Your firm, which specializes in complex electronic products, has grown rapidly a

ID: 2705733 • Letter: Y

Question

Your firm, which specializes in complex electronic products, has grown rapidly and you are now incorporating. Even after incorporation, a large percentage of the stock will be held by the founders, including you. Your colleague recommends a large corporate board made up exclusively of outsiders. She is very concerned about the sensationalized corporate scandals in recent years. Do you agree with her recommendation

Explanation / Answer

Yes, I am agree with her recommendation to have the large corporate board made up only of the
outsiders as after incorporation, a large part of the stock is being held by the owners of the organization. Her
recommendation can be useful in the following ways:
The company will operate in the best interest of the public and the society
There is no chance of conflict between the shareholders interest and the organizational interests
There will not be condition where the owners of the company can make undue profits at the organization cost and its shareholders
The outsiders of the company will bring a large amount of diversified expertise on the board for improve the working of the organization
There is no chance of corporate scandals as the outsiders of the company will have a look on the workings of the owners of the organization
The outsiders of the company will not allow the owners to exert their pressure on the company auditors and proper
audit can be taken by the auditors which are free from any defects and misstatements

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