The top leadership of any organization determines to a great extent the level of success that the organization achieves (McLean, 2015). Leaders who commit all their effort to their organizations create an environment that enables the organization to flourish. On the other hand, when leaders pursue selfish interests, they set the stage for poor performance. To drive organizational growth, the leaders must honor their legal duties to the organization. The corporate directors and officers should lead the charge in pursuing the objectives and strategies of their firms.
Fitzgerald Foods
Duties of Directors and Officers: Policy Document
Legal Duties of Directors and Officers
In an effort to promote adherence to company policy and rules, Fitzgerald Foods has developed a policy document. Among other things, this document outlines the legal duties and responsibilities of its directors and officers. These duties are as outlined below.
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All leaders and officers must uphold the business judgment rule. This rule requires organizational leaders to act in the best interest of their organizations in all their dealings (Schneeman, 2009). The leaders should also act in good faith and avoid any and all conflicts of interest. As part of their adoption of the business judgment rule, the directors and officers of Fitzgerald Foods will be expected to remain faithful to the company and its stakeholders. At no time are the directors and the officers to engage in any activity that compromises the mission and operations of the organization.
The directors and officers also have a duty of care. This means that they need to safeguard the interests of the organization (Anderson, 2008). Moreover, this duty mandates the directors and officers to make informed decisions. When involved in routine operations and while representing the company in external endeavors, the officers and directors will be required to ensure that their decisions are based on sound information. These decisions must also further the interests of the company. The director and officers are also to consult experts and set up an advisory committee. The role of the committee and the experts is to feed the directors and the officers the insights that they need to make informed decisions.
One of the most critical duties that the directors and the officers have is to pursue the interests of stakeholders (Anderson, 2008). In all their dealings and decisions, these leaders should ensure that the welfare of employees, shareholders, the community and other stakeholders is safeguarded at all times. Fitzgerald Foods also mandates its directors and officers to maintain high levels of integrity and accountability. This means that they should shun such ills as fraud and abuse of office.
Benefits of Compliance
When the leaders of an organization comply with policies and rules, they set the organization on a path to success and sustainable growth (Collins, 2009). This is one of the many benefits that Fitzgerald Foods will be poised to enjoy when its directors and officers execute their duties as outlined above. Another benefit of compliance is shielding the organization against legal action. There have been cases where companies have come under scrutiny after it is revealed that their senior officials violated rules and policies. For example, authorities in the European Union and the United States have slapped American banks with huge fines for violating financial regulations (Reuters, 2017). Enhancing the operations and financial performance of the organization is another benefit that will accrue to Fitzgerald Foods. It is understood that firms whose top management lead others in complying with standards, policies and rules record impressive performance and smooth operations.
Consequences of Noncompliance
It is likely that the directors and officers of Fitzgerald Foods will fail to fully comply with the company’s policy and rules. When this happens, the organization should brace for a number of potentially devastating consequences. Poor performance is among these. Failure by leaders to follow the rules sets the stage for disappointing financial performance. Furthermore, when leaders flout rules and policies, they help to create a culture of defiance. If they refuse to follow the rules, the directors and officers will have lost the moral authority to instruct lower-ranking employees to follow the rules.
Legal action and investigations by government authorities are other negative consequences that could result from the failure to follow the rules. Relevant government agencies my launch investigations especially if noncompliance harms the public. For example, suppose that the directors and officers sanction the inclusion of an unhealthy ingredient in the foods that Fitzgerald Foods makes. Such agencies as the Food and Drugs Administration (FDA) will be forced to investigate the directors, officers and the company at large. Consequently, the company’s image could suffer irreparable harm.
To fully appreciate the need for compliance with company policy, it is helpful to consider the example of a company whose performance and image has suffered due to noncompliance on the part of top leadership. Recently, it was revealed that Volkswagen installed software that allowed its vehicles to record lower levels of greenhouse gas emissions (Parloff, 2018). As punishment for this violation, the company was ordered to pay billions. Earlier this year, it was revealed that the company could face criminal prosecution. The case of Volkswagen is relevant because it highlights the damage that a firm faces when its top leadership fails to company with rules. The top leadership of Volkswagen knew about and actively sanctioned the installation of the software that enabled the vehicles to cheat about the levels of carbon emissions.
The policy document provided above will enable Fitzgerald Foods to ensure compliance. However, this document is not enough. It should be combined with the adoption of risk management procedures. Ensuring that the board represents all stakeholders is one of these procedures (Mishra & Jhunjhunwala, 2013). As a firm establishes an inclusive and diverse board, it imposes pressure on the top leadership to act ethically and in accordance with internal rules and policies. Linking pay to performance and behavior is another procedure that minimizes risk and promotes compliance. Fitzgerald Foods should tie the remunerations of its directors and officers to their compliance and performance. This will incentivize them to follow the procedures and work tirelessly to ensure the company’s performance. In conclusion, Fitzgerald Foods should keep a close eye on its directors and officers. It should ensure that they follow all guidelines and policies. As it does this, the company will be creating an environment which supports growth and ethical behavior.
References
Anderson, H. (2008). Directors’ Personal Liability for Corporate Fault: A Comparative Analysis . Alphen aan den Rijn: Kluwer Law International.
Collins, D. (2009). Essentials of Business Ethics: Creating an Organization of High Integrity and Superior Performance. Hoboken, NJ: Wiley.
McLean, H. (2015). The Enduring Organization: How Leaders Revive & Sustain Relevance. Charleston, SC: Advantage Media Group.
Mishra, R. K., & Jhunjhunwala, S. (2013). Diversity and the Effective Corporate Board. Cambridge, MA: Academic Press.
Parloff, R. (2018). How VW Paid $25 Billion for ‘Dieselgate’- and got off Easy. Retrieved April 19, 2018 from http://fortune.com/2018/02/06/volkswagen-vw-emissions-scandal-penalties/
Reuters. (2017). U.S., EU Fines on Banks’s Misconduct to Top $400 Billion by 2020: Report. Retrieved April 19, 2018 from https://www.reuters.com/article/us-banks-regulator-fines/u-s-eu-fines-on-banks-misconduct-to-top-400-billion-by-2020-report-idUSKCN1C210B
Schneeman, A. (2009). Laws of Corporations and other Business Organizations. Boston: Cengage Learning.
