Australian Stock Exchange, 2013 - Management Assignment

Internal Code: MAS4233

Management Assignment:

Interactions are a part of corporate governance which is a set of principles and recommendations that are aimed at corporations to achieve good governance outcomes and to meet the expectations of shareholders (Australian Stock Exchange, 2013). Drucker (1963) considered the lack of corporate governance to be an issue for a long time and argued for it to be incorporated into management. Akbar et al., (2016) regarded the relationship between corporate governance and firm performance in the UK, as paramount. They further argued that power and trust in the relationship between the board of directors and the chief executive officer (CEO), is important and this is supported by Zhang (2013). Interactions, being a part of governance, has not been researched to any large degree, however, corporate governance is a fundamental principle for performance that has attracted the interest of various academics, economists, and politicians (Salim et al., 2016). Vo (2010) examined ideas such as chief executive officer (CEO) duality, board independence, and using an external chair. Very little research, however, has been undertaken on the interaction between the CEO and board and whether the positive or negative interactions impact corporate performance, and whether or not this leads to higher stock prices (Zahra & Pearce (1989). The same issues arise as evidenced by numerous corporate failures such as Enron, WorldCom, Parmalat, Bear Stearns, and Lehman Brothers as prime examples. Rodrigues-Fernandez (2016), found through empirical evidence that better positive interactions improved the financial performance of the corporation and in particular with the compliance in the Dow Jones Sustainability Index whereby good corporate governance recommendations are expected. Questions: 1) To what extent can interactions that are not confrontational at board meetings between the CEO and board members predict corporate performance? 2) To what extent can corporate performance predict higher stock prices? 3) To what extent do interactions between the CEO and board members, predict stock prices? 4) To what extent does electronic communication interactions between the CEO and board members predict corporate performance? 5) To what extent do interactions between the CEO and board members that are deemed hostile, negative emotional, and argumentative, predict corporate performance?