Solution of trhee question Essay Example | Topics and Well Written Essays - 1500 words

Solution of trhee question - Essay Example Separating the roles of chairman and CEO mainly helps in distributing the balance of power and responsibilities. Board is the primary internal control mechanism for aligning the different interests of shareholders and top management. When an individual serves simultaneously as chairman and CEO, the Board’s control over him will be weakened. This does not happen when the roles are separated. The role of Chairman includes managing the business of the Board and monitoring its progress. Non-segregation of duties of Chairman and CEO would reduce the monitoring effectiveness over the management of the company. Opportunistic executives may take advantage of their combined role as Chairman and CEO in order to personally benefit at the expense of the shareholders. The chances of such injustice would reduce to an extent if the roles are separated. Having a single leader instead of two helps promote effective action by the CEO speeding up response to external events faced by the company. Separation of roles could lead to delays in such response. (iv) The main reason for any company to issue its rights shares at a discount is to make the offer relatively attractive to shareholders and encourage them either to take up their rights or sell them so the share issue is â€Å"fully subscribed†. The price discount also acts as a safeguard should the market price of the companys shares fall before the issue is completed. The existing shareholders or purchaser of rights would still be interested in subscribing for the shares so far as the subscription price remains lower than the market price of the shares. A company would prefer to use rights issue as a source of finance because the chances of the shares being fully subscribed under rights issue is higher when compared to shares being freshly issued in the market. A firm can grow in two ways: either by merging with or