Directors can get into trouble if they join boards for the wrong reasons like prestige or power rather than having the competency and time for the role. Key issues include a lack of understanding of director responsibilities and applicable laws, conflicts of interest that prioritize personal gain over shareholders, failure to stay informed on company matters, and insider trading violations. Collective board problems also arise from poor oversight and leadership, inadequate management involvement, entrenchment of long-tenured directors, and internal conflicts that hamper smooth functioning. Directors must understand the business, remain independent and avoid conflicts to effectively govern in the interests of shareholders.
4. Lack of Independence This renders the director ineffective in rendering objective judgments about important issues. Similarly directors are less likely to act independently if they receive substantial financial compensation.
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6. Failure to care Busy directors may not be able to have latest knowledge about the business in general and the company in particular. This affects informed decision making.
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11. Entrenchment A high percentage of board members remain on the board for too long.
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