Financial Decision Making

Assignment no II

Submitted By Waqas Humayyoun

FA10-RBA-012

MBO-II

COMSATS Institute of Information Technology

ISLAMABAD
Chairman
The chairman is the highest office of an organized group such as
a board, committee, or deliberative assembly. The person holding the office is typically
elected or appointed by the members of the group. The chairman presides
over meetings of the assembled group and conducts its business in an orderly
fashion. When the group is not in session, the officer's duties often include acting as its
head, its representative to the outside world and its spokesperson.
A chairman is selected by a company's board to lead the board of directors,
preside over meetings, and lead the board to consensus from the disparate points of view
of its members. The chairman is the presiding director over the other directors on the
board and is expected to be fair, a good listener, and a good communicator.
In public companies, the role of the Chairman of the Board is distinct from that of
the company's chief executive officer or managing director. This point has more recently
been brought into focus after corporate governance shortcomings were observed in
companies where the two roles are combined. It is believed that the separation of
functions within the board of directors or in the structure of the supervisory board and
management board would facilitate control over the workings of the company and
increase the accountability of the CEO or chairman of the management board.

Chairman of the Board types

In the case of companies and similarly-organized bodies, there are generally two
types of chairmen, non-executive and executive.
Non-executive
A non-executive Chairman of the Board is and does the following:

 A part-time officeholder who sits on and chairs the main board of a company.
 Provides support and advice to a CEO.
 This position usually entails fulfilling a similar function on a number of additional
board committees, as well as being a political figurehead of the Company.
Executive
An executive Chairman of the Board is and does the following:

 A full-time officeholder who typically leads the board and also takes a hands-on
role in the company's day-to-day management.
 Helps the CEO to oversee all the operational aspects involved in running the
company, which include project planning and development delivery, retail and
leasing, sales, market research and many other areas within their extensive scope.
  Has overall responsibility for the company, which involves engineering and
controlling the company's current growth in and future expansion into markets,
existing and new.
 In addition, oversees all projects' development activities and related businesses of
the company, with the intention of generating financial returns for the shareholders
and driving sustainable development.
The chairman often sets the style of leadership of the board which in turn filters down
through the organization.

The role of a chairman and CEO

It is the Group’s policy that the roles of the Chairman and CEO are separate, with
their roles and responsibilities clearly divided and recorded. A summary of their roles is
as follows:

The Chairman is responsible for leadership of the Board, ensuring its

effectiveness and setting its agenda. The Chairman facilitates the effective contribution
and performance of all Board members whilst identifying any development needs of the
Board. He also ensures that there is sufficient and effective communication with
shareholders to understand their issues and concerns.

The CEO is responsible for executing the strategy agreed by the Board and
developing the Group objectives through leadership of the senior executive team. He will
recommend to the Board any investment or new business opportunities which meet this
strategy. He also ensures that the Group’s risks are adequately addressed and appropriate
internal controls are in place. The CEO is responsible for meeting with shareholders and
ensuring effective communication.
The special responsibilities of the Chairman include:

• Taking the chair at Board meetings;

• Ensuring the proper working of the Board;

• Sometimes acting as the leading representative of the Company in its dealings with the
outside world, including the financial markets, regulators, the press, governments,
interest groups and the community;

• Maintaining proper shareholder relations, both formally through the Annual General
Meeting and reporting procedures, and informally with all major shareholders;

• Initiating policy decisions with the Chief Executive and the Board;

• Ensuring the existence of an effective strategic planning system and the appropriate
consideration of future development possibilities;
• Ensuring that the Board plays an active role in strategic review and that development
proposals and planning issues are referred to the Board for discussion and approval;

• Establishing basic priorities, ethical values, policies and attitudes for the Company;

• Ensuring that probity is maintained in accounting, reporting and all other respects;

• Monitoring the Chief Executive's performance against established criteria/measures of

financial and operating performance, in conjunction with the Board;

• Deciding, together with the Chief Executive, what matters should be the concern of the
Board, and which are purely management matters, to be left to the executive
Management;

• Acting as counselor, adviser and listener to the Chief Executive and, where necessary,
other members of the Board;

• Ensuring a sound management structure through the appointment of the best

management the Company can afford.

Managing Director
The MD runs the company's business on a day-to-day basis. He is responsible for
ensuring that the company's strategic plans and operating budgets are aligned with the
corporate objectives set by the Board. He provides leadership to the company, and is
accountable to the Board. The basic argument against combining the roles of the
Chairman and the MD/CEO is that it would lead to a conflict of interest. It would be
difficult for the Board of Directors to supervise the management of the company
effectively, if the Chairman (who heads the Board) is also “management”.
Additionally, day-to-day pressures of running the company may make the
incumbent focus more on the MD's role, at the cost of his (or her) responsibilities as the
Chairman. The combined role also denies the company the benefit of having two senior
people at the helm that can bring their combined wisdom to bear on any issue at hand.
Concentration of all powers in the hands of one person is also a risk.

The argument in favor of combining the roles of the Chairman and the CEO rests
essentially on “simplicity” — that it is a lot more efficient to have just one person at the
top to take decisions and move forward. This option eliminates the potential harmful
effects of having two people at the top who do not necessarily see eye-to-eye, leading to
politics and ego clashes. Last, it might not be practical (or affordable) for smaller
companies to have two senior leaders on its rolls.

Executive Director

The role of the Executive Director is to design, develop and implement strategic
plans for their organization in a cost-effective and time-efficient manner. The Executive
Director is also responsible for the day-to-day operation of the organization, including
managing committees and staff and developing business plans in collaboration with the
board for the future of the organization. In essence, the board grants the executive
director the authority to run the organization. The executive director is accountable to the
president of the board and reports to the board on a regular basis - quarterly,
semiannually, or annually. The board may offer suggestions and ideas about how to
improve the organization, but the Executive Director decides whether or not, and how, to
implement these ideas.

The Executive Director is a leadership role for an organization and often fulfills a
motivational role in addition to office-based work. Executive Directors motivate and
mentor members, volunteers, and staff, and may chair meetings. The Executive Director
leads the organization and develops its organizational culture.
As the title suggests, the Executive Director needs to be informed of everything that goes
on in the organization. This includes staff, membership, budget, company assets, and all
other company resources, to help make the best use of them and raise the organization's
profitability and profile.

Required Skills
The core areas of knowledge and skills required by Executive director encompass
 Basics in Management and Leadership
 Planning
 Organizing
 Leading

Non-executive director
A non-executive director (NED, also NXD) or outside director is a member of
the board of directors of a company who does not form part of the executive management
team. He or she is not an employee of the company or affiliated with it in any other way.
They are differentiated from inside directors, who are members of the board who also
serve or previously served as executive managers of the company (most often
as corporate officers).
Non-executive directors have responsibilities in the following areas, according to
the Higgs Report, commissioned by the British Government and published in 2003.

 Strategy: Non-executive directors should constructively challenge and contribute

to the development of strategy.
 Performance: Non-executive directors should scrutinize the performance of
management in meeting agreed goals and objectives and monitoring, and where
necessary removing, senior management and in succession planning.
 Risk: Non-executive directors should satisfy themselves that financial
information is accurate and that financial controls and systems of risk management
are robust and defensible.
 People: Non-executive directors are responsible for determining appropriate
levels of remuneration of executive directors and have a prime role in appointing, and
where necessary removing, senior management and in succession planning.