CORPORATE GOVERNANCE AND ETHICS
However, the negative aspect of this measure can be that it is to be observed continuously that the directors are not working for only short-term growth of the company. There is a possibility that the directors can increase the worth of the company in the short-term, exercise the option and then sell the stock on high prices but after some time the company’s value will fall. To stop this, the owners and the Chairman must renew the performance related stock options and other incentives regularly.
Having external directors on Board:
The Chairman can also reduce the agency conflict between Tyme and other directors by adding more external directors on Cambridge Tymes’ Board.
Any company’s BOD comprises of both outside and inside directors. By having external directors, more expertise is added in the BOD’s competencies in the fields of business strategy development, organizational structure and Finance. Moreover, external directors have an independence that transfers with it greater objectivity in observing the behavior of management.
Adding an external director will reduce Tyme’s concern that the BOD is not making correct decisions and efficient utilization of resources in the interests regarding the growth of Cambridge Tymes; as an external director will have a more neutral opinion in the discussion.
A company’s BOD which is composed of completely insiders cannot be valuable because of the likelihood for permitting managerial entrenchment. While a company’s BOD which is composed of completely outsiders cannot be effective if the board has an incomplete comprehension of the company they are governing and will not be able to overcome the information asymmetry.
However, there is a possibility that Tyme does not like this measure as he may think that the external director may not have the required understanding of the mission and vision of the Cambridge Tymes. As Cambridge Tymes is the brain child of Tyme, he may not believe that any external individual can give same dedication to the company as the Cambridge Tymes’ internal directors can give. Moreover, as a director had sold his own company’s land to Cambridge
However, the negative aspect of this measure can be that it is to be observed continuously that the directors are not working for only short-term growth of the company. There is a possibility that the directors can increase the worth of the company in the short-term, exercise the option and then sell the stock on high prices but after some time the company’s value will fall. To stop this, the owners and the Chairman must renew the performance related stock options and other incentives regularly.
Having external directors on Board:
The Chairman can also reduce the agency conflict between Tyme and other directors by adding more external directors on Cambridge Tymes’ Board.
Any company’s BOD comprises of both outside and inside directors. By having external directors, more expertise is added in the BOD’s competencies in the fields of business strategy development, organizational structure and Finance. Moreover, external directors have an independence that transfers with it greater objectivity in observing the behavior of management.
Adding an external director will reduce Tyme’s concern that the BOD is not making correct decisions and efficient utilization of resources in the interests regarding the growth of Cambridge Tymes; as an external director will have a more neutral opinion in the discussion.
A company’s BOD which is composed of completely insiders cannot be valuable because of the likelihood for permitting managerial entrenchment. While a company’s BOD which is composed of completely outsiders cannot be effective if the board has an incomplete comprehension of the company they are governing and will not be able to overcome the information asymmetry.
However, there is a possibility that Tyme does not like this measure as he may think that the external director may not have the required understanding of the mission and vision of the Cambridge Tymes. As Cambridge Tymes is the brain child of Tyme, he may not believe that any external individual can give same dedication to the company as the Cambridge Tymes’ internal directors can give. Moreover, as a director had sold his own company’s land to Cambridge Tymes for a higher price, this will also reduce Tyme’s interests in any other external director...........
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