Question

This assignment requires you to discuss the your understanding of the role of the Board of Directors. What doe the board do? How does their actions impact the company? What issues should the board address? Describe any potential consequences when the board fails to execute their duties? Additionally, please list the reported 3rd quarter 2019 Earnings Per Share for one company. Did the company meet, exceed or fall short of the market estimate?

Answer 1

The board of directors’ primary task is to set policies for corporate management and oversight. Board of directors essentially makes decisions as a fiduciary on behalf of the shareholders of a company. A board looks into issues like hiring/firing of senior executives (usually C level executives like CEO, COO, CFO etc.), determine dividend policies, and develop executive compensation. The actions of the board of directors directly impacts the company as the actions of the board sets the broad goals for the company and ensures that the company has adequate resources at its disposal so that it can put in place strategic initiatives to achieve its goals and objectives in an optimal manner.

The board should address the issue of corporate governance. The board has to ensure that the interest of the shareholders is met and that the company is able to add value through its business and operational activities. For this the board addresses the issue of corporate governance as well as the issue of internal control as well.

When the board fails to execute their duties then there will be several negative consequences for the company. First of all fiduciary responsibilities towards the shareholders will remain unfulfilled. Secondly the company’s strategic actions will most likely become misaligned with its vision and mission. Thirdly loss of the oversight function of the board will de-optimize the company’s operations and its business model as well.

The 3^rd quarter 2019 earnings per share for Apple Inc. stood at $2.18. This was on a per diluted share basis and was above market estimate i.e. the company’s financial performance of 3^rd quarter 2019 in general and its earnings per share in particular exceeded market expectations. The market and the street had estimated an EPS of around $2.10 for Apple for 3^rd quarter 2019.