Governance models help represent the roles, responsibilities, and tasks distribution between the board of directors and the CEO. Governance theories formulate governance principles, and governance models determine their application.
(Amis, Barney, Mahoney & Wang, 2020).
First: Stakeholder Theory:
Opportunities: According to (Freeman, Harrison, Wicks, Parmar & De Colle, 2010), the chances are when applying this theory that all the company employees and its board of directors will work on one goal, the goal is to raise the ccompany'sproductivity and the quality of its products and services, this will increase customer loyalty and thus increase the value of the company and increase the number of its investors. Finally, the community will benefit from the company that preserves its interests, as the community is included in the list of stakeholders.
Challenges: It is tough to act for the welfare of all stakeholders at once. This is because stakeholders are diverse and have different needs. In addition, their influence on the company's interests varies (Hill, 2017).
Second: CCarver'sModel:
Opportunities: According to (Carver & Carver, 2009), this model emphasizes the role of the board of directors in taking into account the ethical dimension in companies; the focus of this model is on goals and policy development by the board of directors, which makes the board dedicated to maintaining a more sustainable ethical structure for companies.
Challenges: This model's lack of focus on executive decisions leads to reckless decisions that may lead to many company risks. Since executive decisions are taken by the CEO, transparency may be reduced or absent. This would pose a threat to the importance of the board of directors due to the lack of information that reaches them.
Bechtel Company Example:
Although the company's board of directors includes members of the company family (Bechtel, 2022), the CEO always makes the final decision and has the last word and the most authority. Of course, decisions are made in consultation, but with the Carver model, the CEOtive dmakeThereexecutive decisionse, the CEO of Bechtel always takes some representatives in many areas of the company to reach the right decision (Denton, 2016).
Conclusion
Weak governance models lead to uncertainty and mistrust and also lead to many risks related to the reputation and position; the board of directors plays a vital role in establishing good governance when it has the correct information promptly, provided that this council is one of the competencies that can assess what is right and what is not and that the CCEO'sdecisions are based on the ccompany'sgoals and objectives and the needs of stakeholders.
References
Amis, J., Barney, J., Mahoney, J. T., & Wang, H. (2020). Why we need a theory of stakeholder governance—And why this is a complex problem. Academy of Management Review, 45(3), 499–503. Retrieved from EBSCO multi-search database in the TUW Library.
Bechtel. (2022). leadership, https://www.bechtel.com/about-us/leadership/
Carver, J., & Carver, M. (2009). A Carver Policy Governance Guide, The Policy Governance Model and the Role of the Board Member (Vol. 1). John Wiley & Sons.
Denton, S. (2016). The Profiteers: Bechtel and the Men Who Built the World. Simon and Schuster.
Freeman, R. E., Harrison, J. S., Wicks, A. C., Parmar, B. L., & De Colle, S. (2010). Stakeholder theory: The state of the art.
Hill, R. P. (2017). Failure of Ethical Leadership: Implications for Stakeholder Theory and ""nti‐Stakeholders"" Business and Society Review, 122(2), 165-190.