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Governance reform at Research in Motion Ltd. (RIM) Case Solution & Answer

 Governance reform at Research in Motion Ltd. (RIM) Case Solution

Comparison of board with similar companies:

In order to analyze the effectiveness of the board structure of the RIM, there is a need to compare the board structure of RIM with the similar companies. The number of board members at RIM increased from seven to nine members, whereas, byanalyzing the board structure of the similar companies, it is clear that the mobile and IT companies are following both long and short board structures as the number of board members in Samsung isnine (SAMSUNG, 2016)whereas,the number of board members in Ericsson isfifteen (Ericsson).

In order to analyze the best practice of the board’s structure, the board’s structure of other companies is identified such as the number of board members in Diageo is twelve (Diageo)whereas,the number of board members in Tesco is thirteen. (ACCA, 2012)

The advantages and disadvantages of a larger board compared to smaller boards:

There are certain benefits of board’s composition as in some cases larger boards are more preferable and in some cases smaller boards are more preferable such as in smaller companies, even in private or public smaller companies smaller boards are more suitable as they generate more profit as compared to the larger boards. Moreover, the primary need of the smaller companies is to generate greater profits to support the future growth strategies.

On the other hand,the increase in the size of the organization requires more board members to protect the rights of the greater public and for the greater controls as the increase in the size of the organization requires complying with the principles of the corporate governance significantly as compared to the smaller organization. The detailed pros and cons of the larger and smaller boards are given below.

Larger Board over smaller board

Pros:

  • The larger board comprised more members as compared to the smaller board, therefore in large board there were more members who could manage the work efficiently as compared to the smaller board in which less number of people were involved to handle more responsibilities.
  • It is expected that in smaller board, there are more chances to compromise the quality of work whereas, in large board it is easy to maintain the quality of the work.
  • In larger board, it is easy to maintain internal controls as there are more directors as well as independent directors are available to strengthen the process of internal control, whereas in smaller board, there are less chances to strengthen the process of internal controls as less number of individuals are available to establish the procedures of internal controls effectively.
  • In larger board, it is easy to raise funds at the time of need as in the larger board, more members are involved to raise required funds. Therefore, in large board, the directors feel less pressured as compared to the smaller board in which fund raising is more difficult.

Cons:

  • It is expected that the composition of the larger board includes more members, and most of the firms fail to engage each board member in a meaningful or productive activity, therefore in such cases larger board would make losses. In addition to this, in such cases, the members may lose interest, which is also a major drawback of the large boards.
  • In such situations when the board comprises more members and the number of core activities is lower, then it could create dysfunctional behavior among the directors as in that situation some directors have no work to do……………………        This is just a sample partial work. Please place the order on the website to get your own originally done case solution
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