From Board Dominance to Ethical Excellence: The Role of Regulators and Customers

Technical Staff

February 24, 2023

Effective governance1 is critical for any company to thrive and succeed in today’s highly competitive business environment. A prominent and significant challenge boards of directors face is ensuring equal opportunities for all members to contribute to decision-making. Unfortunately, one or two directors dominate the board all too often, making it difficult for others to voice their opinions and ideas.

The dominance of a few directors on the board is counterproductive and can lead to conflict and poor decision-making. When one or two people have all the power, they may be more likely to pursue their interests than act in the company’s best interests. This can result in corruption, conflict of interest, reputational damage, decreased shareholder value, and even legal problems. Therefore, regulators play a significant role in lowering these problems’ risks.

Regulators should closely monitor the board’s actions regarding its commitment to integrity and ethical values and compliance with relevant laws, rules, and regulations. They should also consider the board’s composition to ensure a balance of power and that all directors have an equal opportunity to contribute to the decision-making process.

However, effective governance is not just the responsibility of the board and regulators. Customers also play an essential role in supporting a company’s integrity and ethical business conduct. A company’s reputation is critical, and customers are more conceivable to do business with companies they trust and respect.

In conclusion, effective governance requires a balanced board of directors, a commitment to integrity and ethical values, and consumer engagement. Regulators are essential in ensuring businesses follow the relevant rules, laws, and regulations. Still ultimately, it is up to the company to prioritize ethical behavior and integrity in all its business practices. Companies can achieve long-term success by developing strong customer relationships, earning trust, and gaining confidence.