluate the extent to which you consider that these changes are likely to bring about more effective boards for listed companies in the financial sector and avoid a repetition of the same disastrous events.

081375217

1/03/2012

Word Count : 1912

The main aim of any company is the prosperity and success of the company whether it is for financial gain or for the production of services. The main driving force behind these goals is the successful management of the company.

The Companies Act 2006 (CA 2006) s. 154 states that every private company must have at least one director and every public company there must be two directors in place, thus all companies have

The management of a company however under UK law is to be decided by its members through their articles of association.  The majority of companies use the model articles, under which it states that the directors have control of the companies under Article 3, and therefore are responsible for corporate governance Since 2008 there has undoubtedly been a global financial crisis which has lead to many company failures. However there have been few legal consequences of arguably poor strategic management and risk management by directors, and little new regulations affecting the boards of listed companies in the financial sector . evaluate the proposed changes  recurrence of the

As stated above the main management responsibilities of a company rests directors. However a key duty of a  under s.172 CA 2006 is to act in a way he considers to be in good faith and to promote the success of the company for the benefit of its members as a whole.  Directors also have a duty under s.174 CA 2006 to exercise reasonable care, skill and diligence. The appointment of directors is in accordance with the articles of association, for publicly listed companies it is regulation 19 of the model articlesCommon practice  European Union (EU) is to have a 2-tier board structure, however this is not governed by law. Through good practice of UK companies the boards are commonly made up of half independent non executive directors, however with the financial crisis there has been many questions raised over the suitability of ‘the long established conventional wisdom and practice that non executive directors make an essential contribution to corporate governance.’. (Walker, 2009)

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There is however no reference to non-executive directors specifically in the Companies Act 2006. The input from non-executive directors has at best been questioned due to their ‘lack of Knowledge’ (FSA, 2009,Turner Review). This caused an adaption in the code in 2010 under principle B.2 in which “the search for board candidates should be conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the board, including gender”. As well as this criteria for selection there is call for further development by the OECD steering group in 2010 to make ...

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