- 20 Marks
SCS – L3 – Q23 – Conflicts of interest and ethical conflict resolution
Discuss three justifications for separating the roles of board chairman and CEO at Kabwe Pharmaceuticals Ltd.
Question
Susan Kabwe completed a first degree in pharmacy programme abroad and returned to her native country Gambia with the hope of starting a pharmaceutical company. Gambia has been experiencing high graduate unemployment and Susan was very determined not to join the teaming unemployed youth in the country. Susan put together an excellent business plan and approached four other childhood friends who have also completed university to start Kabwe Pharmaceuticals Ltd for manufacturing of basic and essential drugs locally. After many months of hard work, the company finally commenced operations two years ago.
Susan Kabwe plays a dual role of the chief executive officer (CEO) and chairman of the Board of Directors, and the four other friends are all executive directors of the company. The board of the company is currently composed of five executive directors and two non-executive directors. The two non-executive directors are close friends of the executive directors without relevant work experience since they remained unemployed 3 years after completing university. There have been several board meetings held without the non-executive directors. This situation is largely due to a belief by the executive directors that non-executive directors are really not needed since they do not play any important role on the board. Susan and other executive directors participated in a seminar on corporate governance where the facilitator made the following statements on best practices of corporate governance:
“The roles of board chairman and chief executive officer should be held by two different individuals”
“The board chairman performs critical functions to ensure that the board functions effectively”
“The board should be composed of at least one-third of non-executive directors”
After the seminar the executive directors disagreed with some of the facilitator’s assertions. They claimed the statements are idealistic and not pragmatic. Susan Kabwe has approached you as a corporate governance expert to help provide clarity to the statements by the facilitator.
Required:
Discuss THREE justifications why the roles of the board chairman and chief executive officer should not be held by Susan Kabwe.
Find Related Questions by Tags, levels, etc.
